At 8:30 AM Eastern on Friday (Feb. 6) the new U.S. nonfarm payrolls report probably made some economists gasp:
"The Labor Department said U.S. employers slashed 598,000 jobs in January, the most since late 1974. The unemployment rate rose to 7.6 percent, the highest since late 1992. The January data were not only a bit worse than anticipated, but December's job losses were revised upward." (AP)
Following this report, the U.S. dollar promptly lost to the euro, sending the EUR/USD some 200 pips higher. You might say – of course, what else can the USD do but lose after an economic report like that?
But think back to January 9, when the previous sharply negative jobs number was released. Following that report, the USD gained, and strongly – in fact, it pushed the EUR/USD ten figures (that's 1,000 pips!) lower by February 2.
So, the same negative U.S. employment number can send the dollar higher and lower? Interesting.
That's why fundamental analysis cannot tell you where the USD is going from here. Maybe forex traders will see the worsening U.S. unemployment as a reason to continue selling the buck. Or, maybe they will look past it and focus on the future economic stimulus plans. Which scenario do you like more?
Elliott wave analysis can help you get much more clarity. Not only can you get a good idea of where the EUR/USD is headed from here, but you can also define specific price targets. For example, take a look at this daily EUR/USD forecast that EWI's Currency Specialty Service posted on February 5, a day before the new jobs report came out.
Update For: Friday
Posted On: Thu, 5 Feb 2009 22:55:00 GMT
EURUSD [Last Price]: 1.2782
[Bottoming] The dip below 1.2769 satisfied downside expectations... It's already possible to count five waves up from 1.2707, so a bottom may already be in place. If so, the market must put in a secondary low and start higher, doing so from current levels.
As you can see, this forecast doesn't even mention the upcoming Friday's jobs number. Instead, it focuses on the market's internals – specifically, its Elliott wave structure: the five-waves moves, in this case. When you can clearly count a five-wave impulse on a chart, it's is always a strong clue, because its direction denotes the direction of the trend.