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EUR/USD at Risk for Fresh Lows as Non-Farm Payrolls (NFP) Climb 200K

By , Currency Analyst  and Gregory Marks
04 April 2014 07:00 GMT

EUR/USD Unemployment Figures

- U.S. Non-Farm Payrolls (NFP) to Increase 200K; Unemployment Rate to Slip to 6.6%.

- February NFP Exceeded Market Expectations for First Time in Three-Months.

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

The U.S. Non-Farm Payrolls (NFP) report may in still a bullish outlook for the dollar (bearish EUR/USD) as employment is expected to increase another 200K in March, while the jobless rate is anticipated to narrow to an annualized 6.6% from 6.7%.

What’s Expected:

EUR-USD-Risk-for-Fresh-Lows-nfp-0206_body_ScreenShot029.png, EUR/USD at Risk for Fresh Lows as Non-Farm Payrolls (NFP) Climb 200KEUR/USD Non-Farm Payrolls (NFP)

Why Is This Event Important:

Indeed, a material pickup in job growth may put increased pressure on the Federal Open Market Committee (FOMC) to normalize monetary policy sooner rather than later, but the reserve currency may struggle to hold its ground should the NFP report dampen the outlook for growth and inflation.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Challenger Job Cuts (YoY) (MAR)

--

-30.2%

Durable Goods Orders (FEB)

0.8%

2.2%

Advance Retail Sales (MoM) (FEB)

0.2%

0.3%

The resilience in private sector consumption along with the ongoing decline in planned job cuts may generate a positive employment report, and a large uptick in job growth may highlight an improved forecast for the USD as the Fed continues to see a stronger recovery in 2014.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

ADP Employment Change (MAR)

195K

191K

ISM Manufacturing- Employment (MAR)

--

51.1

NFIB Small Business Optimism (FEB)

93.8

91.4

Nevertheless, the persistent slack in the real economy paired with the downtick in business confidence may drag on NFPs, and a dismal print may trigger a sharp selloff in the greenback as it weighs on interest rate expectations.

How To Trade This Event Risk(Video)

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

Bullish USD Trade: NFP Climb 200K+; Unemployment Slips to 6.6%

  • Need to see red, five-minute candle following the NFP print to consider a short trade on EUR/USD
  • If market reaction favors a long dollar trade, sell EUR/USD 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: March Employment Disappoints

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

Potential Price Targets For The Release

EUR/USD Daily

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Risks Larger Correction After Failed Attempts to Close Above 1.3800
  • Relative Strength Index Carving Bearish Trend
  • Interim Resistance: 1.3960-70 (61.8 expansion)
  • Interim Support: 1.3650 (78.6% expansion) to 1.3660 (61.8 retracement)

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)

FEB 2014

3/07/2013 13:30 GMT

149K

175K

-29

-13

U.S. Non-Farm Payrolls (NFP) February 2014

EUR/USD Chart

At the February release of the US Non-Farm Payroll Change we saw USDollar gain against the Euro as the print came in 26K higher than economist estimates and the January print was revised upwards to 129K from 113K prior. Current surveys point to another better than expected print with estimates at 200K for March. We did see a slight miss for the ADP figure on Wednesday, although it is not uncommon to see the NFP figure beat or miss with a larger range. If the print misses expectations, it will be difficult to place blame on the weather once more as has been the case since December.

--- 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.

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04 April 2014 07:00 GMT