EUR/USD: Trading the US NFP Dec 2012

US Non-Farm 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 bearish for the dollar.

Here are the details and 5 possible outcomes for EUR/USD.

Published on Friday at 13:30 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. Thus, the publication of employment data is highly anticipated by the markets, and an unexpected reading could affect the direction of EUR/USD.

In November, Non-Farm Employment Change rose to 171 thousand, crushing the estimate of 123K. This was the indicator’s strongest showing since March. The estimate for December is much lower, at 90K. Will the indicator again surprise the market with a strong release?

Sentiment and Levels

The markets are not yet convinced that the new Greek debt agreement will last. In addition, the economies of the euro-zone are still struggling. A Spanish bailout request could help the euro, but chances seem low for this to happen just now, with yields falling on Spanish bonds. Spain’s problems are growing.

In the US, comments by politicians regarding the cliff are taking center stage. They have an increasing influence on currencies. Here is all you need to know about the cliff. We are still too far from the last minute, so the battle on Capitol Hill will likely continue. As we’ve seen now, positive news triggers a risk on move – a weaker dollar, while bad news triggers a risk off move – a stronger dollar.

Technical levels, from top to bottom: 1.3170, 1.3140, 1.3080, 1.3030, 1.30 and 1.2960.

5 Scenarios

  1. Within expectations: 80K to 100K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 101K to 111K: An unexpected higher reading can send the pair below one support line.
  3. Well above expectations: Above 111K: The chances of such a scenario are low. Such an outcome would prop up the pair, and a second support line could fall as a result.
  4. Below expectations: 69K to 79K: A smaller increase than forecast could result in EUR/USD pushing above one line of resistance.
  5. Well below expectations: Below 69K. In this scenario, the pair could move above a second resistance line.

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

You can follow a live update of the release here:

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