EUR/USD: Trading the US Unemployment Claims Oct 2011

The US Unemployment Claims indicator is published weekly, and measures the number of people filing for  unemployment for the first time during the previous week. An increase in unemployment claims will  hurt consumer spending, and any figures which are higher than the market forecast is bearish for the dollar.

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

Published on Thursday at 12:30 GMT.

Indicator Background

Unemployment claims is an important economic indicator of consumer confidence in the economy. It helps measure future spending behavior, as consumers are more likely to spend if they are confident that their jobs are secure and unemployment is dropping. In turn, an increase in consumer spending sends a strong signal that the economy is healthy and growing.

The previous unemployment claims release came in at 404K, almost identical to the forecast. This week’s forecast is practically unchanged at 405K. Thus, unemployment in the US, which has not budged from a very high rate of 9.1% over the last several months, continues to be one of the most significant problems affecting the US economy.

Sentiments and levels

EUR/USD has been on the rise of late, but the threat of the Euro Zone drowning in debt is very real, with investors nervously waiting for the politicians to take some concrete action. So, the overall sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3950, 1.39, 1.3838, 1.37, 1.3630, 1.3550 and 1.3450.

5 Scenarios

1. Within expectations: 395K to 415K : In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 385K to 395K: An unexpected lower reading can send the pair well below one support level.
3. Well above expectations: Below 385K: Given the persistent high unemployment figures, the chances of such a scenario are low. A second support line or more might be broken on such an outcome.
4. Below expectations: 416 to 426K: A poor reading could push EUR/USD higher, and one resistance line could be broken.
5. Well below expectations: Above 426K. A sharp increase in the reading will hurt the dollar, and the pair could break two resistance levels.

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