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
- Within expectations: 287K to 295K: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 296K to 300K: An unexpected higher reading can send the pair above one resistance line.
- 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.
- Below expectations: 282K to 286K: A positive reading could push EUR/USD lower, and one support line could be broken.
- 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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