EUR/USD: Trading the US Non-Farm Payrolls Jan 2013

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US Non-Farm Employment Change measures the change in the number of employed people in the US, excluding workers in the farming industry. This indicator is released one day after the ADP Non-farm payrolls, which is an unofficial release. A reading which is higher than the market forecast is bullish for the dollar.

Here are the details and 5 possible outcomes for EUR/USD.

Published on Friday at 13:30 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. Thus publication of employment data, such as the Non-Farm Employment Change, is highly anticipated by the markets. Due to its importance, an unexpected reading can affect the movement of EUR/USD.

In December, the indicator fell to 146 thousand, but this was much higher than the forecast of 86K. The markets are anticipating a stronger January reading, with a forecast of 135K. Will the indicator repeat and beat the market forecast this month?

Sentiment and Levels

The euro looked sharp following the fiscal cliff agreement, but has since dropped sharply, and the pair continues to fluctuate. Will the downtrend continue or can the euro regain its footing?  The euro could get a boost from the many positive signs evident in the US economy, which certainly help the “risk on” environment – dollar selling, as seen throughout most of the post financial crisis period. So, the sentiment is neutral on EUR/USD towards this release.

Technical levels from top to bottom: 1.3170, 1.3130, 1.3110, 1.3030, 1,30 and 1.2960.

5 Scenarios

  1. Within expectations: 129K to 141K: In this scenario, EUR/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
  2. Above expectations: 142K to 148K: A reading above expectations would signal economic expansion, and could push the pair below one support level.
  3. Well above expectations: Above 148K: A sharp rise in employment numbers could propel EUR/USD upwards, and two or more support levels could be broken.
  4. Below expectations: 122K to 128K: A weak reading could pull the pair downwards, with one line of resistance at risk.
  5. Well below expectations: Below 122K: Such a scenario would be bearish for the dollar, and EUR/USD could break two or more resistanance lines.

For more on the euro, see the EUR/USD forecast.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

6 Comments

  1. Pingback: US Weekly Jobless Claims: 372K – A Small Disappointment | Forex Crunch

  2. WaterProf on

    Sorry, if NFP comes above expectations EURUSD is set to break resistance? Why should Euro get higher?

  3. Leonardos on

    Indeed,I have the same question. If the actual NFP figure is higher than market expectations, the US$ should go higher, because this is a sign of economic expansion in the US, therefore investors want to hold US dollars in their portfolios. Demand for the US$ goes up, therefore the price of the US$ vs other currencies should go higher. I don’t understand why the US$ will go down if the NFP report exceeds market expectations.

  4. Pingback: EUR/USD Jan 4 – Slide Continues as 1.30 in Sight | Forex Crunch

  5. I can’t understand how in the world they can revise the previous values after actual NFP values came out. Initially 146K was indicated, so with the actual value of 155K I thought dollar should rise. But after 10 minutes previous value was revised to 161K. Somebody can explain the reason?