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EUR/USD Risks Fresh Monthly Lows on Strong Non-Farm Payrolls (NFP)

EUR/USD Risks Fresh Monthly Lows on Strong Non-Farm Payrolls (NFP)

2014-11-07 08:00:00
David Song, Shuyang Ren,
Share:

- U.S. Non-Farm Payrolls (NFP) to Expand 200+K for Eighth Time in 2014.

- Jobless Rate to Hold at 5.9% for Second Consecutive Month.

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

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

The U.S. Non-Farm Payrolls (NFP) report may generate a further decline in the EUR/USD as market participants anticipate a pickup in job growth.

What’s Expected:

EUR/USD NFP

Click Here for the DailyFX Calendar

Why Is This Event Important:

At the same time, Average Hourly Earnings are also expected to uptick to an annualized 2.1% from 2.0% in September, and stronger employment paired with growing wage pressures should heighten the bullish sentiment surrounding the greenback especially as the Federal Open Market Committee (FOMC) moves away from its easing cycle.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

ISM Non-Manufacturing Employment (OCT)

--

59.6

ADP Employment Change (OCT)

220K

230K

ISM Manufacturing Employment (OCT)

--

55.5

Expectations for a faster recovery in the second-half of 2014 may spur a marked pickup in job/wage growth, and a positive employment report may spur fresh monthly lows in EUR/USD as puts increased pressure on the Fed to normalize monetary policy sooner rather than later.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Factory Orders (SEP)

-0.6%

-0.6%

Construction Spending (MoM) (SEP)

0.7%

-0.4%

Durable Goods Orders (SEP)

0.5%

-1.3%

However, easing demand paired with the slowdown in building activity may drag on the labor market, and a dismal NFP report may spur a relief rally in EUR/USD as it drags 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: NFPs Exceed Market Expectations

  • Need red, five-minute candle following the release to consider a short trade on EUR/USD
  • If market reaction favors a long dollar position, 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/Wage Growth 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 Chart

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Will continue to look for lower highs/lows as the RSI retains the bearish momentum carried over from the end of 2013.
  • Interim Resistance: 1.2580 (78.6% retracement) to 1.2625 (61.8% expansion)
  • Interim Support: 1.2290 (100% expansion) to 1.2320 (38.2% expansion)

Read More:

Price & Time: Less Headwinds in the Aussie?

EUR/USD Slumps Below $1.2400 as Press Conference Affirms Dovish ECB

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)

SEP 2014

10/03/2014 12:30 GMT

215K

248K

-76

-83

September 2014 U.S. Non-Farm Payrolls

EUR/USD Chart

U.S. Non-Farm Payrolls (NFPs) increased 248K in September after expanding a revised 142K the month prior, while the jobless rate unexpectedly slipped to a six-year low of 5.9% from 6.1% in August. The uptick in hiring certainly highlights an improved outlook for the world’s largest economy, and the bullish sentiment surrounding the U.S. dollar may gather pace over the remainder of the year as the Fed is widely expected to halt its asset-purchase program at the October 29 meeting. Indeed, the better-than-expected prints spurred a bullish dollar reaction, with the EUR/USD slipping below the 1.2550 handle to hit a fresh yearly low of 1.2501.

--- 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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