Trade FOREX with FXCM

  • Award-Winning Platform
  • 24/7 Customer Support
  • Trade Directly on Charts
  • Free $50K Practice Account

Resources

Dollar to Face Further Losses on Dismal NFP- EURUSD to Target 1.3960?

By , Currency Analyst  and Gregory Marks
07 March 2014 08:00 GMT

- U.S. Non-Farm Payrolls to Climb 150K, Unemployment Rate to Hold at 6.6%

- NFPs Have Missed Market Forecast the Last Two Consecutive Prints

Trading the News: U.S. Non-Farm Payrolls

The U.S. Non-Farm Payrolls report may prop up the dollar as the economy is expected to add another 150K jobs in February, and a pickup in employment may instill a bullish outlook for the greenback as the Federal Reserve is widely anticipated to discuss another $10B taper at the March 19 meeting.

What’s Expected:

Time of release: 03/07/2014 13:30 GMT, 8:30 EST

Primary Pair Impact: EURUSD

Expected: 150K

Previous: 113K

DailyFX Forecast: 100K to 150K

Why Is This Event Important:

However, the recent slowdown in economic activity certainly raises the risk of seeing another weaker-than-expected NFP print, and a dismal result may heighten the bearish sentiment surrounding the reserve currency as it limits the Fed’s scope to normalize monetary policy sooner rather than later.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Challenger Job Cuts (YoY) (FEB)

--

-24.4%

ISM Manufacturing (FEB)

52.3

53.2

NFIB Small Business Optimism (JAN)

93.9

94.1

The decline in planned job cuts along with the rise in business sentiment may pave the way for a strong NFP print, and a marked increase in employment may present a near-term rebound in the greenback as it raises the outlook for growth and inflation.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

ISM Non-Manufacturing (Employment) (FEB)

--

47.5

ADP Employment Change (FEB)

155K

139K

Advance Retail Sales (MoM) (OCT)

0.1%

0.4%

However, the slowdown in job growth may persist in February amid the ongoing slack in the real economy, and another dour employment report may spur a sharp selloff in the greenback as market participants see the Fed retaining its highly accommodative policy stance for an extended period of time.

How To Trade This Event Risk(Video)

Join DailyFX on Demand for Full Coverage of U.S. Non-Farm Payrolls

Bullish USD Trade: NFP Increases 155K+; Unemployment Holds at 6.6%

  • Need to see red, five-minute candle following the print to consider a short trade on EURUSD
  • If market reaction favors a long dollar trade, sell EURUSD with two separate position
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is hit; set reasonable limit

Bearish USD Trade: February Job Growth Falls Short of Market Expectations

  • Need green, five-minute candle to favor a long EURUSD trade
  • Implement same setup as the bullish dollar trade, just in the opposite direction

Potential Price Targets For The Release

EURUSD Daily

Forex_Dollar_to_Face_Further_Losses_on_Dismal_NFP-_EURUSD_to_Target_1.3960_body_Picture_2.png, Dollar to Face Further Losses on Dismal NFP- EURUSD to Target 1.3960?

Chart - Created Using FXCM Marketscope 2.0

  • Close Above 1.3800 Negates 2008 Bear Trend; 1.3960-70 Up Next?
  • Bullish Relative Strength Index Favors Topside Targets
  • Interim Resistance: 1.3870 (50.0% expansion) to 1.3900 Pivot
  • Interim Support: 1.3650 (78.6% expansion) to 1.3660 (23.6% expansion)

Impact that the U.S. Non-Farm Payrolls report has had on EUR/USD during the last month

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JAN 2014

2/07/2013 13:30 GMT

181K

113K

+10

+56

January 2014 U.S. Non-Farm Payrolls

Forex_Dollar_to_Face_Further_Losses_on_Dismal_NFP-_EURUSD_to_Target_1.3960_body_Picture_1.png, Dollar to Face Further Losses on Dismal NFP- EURUSD to Target 1.3960?

Last month’s NFP release led to the regular USD chop, but the disappointing figure and weak December revision pushed EUR/USD to over 50 pips higher to end the week. Despite this weak data combined with those NFPs of December and a multitude of other US economic figures that have come in to the downside, FOMC members and Dr. Janet Yellen herself have continued to reiterate that tapering would continue. Now that market participants have accepted this fact, it is likely FX markets continue to respect data relative to their currency in a good news is good and bad news is bad mentality. This has been appropriately reflected in recent USD weakness, despite continuous all-time highs in the US S&P 500 index. If we see poor revisions to January’s 113K print in addition to weakness in the February reading, USD weakness may end the week. Note that excess volatility may occur in USD/CAD as we also have Candian employment data being released at 13:30GMT.

--- Written by David Song, Currency Analyst and Gregory Marks

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

Trade Alongsidethe DailyFX Team on DailyFX on Demand

Looking to use the DailyFX Trade Signals LIVE? Check out Mirror Trader.

New to FX? Watch this Video

Join us to discuss the outlook for the major currencies on the DailyFXForums

07 March 2014 08:00 GMT