EUR/USD: Trading the US Unemployment Claims Mar 2013


US Unemployment Claims indicator 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 economy. 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

Analysts closely monitor the weekly Unemployment Claims reading. Employment is highly correlated with economic growth, as an unemployed person will likely cut back on expenses and personal spending. Conversely, an increase in employment leads to greater consumer spending and activity and growth in other sectors of the economy.

Unemployment Claims looked sharp last week, coming in at 336 thousand. This was well  below the estimate of 343 thousand. More importantly, it marked the fourth straight week that the key employment indicator has beaten the forecast. The upcoming estimate is slightly lower than the previous week, at 340 thousand. Will the indicator meet or beat the forecast?

Sentiments and levels

The crisis in Cyprus has been resolved, but money could still flood out of the country when banks open. There is also a confidence crisis which began when the EU tried to tax Cypriot bank deposits under 100,000 euros that were considered safe. In addition to the crisis, the economic situation remains weak in the Eurozone, as recent figures have shown. This is in sharp contrast to the US, where most economic indicators point to a somewhat accelerated growth. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.30, 1.2960, 1.2880, 1.2805, 1.2746, and 1.27.

5 Scenarios

  1. Within expectations: 334K to 346K: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 347K to 353K: An unexpected higher reading can send the pair above one resistance level.
  3. Well above expectations: Above 353K: High unemployment numbers would be bearish for the dollar. Two or more resistance lines might be broken on such an outcome.
  4. Below expectations: 327K to 333K: A better reading than expected could push EUR/USD lower and one support line could fall.
  5. Well below expectations: Below 327K. In this scenario, the pair could break two or more support levels.

For more on 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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