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US Unemployment Claims is released weekly, and measures the number of people filing for unemployment for the first time. It is considered an important measure of the health and direction of the US economy. A reading which is higher than the market forecast is bullish for the euro. The indicator is usually released on Thursdays, but has been advanced this week to Wednesday due to the Christmas holiday.

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on Wednesday at 13:30 GMT.

Indicator Background

Analysts closely monitor employment data, and Unemployment Claims provides them the opportunity to track the US employment picture on a weekly basis.  The labor market  is highly correlated with economic growth, as an increase in employment will result in greater consumer confidence and an increase in consumer spending.

Unemployment Claims is on a welcome downward trend, as the indicator has now dropped for four straight weeks. Last week, the indicator came in at 289 thousand, well below the estimate of 297 thousand. Little change is expected in the upcoming reading, with the estimate standing at 291 thousand.

Sentiments and levels

The general direction for EUR/USD remains lower as the ECB  could be headed for  QE in January and Fed  chair Yellen broadly  hinted  that rate hikes are coming in 2015. Europe needs a lower euro to kick-start inflation mandate and boost  much needed growth. US citizens received a “tax cut” from oil prices, allowing consumers to spend more. 1.15 in EUR/USD is certainly an option, but perhaps not now.  After  we’ve seen a fall now, the relatively quiet Christmas market may allow markets to take a break before some  fast and  furious end-of-year adjustments in thin trading  next week. So, the overall sentiment is  neutral on EUR/USD towards this release.

 

Technical levels, from top to bottom: 1.2400, 1.2280, 1.2250, 1.2150 and  1.2042.

5 Scenarios

  1. Within expectations: 287K to 295K: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 296K to 300K: An unexpected  higher reading can send the pair  above one resistance line.
  3. Well above  expectations:  Above 300K:  A sharp increase in  unemployment claims  would be bearish for the dollar. Two or more  resistance lines  could be broken on such an outcome.
  4. Below expectations: 282K to 286K: A positive reading could push EUR/USD lower, and one  support  line could be broken.
  5. Well below expectations: Below  282K. A  sharp decrease  in unemployment claims could lead to the pair breaking two or more support levels.

For more on the Euro, see the EUR/USD forecast.

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