Time of release: 06/01/2007 12:30 GMT, 08:30 EST
Primary Pair Impact : EUR/USD
Expected: 140K
Previous: 88K

The US Non-Farm Payrolls report is one of the most market-moving economic releases on the calendar, promising volatility regardless of the outcome. Last month’s report proved to be marginally dollar-bearish, but overall Greenback resilience forced the EURUSD lower through subsequent weeks of trading. Increasingly narrowed focus on overall US employment growth leaves dollar bulls hoping that NFP’s will surprise to the topside. Yet an improvement in NFP’s is far from a foregone conclusion; disappointments in this week’s ADP Employment Change and similar jobs data may leave risks to the downside ahead of the report.

Given expectations of a strong NFP gain, the dollar may have difficulty rallying in the absence of a notable surprise to the topside. A strong May print and an unchanged or upwardly revised April figure would clearly be the most Greenback-bullish outcome, providing a signal to go short the EURUSD on confirmation of a bearish reaction at 08:35 EST (12:35 GMT). Stops should be set above preceding swing-highs, while profit taking will be at the trader’s discretion. If the initial 5-minute move is especially pronounced, it may be difficult to achieve a 1:1 stop-loss to profit target ratio on this trade. This makes it that much more important to watch for signs of imminent reversal through the following hours of trade.

Bullish predictions for the coming NFP report leave ample room for disappointment with risks weighed to the downside for the US dollar. A below-consensus April print and an unchanged or downwardly revised March number would be the most dollar-bearish scenario, providing a clear signal to go long the EURUSD on confirmation of a rally at 08:35 EST (12:35 GMT). Stop limits shall be set at preceding swing lows, while profit targets will remain at the trader’s discretion. If the initial move is particularly pronounced, it may be difficult to achieve a 1:1 stop-loss to profit-target ratio—reinforcing the importance of monitoring the trade.

Terri Belkas is a Currency Analyst for FXCM.