EUR/USD: Trading the US NFP Sep 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.

Update: Non-Farm Payrolls +173K but other data is positive

Published on Friday at 12:30 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 July, to 215 thousand, short of the forecast of 225 thousand. This marked a 4-month low for the indicator. Little change is expected in the August release, with an estimate of 217 thousand.

Sentiment and Levels

The euro has rallied recently, enjoying its role a safe haven currency, as a potential delay in the Fed hike and the Chinese yuan devaluation (with the accompanying stock market crash) strengthened the common currency. Yet also the ECB can play this game and could announce further monetary stimulus steps in order to help the lackluster economy. In addition, after we had a washout of euro shorts, positioning is probably more favorable for a renewed downturn. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1460, 1.1373, 1.1290, 1.1215, 1.1113 and 1.1050.

5 Scenarios

  1. Within expectations: 220K to 230K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 231K to 250K: An unexpected higher reading could send the pair below one support line.
  3. Well above expectations: Above 250K: 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: 200K to 219K: A weaker reading than forecast could result in EUR/USD breaking above one resistance line.
  5. Well below expectations: Below 200K. In this scenario, the pair could break through two or more resistance lines.

For more about 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.

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