EUR/USD: Trading the US Non-Farm Payrolls

US Nonfarm Employment Change measures the change in the number of newly employed people in the US, excluding workers in the farming industry. A reading which is higher than the market forecast is bullish for the dollar. Here are the details and 5 possible outcomes for EUR/USD.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. The release of US Non-Farm Employment Change is highly anticipated by the markets, and an unexpected reading can affect the direction of EUR/USD.

Nonfarm Employment Change disappointed in August, slipping to 173 thousand, well short of the estimate of 215 thousand. This marked a 5-month low for the key indicator. The markets are expecting a strong rebound in September, with a forecast for 202 thousand.

Sentiment and Levels

Monetary policy divergence is likely to continue weighing on the euro. With both the ECB and the Fed sounding more hawkish than expected, this means ongoing euro printing from the ECB and a rate hike in 2015 from the Fed, and this supports a drop. The weak inflation figures in the euro-area could serve as a reminder that the ECB may have to provide additional stimulus. So, the overall sentiment remains bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1373, 1.13, 1.1215, 1.1113, 1.1050 and 1.0950.

5 Scenarios

  1. Within expectations: 198K to 206K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 207K to 212K: An unexpected higher reading could send the pair below one support line.
  3. Well above expectations: Above 212K: Such an outcome could push the pair lower and two or more support lines could fall as a result.
  4. Below expectations: 192K to 197K: A weaker reading than forecast could result in EUR/USD breaking above one resistance line.
  5. Well below expectations: Below 191K. If the reading is very weak, the pair could break above two or more resistance lines.
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