EUR/USD: Trading the US Unemployment Claims

The US Unemployment Claims indicator is published weekly, and measures the number of people filing for  unemployment for the first time during the previous week. A reading which  is higher than the market forecast is bearish for the dollar.

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on Thursday at 13:30 GMT.

Indicator Background

Unemployment claims is an important economic indicator of consumer confidence in the economy. It helps measure future spending behavior, as consumers are more likely to spend if they are confident that their jobs are secure and unemployment is dropping. In turn, an increase in consumer spending sends a strong signal that the economy is healthy and growing and boosts other sectors in the economy.

Last week’s figures  came in at 348K, the third consecutive week that the readings were better than the market forecast. This week’s forecast is practically unchanged, at 350K. The unemployment rate in the US has dropped slightly  in recent months, but  at over 8%, it is still  very high and continues  to be a source of concern for the economy.

Sentiments and levels

The Greek drama may have subsided, but the eurozone financial crisis is far from over. The continent’s debt load will continue to grow without an effective and comprehensive  plan for growth, and other eurozone countries, notably Portugal, are still in deep trouble.  So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3450, 1.3330, 1.3280, 1.3212, 1.3150, 1.3050 and 1.30.

5 Scenarios

1. Within expectations: 340K to 360K : In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 330K to 339K: An unexpected lower reading can send the pair well below one support level.
3. Well above expectations: Below 330K:   In this scenario, two or more  support levels   could fall.
4. Below expectations:  361K to 370K: A poor reading could push EUR/USD higher, and one resistance line could be broken.
5. Well below expectations: Above 371K. A sharp increase in  the reading will hurt the dollar, and the pair could break two resistance levels.

For more on the Euro, see the EUR/USD forecast.