EUR/USD: Trading the US NFP March 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 have a substantial  impact on  the direction of EUR/USD.

Nonfarm Employment Change plunged in January to just 151 thousand,  compared to  292 thousand a month earlier. This figure fell short of  the estimate of 189 thousand.  The markets are expecting a strong improvement in the February report, with an estimate of 195 thousand.

Sentiment and Levels

The worsening inflation  picture in the Eurozone is  putting strong pressure on Mario Draghi  & Co. to take monetary action at  next week’s policy meeting. Further worries about the economic recovery fueled with speculation regarding the ECB’s moves could push the common currency lower. Over in the US, a rate hike in March  has been put  to rest  and recent figures have shown improvement, so a fall of the greenback is not likely.  So, the overall sentiment  is  bearish  on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1070, 1.10, 1.0960, 1.0850, 1.0780 and 1.0710.

5 Scenarios

1. Within expectations: 191K to 199K. In such a scenario, the EUR/USD is likely to rise within  range, with a small chance of breaking higher.
2. Above expectations: 200K to 205K: An unexpected higher reading could  push the pair  below one support  line.
3. Well above expectations: Above 205K: Such an outcome could  push the pair lower and two or more  support lines could  fall as a result.
4. Below expectations:  185K to 190K: A  weaker reading  than forecast could result in EUR/USD breaking above one resistance line.
5. Well below expectations: Below 185K. In this scenario, the pair could break through two or more resistance lines.

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