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EURUSD Breaks Bullish Trend Ahead of NFP- Key Support in Focus

EURUSD Breaks Bullish Trend Ahead of NFP- Key Support in Focus

David Song, Strategist

- U.S. Non-Farm Payrolls to Climb 120K, Unemployment Rate to Rise to 7.3%

- NFP Missed Market Forecast for the Last Three Prints

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

U.S. Non-Farm Payrolls are projected to increase a lackluster 120K in October, and marked slowdown in job growth may dampen the appeal of the greenback as the Federal Reserve retains a cautious outlook for the world’s largest economy.

What’s Expected:

Time of release: 11/08/2013 13:30 GMT, 8:30 EST

Primary Pair Impact: EURUSD

Expected: 120K

Previous: 148K

DailyFX Forecast: 100K to 160K

Why Is This Event Important:

Given the Fed’s forward-guidance for monetary policy, a dismal employment report may encourage the central bank to further delay its exit strategy, and the board may forego the taper-timeline laid out by Chairman Ben Bernanke in order to promote a stronger recovery.

Expectations: Bearish Argument/Scenario

Release

Expected

Actual

Personal Consumption (3Q A)

1.6%

1.5%

ADP Employment Change (OCT)

150K

130K

Advance Retail Sales (MoM) (SEP)

0.0%

-0.1%

The ongoing slack in the real economy along with the recent slowdown in household spending may weigh on hiring, and a dismal print may halt the near-term rally in the dollar as it dampens the outlook for growth.

Risk: Bullish Argument/Scenario

Release

Expected

Actual

Gross Domestic Product (Annualized) (3Q A)

2.0%

2.8%

ISM Non-Manufacturing (OCT)

54.0

55.4

ISM Manufacturing (OCT)

55.0

56.4

Nevertheless, the uptick in the growth rate paired with the pickup in business outputs may generate a strong NFP figure, and a positive development should prompt a more meaningful rally in the greenback as it renews bets for a taper at the Fed’s December 17-18 meeting.

How To Trade This Event Risk(Video)

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

Bearish USD Trade: NFP Prints 120K or Lower

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

Bullish USD Trade: Job Growth Exceeds Market Forecast

  • Need green, five-minute candle to favor a long EURUSD trade
  • Implement same setup as the bearish euro trade, just in reverse

Potential Price Targets For The Release

EURUSD Daily

Forex_EURUSD_Breaks_Bullish_Trend_Ahead_of_NFP-_Key_Support_in_Focus_body_Picture_2.png, EURUSD Breaks Bullish Trend Ahead of NFP- Key Support in Focus

Chart - Created Using FXCM Marketscope 2.0

  • Bullish Trend Gives Out; Carving Head-and-Shoulders Top?
  • Relative Strength Index Slips Below Support (37)
  • Interim Resistance: 1.3530-40 (61.8 retracement)
  • Interim Support: 1.3270 (23.6 expansion) to 1.3300 Pivot

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

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

SEP 2013

10/22/2013 12:30 GMT

180K

148K

+67

+106

September 2013 U.S. Non-Farm Payrolls

Forex_EURUSD_Breaks_Bullish_Trend_Ahead_of_NFP-_Key_Support_in_Focus_body_ScreenShot344.png, EURUSD Breaks Bullish Trend Ahead of NFP- Key Support in Focus

Employment increased another 148K following the 193K advance in August, while the jobless rate unexpectedly narrowed to 7.2% from 7.3% as discouraged workers continued to leave the labor force. The dollar took a hit following the weaker-than-expected print, with the EURUSD climbing above the 1.3700 handle, and the greenback continued to weaken throughout the day as the pair closed at 1.3780.

--- Written by David Song, Currency Analyst

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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