Euro to Rebound as Unemployment Declines- Former Support in Focus
- German Unemployment to Decline for Three Straight Month
- Unemployment Reported to Hold at 6.8% for Third Month
Trading the News: German Unemployment Change
Another 10.0K drop in German Unemployment may spur a bullish reaction in the EURUSD as it limit’s the European Central Bank’s (ECB) scope to further embark on its easing cycle at the March 6 meeting.
What’s Expected:
Time of release: 02/27/2014 8:55 GMT, 3:55 EST
Primary Pair Impact: EURUSD
Expected: -10K
Previous: -28K
DailyFX Forecast: -10K to 10K
Why Is This Event Important:
With the ECB interest rate decision quickly approaching, positive developments coming out of Europe’s largest economy may limit the downside risk for the single currency, but the Governing Council may have little choice but to implement more non-standard measures this year amid the persistent threat for disinflation.
Expectations: Bullish Argument/Scenario
Release | Expected | Actual |
IFO Business Climate (FEB) | 110.5 | 111.3 |
IFO Expectations (FEB) | 108.1 | 108.3 |
Gross Domestic Product s.a. (QoQ) (4Q P) | 0.3% | 0.4% |
German’s unemployment report may continue to exceed market expectations as the rise in business confidence instills a positive outlook for the labor market, and a better-than-expected print may generate a short-term rebound in the EURUSD as it dampens bets for additional monetary support.
Risk: Bearish Argument/Scenario
Release | Expected | Actual |
Industrial Production s.a. (MoM) (DEC) | 0.3% | -0.6% |
Factory Orders (MoM) (DEC) | 0.2% | -0.5% |
Retail Sales (MoM) (DEC) | 0.2% | -2.5% |
However, the slowdown in business outputs paired with the ongoing weakness in private sector consumption may limit the prospects for a marked decline in unemployment, and a dismal print may heighten the bearish sentiment surrounding the single currency as it curbs the outlook for growth and inflation.
How To Trade This Event Risk(Video)
Join DailyFX on Demand to Cover Current Trade Setups on the Euro
Bullish Euro Trade: German Unemployment Falls 10.0K or Greater
Need green, five-minute candle following the report to consider a long Euro trade
If the market reaction favors a bullish EURUSD trade, buy with two position
Set stop at the near-by swing high/reasonable distance from entry with at least 1:1 risk-to-reward
Move stop to cost on remaining position once initial target is met; set reasonable limit
Bearish Euro Trade: Labor Report Disappoints
Need red, five-minute candle following the release to look at a short EURUSD entry
Implement same setup as the bullish Euro trade, just in reverse
Potential Price Targets For The Release
EUR/USD Daily
Chart - Created Using FXCM Marketscope 2.0
Carves Lower High Within 2008 Down Trend; At Risk for Lower Low
RSI Fails to Preserve Bullish Momentum from Start of February
Interim Resistance: 1.3800 (100.0 expansion) to 1.3830 (61.8 retracement)
Interim Support: 1.3450 (38.2% retracement) to 1.3460 (50.0% expansion)
Impact that the change in German Unemployment has had on EUR during the last month
Period | Data Released | Estimate | Actual | Pips Change (1 Hour post event ) | Pips Change (End of Day post event) |
JAN 2014 | 01/30/2014 8:55 GMT | -6K | -28K | -27 | -67 |
January 2014 German Unemployment Change
Germany’s January unemployment change print came in far better than market expectations and the -28K change figure was the best since 2011. The unemployment figure also ticked down by a tenth of a percent to 6.8%, but the Euro fell against the Dollar and continued to until bottoming out on February third. Although inflation data met estimates on Monday, EUR crosses remain at key technical levels and negative catalysts could bring out sellers in EUR/USD and EUR/JPY pairs.
--- Written by David Song, Currency Analyst and Gregory Marks
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.
Trade Alongsidethe DailyFX Team on DailyFX on Demand
Looking to use the DailyFX Trade Signals LIVE? Check out Mirror Trader.
New to FX? Watch this Video
Join us to discuss the outlook for the major currencies on the DailyFXForums
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.
