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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 13:30 GMT.

The News:  Non-Farm Payrolls +175K, unemployment rate 6.7% – USD strronger

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity.  The release of US Non-Farm  Employment Change  is highly anticipated by the markets, and an unexpected reading could affect the direction of EUR/USD.

There is increasing concern about the employment picture in the US, as the last two releases have been soft, well off expectations. The January reading came in at 113 thousand, far short of the estimate of 185 thousand. The markets are expecting a strong improvement in the upcoming release, with an estimate of 151 thousand. Will the indicator beat this prediction?

Sentiment and Levels

The euro remains at high levels, but has hit some turbulence this week, as it trades just above the 1.37 line. The surprising inflation numbers from the euro-zone (which  contradict German data) triggered a strong euro-rally, and this certainly changes the prospects for the rate decision on Thursday. Nevertheless, the inflation level is still low and the exchange rate is uncomfortable for both export growth and for import-related inflation. We could see Mario Draghi try to “talk down” the euro while shying away from any concrete action.

In the US, it seems that the  nasty streak  terrible data  may be over.  GDP was strong,  as were the readings for  new home sales  and durable goods orders. The  Fed has served notice that  it will take a serious downturn to derail the taper train. The Fed’s cuts to QE are dollar positive, and no less important, represent a vote of confidence in the US economy, despite recent problems. So, the overall sentiment is  bearish on EUR/USD towards this release.

Update: EUR/USD surged above 1.39 to the highest since 2011 towards the NFP.

Technical levels, from top to bottom: 1.4214, 1.40, 1.3940, 1.3830, 1.3773, 1.37, 1.3650 and 1.3515.

5 Scenarios

  1. Within expectations: 145K to 157K. In such a scenario, the EUR/USD is likely to rise  within  range, with a small chance of breaking higher.
  2. Above expectations: 158K to 168K: An unexpected higher reading could send the pair below one support line.
  3. Well above expectations: Above 169K: The chances of such a scenario are low. Such an outcome  could  prop up the pair, and a second support line could fall as a result.
  4. Below expectations:  134K to 144K: A  weaker reading  than forecast could result in EUR/USD pushing above one line of resistance.
  5. Well below expectations: Below 134K. 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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