By Yan Petters – The U.S. NonFarm Payrolls report is expected today at 12:30 GMT. This indicator measures the change in the number of employed individuals during May, excluding the farming industry. This is considered to be the most accurate indicator for employment data in the U.S. In addition, the NonFarm Payrolls is released on the first Friday of the month, which makes it the most significant economic data from the U.S. This combination, of both importance and earliness, makes this report to be one of the most vital publications, and its release is usually accompanied with harsh volatility.
The employment condition in the U.S. is finally stabilizing, and is providing signals of recovery. The payrolls have climbed in both March and April, and the current estimate is that payrolls have increased in May as well. Analysts have forecasted that payrolls have climbed by 529,000 new jobs during May, which will further prove that the U.S. economy continues with its recovery pace, and that the Euro-Zone crisis has very little affect on the economy. The impact of such positive data is likely to boost the Dollar further, and the market seems ready to take advantage of such a development.
Let’s look at the EUR/USD weekly chart, and see how the technical indicators can assist us analyzing the market’s reaction to this publication.
The first thing you see when looking on the chart, is the abnormal freefall of the pair. The EUR/USD, which is considered to be the most stable currency pair, has dropped about 3,000 pips in 7 months. While this chart is of currencies, it accurately depicts the economic conditions of the Euro-Zone and the U.S. over the past 7 months. While the U.S. economy is recovering at a faster pace than expected, the Euro-Zone is suffering from an ongoing debt crisis. The outcome, as shown by the nations’ currencies, is quite clear. Here are several technical indications that can be noted from the chart:
• The pair is currently trading below the lower Bollinger Band, which indicates that the momentum is still bearish.
• The MACD continues to point down, with plenty of room left to drop further. The MACD indicates that the pair’s freefall is far from reaching its end.
• The RSI is floating in the Over-Sold section for several months now. Once the RSI will point up and exit the Over-Sold section, we should see it as an indication that the trend is reversing. Until then, the bearish trend is likely to proceed.
• The only indicator that provides a signal for a potential correction is the Slow Stochastic, and this is no accident. The Slow-Stochastic is considered to be the leading short-term indicator, and is very useful for news publication analysis. This teaches us that the market is waiting for the actual result before declaring its reaction to the NonFarm Payrolls release. This means that if the end result will fail to reach expectations, the pair might see a bullish correction.
• In a case that the pair will drop following the NonFarm Payrolls, the EUR/USD has potential to reach the 1.2000 level.
• If the EUR/USD will see a bullish correction, it might go as high as the 1.2500 level.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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