EUR/USD: Trading the US Non-Farm Employment Change Apr 2013

US Non-Farm Employment Change measures the change in the number of newly employed people in the US, excluding workers in the farming industry. 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 12:30 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. Thus, the publication of employment data is highly anticipated by the markets, and an unexpected reading could affect the direction of EUR/USD.

In March, Non-Farm Employment Change  was outstanding, jumping to 236 thousand. This  easily beat the estimate of  162 thousand.  The estimate for  the April release stands at 198 thousand.  Will the indicator again surprise the markets with a strong reading?

Sentiment and Levels

While banks  have reopened  in Cyprus, strict capital controls remain in place, as the government fears a run on the banks. A  great deal  of damage has been done to confidence in the euro-zone’s banks, especially after the ill-timed statement by Eurogroup head Dijsselbloem. Many people wonder why they should hold more than   €100K in the banks, if their money is not safe.  The crisis could spread to Slovenia, even if there is little in common between the countries.

The picture out of the Eurozone continues to look gloomy. Italy isn’t getting closer to a government, and is probably headed to new elections. The economies in France and Germany are struggling and unemployment remains sky high in Spain, Greece and many other countries. Draghi will find it hard to express optimism at the upcoming ECB policy meeting, and he has a more limited set of tools this time.

Also US figures have taken a turn for the worse after a good streak, but the economy continues to grow, and we’ll likely see major releases bounce upwards soon. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.30, 1.2960, 1.2880, 1.2805, 1.2750 and 1.27.

5 Scenarios

1. Within expectations:  192K to 204K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 205K to 209K: An unexpected higher reading can send the pair  below one support  line.
3. Well above  expectations: Above 209K: Such an outcome would be bullish for the dolllar, and a second support line could fall as a result.
4. Below expectations:  187K to 191K: A weaker reading than forecast could result in EUR/USD pushing above one line of resistance.
5. Well below expectations: Below 191K. In this scenario, the pair could  break above a second resistance line.

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

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