Trading the US Non-Farm Payroll Data - EUR/USD

The shared currency rebounded from an 11-year low mid-Thursday as investors looked ahead to Non-farm Payroll report due today, which could shed some light on the pace of the U.S. recovery. The single currency hit an 11-year low during the European session after ECB President Mario Draghi said the ECB would not purchase bonds with yields lower than the current deposit rate of -0.2%. However, the euro managed to pare some of its losses against the dollar after the ECB President Mario Draghi said that the recent stream of stronger-than-expected euro zone economic data has led the ECB to revise its economic projections upward. The central bank now expects annual real GDP to increase by 1.5% in 2015, 1.9% in 2016 and 2.1% in 2017.

The market continued moving quietly during the Asian session, keeping its eyes on today’s US Non-farm Payrolls report. The only exceptions were the JPY and NOK which managed to maintain their day’s early gains. The market expects US payrolls to have increased 240k in February and the jobless rate to have ticked down to 5.6% from 5.7%. That would be a slowdown in hiring from the previous month of 257k, but not a cause for concern as it would be exactly in line with the average for the last year.

A disappointing number (below 200k) will help the euro recover against the greenback, while a good number (above 240k) would support the USD and may put the EUR/USD pair under further selling pressure near the key support level of 1.1000. During the week, ADP Employment report showed a gain of 212k, while the weekly Jobless Claims for the week ended Feb. 28 increased by 7k to a seasonal adjusted 320k.

Technically, we have said that a close below the psychological level of 1.1100 would be a very bearish development for the euro, as we have not seen a daily close below that level since September 2003. With the NFP report coming later in the day, we could expect any kind of reaction as the NFP figure will determine the pair’s move and trend direction.

The correction few days ago saw the pair close to around the key resistance level of 1.1500, which technically speaking could be viewed as quite bearish, given the fact that it was a continuation pattern. That said, I remain bearish on the pair since we still see no sign that the pair it’s going to reverse yet, with the next target now being the key support level at 1.0920. Alternatively, given how aggressive the rally has been over the last two days, we could see a brief period of consolidation, above the 1.1100 before a continuation of the move towards 1.0920.