EUR/USD: Trading the US Unemployment Claims Apr 2012

The US Unemployment Claims indicator is released weekly, and measures the number of people filing for   unemployment for the first time during the previous week. A reading which is 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 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 unemployment is dropping. In turn, an increase in consumer spending sends a strong signal that the economy is healthy and growing.

The previous release came in at a disappointing 380K, well above the market forecast  of 355K. Further poor employment figures  could spook  the markets, which  are already  concerned that the US recovery may have shifted gears in a downward direction. The forecast for this week calls for an improvement to 370K. Will the indicator rebound this week?

Sentiments and levels

Despite a successful government auction of  EUR 3 billion, the  markets  remain wary of the  crisis in Spain. The ECB will likely keep pressure up on the fourth largest economy in the Euro-zone, and the bad news is likely to continue. In  the  US, disappointing economic data could lead to more QE, and send  investors  scurrying for safe haven currencies, such as the US dollar, to park their funds.  Weaker economies in the US and Europe don’t favor the euro. So, the overall sentiment has turned from neutral to bearish  on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3212, 1.3165, 1.3110, 1.3050, 1.30 and 1.2945.

5 Scenarios

1. Within expectations: 362K to 378K : In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 354K to 361K: An unexpected lower reading can send the pair below one support level.
3. Well above expectations: Below 354K:  Strong employment numbers  would be bullish for the dollar.  Two or more support lines might be broken on such an outcome.
4. Below expectations: 379K to 387K: A poor reading could push EUR/USD higher, and one resistance line could be broken.
5. Well below expectations: Above 387K. A sharp increase in the reading could lead to the pair breaking two or more resistance levels.

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