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EUR/USD Downside Targets in Focus Ahead of Non-Farm Payrolls (NFP)

EUR/USD Downside Targets in Focus Ahead of Non-Farm Payrolls (NFP)

2014-09-05 08:30:00
David Song, Shuyang Ren,
Share:

- U.S. Non-Farm Payrolls (NFP) to Increase 200+K for Seventh Consecutive Month.

- Would Match the Longest String of 200+K Prints Since 1997.

For more updates, sign up for David's e-mail distribution list.

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

The EUR/USD may face a further decline over the next 24-hours of trade as the U.S. Non-Farm Payrolls (NFP) report is expected to show the world’s largest economy adding another 230K jobs in August while the jobless rate is expected to narrow to an annualized 6.1% from 6.2% the month prior.

What’s Expected:

EUR/USD NFP

Click Here for the DailyFX Calendar

Why Is This Event Important:

Signs of a more robust recovery may further boost interest rate expectations as the Federal Open Market Committee (FOMC) is expected to halt its asset-purchase program at the October 29 meeting, and the bullish sentiment surrounding the U.S dollar may gather pace throughout the remainder of the year as a growing number of central bank officials show a greater willing to normalize monetary policy sooner rather than later.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

ISM Non-Manufacturing- Employment (AUG)

--

57.1

ISM Manufacturing- Employment (AUG)

--

58.1

Gross Domestic Product (Annualized) (2Q S)

3.9%

4.2%

The pickup in economic activity paired with the highest ISM employment prints for 2014 may highlight a further expansion in job growth, and an above-forecast NFP figure may spur fresh monthly lows in the EUR/USD amid the deviation in the policy outlook.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Personal Spending (JUL)

0.2%

-0.1%

Durable Goods Orders ex Transportation (JUL)

0.5%

-0.8%

Advance Retail Sales (MoM) (JUL)

0.2%

0.0%

On the other hand, the recent slowdown in private-sector consumption - one of the leading drivers of growth - may generate another weaker-than-expect print, and a soft employment reading may spur a more meaningful pullback in the greenback as it dampens the outlook for the world’s largest economy.

How To Trade This Event Risk(Video)

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

Bullish USD Trade: NFPs Climb 230K or Greater While Jobless Rate Slips to 6.1% or Lower

  • Need red, five-minute candle following the release 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: Job Growth Falls Short of Market Forecast

  • 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

  • Downside targets remain favored as RSI pushes deeper into oversold territory.
  • Interim Resistance: 1.3350 (61.8% expansion) to 1.3370 (50.0% retracement)
  • Interim Support: 1.2870 (50.0% expansion) to 1.2900 (1.618% expansion)

Read More:

Key Levels for EUR Crosses- USD/CAD Inverse H&S Pattern at Risk

Euro Plunges as European Central Bank Cuts Rates, Announces QE

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

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JUL 2014

8/01/2014 12:30 GMT

230K

209K

+ 24

+ 33

July 2014 U.S. Non-Farm Payrolls

EUR/USD Chart

The U.S. economy added 209K jobs in July, following a revised 298K increase the month prior. The print was below the average estimate of 230K. The jobless rate unexpectedly rose to 6.2% from 6.1% in June as discouraged workers returned to the labor force. Nevertheless, the greenback lost ground following the below-forecast print, with the EUR/USD rallying to a high of 1.3443 going into the European close.

--- Written by David Song, Currency Analyst and Shuyang Ren

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

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