TheNews

- U.S. Non-Farm Payrolls (NFP) to Pick Up From Lowest Print Since .
- Jobless Rate to Hold at 6.1% for Second Consecutive Month.

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

A pickup in U.S. Non-Farm Payrolls (NFP) may spur a further decline in the EUR/USD as the Federal Reserve is widely expected to halt its quantitative easing (QE) program at the October 29 policy meeting.

What’s Expected:



Why Is This Event Important:

The deviation in the policy outlook certainly casts a long-term bearish outlook for the EUR/USD, but a further slowdown in job growth may generate a larger pullback in the dollar as it would allow the Federal Open Market Committee (FOMC) to further delay the normalization cycle.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Challenger Job Cuts (YoY) (SEP)	--	-24.4%
ADP Employment Change (SEP)	205K	213K
Gross Domestic Product (Annualized) (2Q F)	4.6%	4.6%

The ongoing decline in planned job-cuts along with the pickup in private sector activity may spur a meaningful uptick in job growth, and a positive print may spur another round of dollar strength as it boosts interest rate expectations.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Construction Spending (MoM) (AUG)	0.5%	-0.8%
Pending Home Sales (MoM) (AUG)	-0.5%	-1.0%
Building Permits (MoM) (AUG)	-1.6%	-5.6%

However, the slowdown in building activity paired with the persistent weakness in the housing market may drag on hiring, and another disappointing employment report may trigger a near-term decline in the greenback as it dampens bets of seeing the Fed normalize policy sooner rather than later.

How To Trade This Event Risk

Bullish USD Trade: Job & Wage Growth Picks Up

• 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: NFPs Disappoint for Third Consecutive Month

• 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

• As Relative Strength Index (RSI) comes off of oversold territory, break of near-term bearish momentum should highlight a larger topside correction.
• Interim Resistance: 1.3010 (50.0% retracement) to 1.3020 (23.6% expansion)
• Interim Support: 1.2450 (78.6% retracement) to 1.2500 pivot

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)
AUG 2014	09/05/2014 12:30 GMT	230K	142K	+15	+3

U.S. Non-Farm Payrolls (NFP) advanced only 142K in August to mark the slowest pace of growth for 2014 after climbing a revised 212K the preceding month. The jobless rate declined as expected to an annualized 6.1% from the prior month’s 6.2% as discouraged workers left the labor force, with participation rate slipping to 62.8% from 62.9%. The slowing recovery in employment may dampen the Fed’s scope to normalize policy sooner rather than later as Chair Janet Yellen remains in to rush to remove the zero-interest rate policy (ZIRP). The lower-than expected print dragged on the greenback, with the EUR/USD rising 28 pips right after the release to mark a fresh session high of 1.2988. However, the reaction was short-lived, with the pair consolidating during the rest of the North America trade to close at 1.2950.

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


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