EUR/USD: Trading the US Unemployment Claims Dec 2011

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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 leads to less consumer spending and impacts on economic growth. 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 13:30 GMT.

Indicator Background

Unemployment claims is an important 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. A drop in unemployment is an important indication that the economy is growing and moving in the right direction.

Unemployment claims last week came in at 364K, somewhat lower than the market forecast of 376K. This marks the third straight reading which has been below the market prediction, which is bullish for the dollar. The forecast for this week is at 372K. Will the indicator fall below the market’s expectation yet again?

Sentiments and levels

EUR/USD has been trading in a very narrow range, although we may see this calm disappear quickly, as the eurozone debt crisis promises to be back in the headlines after the holiday season. So, the overall sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3280, 1.3212, 1.3145, 1.3060, 1.30, 1.2945 and 1.2873.

5 Scenarios

  1. Within expectations: 362K to 382K : In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 350K to 361K: An unexpected positive reading can send the pair well below one support level.
  3. Well above expectations: Below 350K:  If unemployment claims drop sharply, two or more support levels could broken.
  4. Below expectations: 383K to 393K: A poor reading could push EUR/USD higher, and one resistance line could be broken.
  5. Well below expectations: Above 393K. A sharp increase in unemployment claims will hurt the dollar, and the pair could break two resistance 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.