Euro Rebound to Benefit From Another Decline in German Unemployment

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- Germany Unemployment to Contract for Second Consecutive Month.

- Jobless Rate to Hold at Annualized 6.7% for Six Straight Months.

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Trading the News: German Unemployment Change

Germany’s Unemployment report may generate a more meaningful rebound in the EUR/USD should the data highlight an improved outlook the euro-area’s largest economy.

What’s Expected:

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Why Is This Event Important:Despite fears of a slowing recovery in the monetary union a further decline in unemployment may keep the European Central Bank (ECB) on the sidelines throughout the remainder of 2014 and a further improvement in the economic outlook may limit the downside risks for the EUR/USD as market participants scale back bets for more non-standard measures.

Expectations: Bullish Argument/Scenario

Stronger consumption paired with the pickup in business outputs may generate a larger-than-expected decline in unemployment and a positive development may encourage a more meaningful rebound in the EUR/USD as it gives the ECB greater scope to retain its current policy throughout the remainder of the year.

Risk: Bearish Argument/Scenario

However the ongoing decline in business sentiment along with the weakening outlook for global trade may drag on the labor market and an unexpected rise in unemployment may trigger a bearish reaction in the EUR/USD as it fuels bets for additional monetary support.

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How To Trade This Event Risk(Video)

Bullish EUR Trade: German Unemployment Declines 5K or Greater

• Need red green-minute candle following the print to consider a long EUR/USD position
• If market reaction favors a long Euro trade buy EUR/USD with two separate position
• Set stop at the near-by swing low/reasonable distance from cost; at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is met set reasonable limit

Bullish EUR Trade: Labor Market Report Disappoints

• Need red five-minute candle to favor a short EUR/USD trade
• Implement same strategy as the bullish Euro trade just in the opposite direction

Read More:

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Potential Price Targets For The Release

EUR/USD Daily

Chart - Created Using FXCM Marketscope 2.0

• Despite the long-term bearish RSI momentum may see a larger rebound as the oscillator rebounds from oversold territory.
• Interim Resistance: 1.3510 (38.2% expansion) to 1.3520 (38.2% retracement)
• Interim Support: 1.3140 (38.2% retracement) to 1.3150 Pivot

Impact that Germany’s Unemployment report has had on EUR/USD during the last release

July 2014 German Unemployment Change

Unemployment in German shrank by 12000 in July more than the average estimate for a 5000 decline while the jobless rate was unchanged at 6.6% as in June. However the Euro fell against the US Dollar after the release though the pair came back later during the North America trade. Despite the better-than-expected data it seems as though one single good print may not be strong enough to shift the near-term outlook for the EUR/USD as it remains in a downward trend.

-- Written by David Song Currency Analyst and Shuyang Ren

To contact David e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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