EUR/USD: Trading the US NFP Nov 2016

US Nonfarm 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.

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 can affect the direction of EUR/USD.

Nonfarm Employment Change slipped in September, dropping  to 142 thousand. This  was much weaker than  the estimate of 2o1 thousand. The markets are expecting a  strong recovery  in October, with the forecast at  179 thousand. Will the indicator  meet or  beat the estimate?

Sentiment and Levels

Monetary policy divergence  has sharpened, courtesy of  the Fed’s intention to raise rates in December. In the euro-zone,  the ECB  has hinted broadly at further stimulus  and that will likely be euro negative. The small rise in inflation  is not a game changer and  persistently weak  German data  could certainly hurt. So, the overall sentiment  remains  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1070, 1.10, 1.09, 1.0810, 1.0760 and 1.0715.

5 Scenarios

1. Within expectations: 176K to 184K. In such a scenario, the EUR/USD is likely to rise within  range, with a small chance of breaking higher.
2. Above expectations: 185K to 189K: An unexpected higher reading could send the pair  below one support  line.
3. Well above expectations: Above 189K: The chances of such a scenario are low. Such an outcome could  push the pair lower and two or more  support lines could  fall as a result.
4. Below expectations:  179K to 183K: A  weaker reading  than forecast could result in EUR/USD breaking above one resistance line.
5. Well below expectations: Below 179K. In this scenario, the pair could break through two or more resistance lines.

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