EUR/USD: Trading the US Non-Farm Payrolls

EUR/USD: Trading the US Non-Farm Payrolls

2 June 2016, 14:32
Roberto Jacobs

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 have a substantial impact on the direction of EUR/USD.

Nonfarm Employment Change plunged in April to 160 thousand, well below the estimate of 203 thousand. Little change is expected in the May report, with an estimate of 159 thousand.


Sentiment and Levels

In the Eurozone, weak inflation figures will likely mean looser monetary policy for longer, and a dovish message from Mario Draghi could send the euro lower. In the US, a June rate hike isn’t likely, but one in July is certainly an option. The monetary policy divergence play could continue this week. So, the overall sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1375, 1.1335, 1.1230, 1.1175, 1.1140 and 1.1070


5 Scenarios

  1. Within expectations: 155K to 163K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.

  2. Above expectations: 164K to 168K: An unexpected higher reading could push the pair below one support line.

  3. Well above expectations: Above 168K: Such an outcome could push the pair lower and two or more support lines could fall as a result.

  4. Below expectations: 150K to 154K: In this scenario, EUR/USD breaking above one resistance line.

  5. Well below expectations: Below 150K. A very weak reading could result in the pair breaking above two or more resistance lines.


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