EUR/USD: Trading the US NFP Feb 2016

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.

Update: Non-Farm Payrolls +257K – above expectations – USD higher

Published on Friday at 13:30 GMT.

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 ended 2014 on a weak note, as the December report fell sharply to 252 thousand. This was down from 321 thousand a month earlier. The markets are braced for another drop in the January release, with an estimate of 236 thousand.

Sentiment and Levels

The outlook for the euro continues to remains weak and the pair has more room before bottoming out (with some talking about parity or below), but the US could continue with its break in rises. The Fed was upbeat about the US economy, but GDP missed expectations. In the euro-zone, deflation has deepened  and this has hit Germany, the region’s locomotive. This has justified the massive QE move by Draghi and the general pressure on the euro. So, the overall sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1650, 1.1540, 1.15, 1.1373, 1.1313, and 1.12.

5 Scenarios

1. Within expectations: 233K to 239K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 239K to 244K: An unexpected higher reading could send the pair below one support line.
3. Well above expectations: Above 244K: The chances of such a scenario are low. Such an outcome could push the pair lower and two or more support lines could fall as a result.
4. Below expectations: 229K to 233K: A weaker reading than forecast could result in EUR/USD breaking above one resistance line.
5. Well below expectations: Below 229K. In this scenario, the pair could break through two or more resistance lines. 

For more about the euro, see the EUR/USD.

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