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EUR/USD Hangs Onto Bearish Momentum Ahead of Non-Farm Payrolls (NFP)

EUR/USD Hangs Onto Bearish Momentum Ahead of Non-Farm Payrolls (NFP)

2015-04-03 08:00:00
David Song, Shuyang Ren,
Share:

- U.S. Non-Farm Payrolls (NFP) to Expand 200+K for Thirteen-Consecutive Months.

- Unemployment Rate, Average Hourly Earnings Projected to Hold Steady in March.

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

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

Another 245K rise in U.S. Non-Farm Payrolls (NFP) may highlight an improved outlook for the world’s largest economy, but weak wage growth figures may undermine bets for a mid-2015 Fed rate hike as the central bank struggles to achieve its 2% target for inflation.

What’s Expected:

EUR/USD NFP

Click Here for the DailyFX Calendar

Why Is This Event Important:

Little evidence of stronger household earnings may spur a growing dissent within the Federal Open Market Committee (FOMC) and the central bank may show a greater willingness to further delay the normalization cycle in an effort to encourage a stronger recovery.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Pending Home Sales (MoM) (FEB)

0.3%

3.1%

New Home Sales (MoM) (FEB)

-3.5%

7.8%

Building Permits (MoM) (FEB)

0.5%

3.0%

The ongoing improvement in the housing market along with the pickup in building activity may generate a larger-than-expected expansion in U.S. employment, and a positive development may bolster the bullish outlook for the greenback as the Fed remains well on course to remove the zero-interest rate policy (ZIRP).

Risk: Bearish Argument/Scenario

Release

Expected

Actual

ISM Manufacturing (MAR)

52.5

51.5

Industrial Production (MoM) (FEB)

0.2%

0.1%

Advance Retail Sales (MoM) (FEB)

0.3%

-0.6%

Nevertheless, waning business outputs paired with the slowdown in household spending may drag on hiring, and a dismal NFP report may dampen the bullish sentiment surrounding the greenback as it raises the Fed’s scope to retain the highly accommodative policy stance beyond mid-2015.

How To Trade This Event Risk(Video)

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Bullish USD Trade: Employment/Wage Growth Beats Market Expectations

  • Need red, five-minute candle following the NFP print to consider a short trade on EUR/USD
  • If market reaction favors a bullish 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: U.S. Non-Farm Payrolls (NFP) Report Disappoints

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

Potential Price Targets For The Release

EUR/USD Daily Chart

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Watching the long-term bearish trendline on RSI, but need a break/close below the 1.0700 handle to provide confirmation/conviction for a further decline in EUR/USD.
  • Interim Resistance: 1.0970 (38.2% expansion) to 1.0990 (50% retracement)
  • Interim Support: 1.0700 pivot to 1.0710 (23.6% retracement)

Read More:

USDCAD Reversal Scalps Pending Below 1.2700 Resistance Ahead of NFPs

AUD/USD Retail FX Remain Net-Long; 0.7500 in Focus Ahead of NFP, RBA

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)

FEB 2015

03/06/2015 13:30 GMT

235K

295K

-89

-124

February 2015 U.S. Non-Farm Payrolls

EUR/USD Chart

U.S. Non-Farm Payrolls (NFP) continued to beat market expectations in February as the economy added another 295K jobs following the revised 237K expansion the month prior. The unemployment rate fell to an annualized 5.5% from 5.7% following a drop in participation rate, while Average Hourly Earnings unexpectedly slowed to an annualized 2.0% from 2.2% during the same period. The pickup in wage growth may put increased pressure on the Fed to deliver a mid-2015 rate hike, but the sluggish outlook for wage growth may become a growing concern for the central bank as it struggles to achieve the 2% target for inflation. Nevertheless, the better-than-expected NFP print propped up the greenback, with EUR/USD slipping below the 1.0900 handle to end the day at 1.0838.

--- 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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