TheNews

Another 230K rise in U.S. Non-Farm Payrolls (NFP) along with a downtick in the jobless rate may heighten the appeal of the greenback and trigger a near-term sell-off in EUR/USD should the data put increased pressure on the Federal Open Market Committee (FOMC) to remove the zero-interest rate policy (ZIRP).

What’s Expected:

Why Is This Event Important:

A further improvement in the labor market may boost bets for a Fed rate hike in 2015 as the U.S. economy approaches ‘full-employment,’ and we may see a growing number of central bank officials adopt a hawkish tone for monetary policy as Chair Janet Yellen remains confident in achieving the 2% inflation target over the policy horizon.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Advance Retail Sales (MAY)	1.2%	1.2%
Personal Spending (MAY)	0.7%	0.9%
NFIB Small Business Optimism (APR)	97.2	98.3

The ongoing improvement in business sentiment paired with the pickup in private-sector consumption may generate a marked expansion in U.S. job growth, and a positive development may spur a resumption of the long-term bull trend in the greenback as it boosts interest rate expectations.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Challenger Job Cuts (YoY) (JUN)	--	42.7%
Housing Starts (MoM) (MAY)	-4.0%	-11.1%
Industrial Production (MoM) (MAY)	0.2%	-0.2%

However, the rise in planned job cuts along with the ongoing slack in business outputs may drag on hiring, and a dismal NFP report may prop up the euro-dollar exchange rate going into the holiday weekend as it raises the risk of seeing a further delay in the Fed’s normalization cycle.

How To Trade This Event Risk

Bullish USD Trade: U.S. Adds 230K Jobs or More; Unemployment Slips to 5.4%

• 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: Employment Report Falls Short of Market Expectations

• 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

EURUSD Daily

• Long-term forecast remains bearish for EUR/USD amid the divergence in the policy outlook, but the pair may continue to consolidate within the wedge/triangle formation from earlier this year as the pair holds above the May low (1.0818).
• Interim Resistance: 1.1510 (61.8% expansion) to 1.1532 (February high)
• Interim Support: 1.0970 (38.2% expansion) to 1.1000 (50% retracement)

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)
MAY 2015	06/05/2015 12:30 GMT	226K	280K	-199	-151

EURUSD M5: 179 pips price movement by USD - Non-Farm Employment Change news event:

U.S. job growth picked up in May, with Non-Farm Payrolls(NFP) beating estimates as the economy added 280K jobs following the 221K the month prior. At the same time, the jobless rate unexpectedly increased to an annualized 5.5% from 5.4% as discouraged workers returned to the labor force, with the participation rate expanding to 62.9% from 62.8% during the same period. The ongoing improvement in the labor market may boost expectations for an imminent Fed rate hike, but the central bank may look to further delay the normalization cycle as it struggles to achieve the 2% target for inflation. The greenback strengthened following the better-than-expected release, with EUR/USD dipping below the 1.1100 handle, but the pair consolidated throughout the remainder of the North American trade as it ended the day at 1.1107.

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

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