EUR/USD – Euro Ticks Lower as Eurozone, German Manufacturing Meets Expectations

The euro has posted small losses on Thursday, as EUR/USD trades at 1.1140. On the release front, it’s another very busy day in Europe and the US. German and Eurozone Manufacturing PMIs both pointed to expansion in August. In the US, today’s major events are unemployment claims and the ISM Manufacturing PMI.

Eurozone and German Manufacturing PMIs both showed expansion in the manufacturing sector, with readings of 51.7 and 53.6 points, respectively. Although the Eurozone release was just shy of the forecast of 51.8 points, it did mark a 3-month low, which could raise concerns. As well, French and Italian Manufacturing PMIs failed to crack the 50-point threshold, pointing to contraction. Inflation in the Eurozone remains soft, although this week’s releases were close to the estimates, so the euro showed little reaction. German Preliminary CPI dropped to a flat 0.0% in August, down from 0.3% a month earlier. This was close to the forecast of 0.1%. Eurozone CPI remained steady at 0.2%, shy of the estimate of 0.3%. These soft numbers will add pressure on the ECB to adopt further monetary easing at its policy meeting on September 7. Meanwhile, German consumer spending and jobless numbers impressed in July. Retail Sales sparkled, jumping 1.7%, its strongest reading in over a year. Employment Change was unchanged at -7 thousand, beating the forecast of -2 thousand.

US numbers continues to enjoy a solid week. The ADP Nonfarm Employment Change was little changed in August, posting a gain of 177 thousand. This beat the forecast of 174 thousand, the third straight month the indicator has exceeded the forecast. This release precedes the all-important official Nonfarm Employment Change report on Friday. On the housing front, Pending Home Sales gained 1.3%, well above the forecast of 0.7%, marking a 3-month high. On Tuesday, CB Consumer confidence jumped to 1o1.1 points in August, above the forecast of 99.7 points. It marked the indicator’s highest level since September 2015 and points to strong confidence on the part of the US consumer.

A September rate hike is back on the table, following an upbeat speech from Fed chair Janet Yellen last week at the Jackson Hole summit. Yellen’s message to the markets was refreshingly clear, as she said that the case for a rate increase had “strengthened in recent months”. Yellen noted that the key economic indicators were performing well – the labor market was approaching maximum employment, inflation was steady, and consumer spending remained solid. Still, Yellen did not provide any timeline on a rate hike nor did she spell out what the Fed wants to see before pressing the rate trigger. The Fed’s signal to the markets has raised the odds of a rate move, according to the CME Group FedWatch tool, with a September hike priced at 30% in September and 57% for a December hike. However, given that any move by the Fed will be data-dependent, US numbers ahead of the Fed policy meeting on September 21 could significantly change the rate outlook.

EUR/USD Fundamentals

Thursday (September 1)

• 7:15 Spanish Manufacturing PMI. Estimate 50.8. Actual 51.0
• 7:45 Italian Manufacturing PMI. Estimate 51.3. Actual 49.8
• 7:50 French Final Manufacturing PMI. Estimate 48.5. Actual 48.3
• 7:55 German Final Manufacturing PMI. Estimate 53.6. Actual 53.6
• 8:00 Eurozone Final Manufacturing PMI. Estimate 51.8. Actual 51.7
• Tentative – Spanish 10-year Bond Auction
• Tentative – French 10-year Bond Auction
• 11:30 US Challenger Job Cuts
• 12:30 US Unemployment Claims. Estimate 265K
• 12:30 US Revised Nonfarm Productivity. Estimate -0.6%
• 12:30 US Revised Unit Labor Costs. Estimate 2.0%
• 13:45 US Final Manufacturing PMI. Estimate 52.1
• 14:00 US ISM Manufacturing PMI. Estimate 52.0
• 14:00 Construction Spending. Estimate 0.6%
• 14:00 US ISM Manufacturing Prices. Estimate 54.5
• 14:30 US Natural Gas Storage. Estimate 38B 
• All Day – US Total Vehicle Sales. Estimate 17.2M 

Friday (September 2)

• 12:30 US Average Hourly Earnings. Estimate 0.2%
• 12:30 US Nonfarm Employment Change. Estimate 186K
• 12:30 US Unemployment Rate. Estimate 4.8%

*All release times are EDT

* Key events are in bold

EUR/USD for Thursday, September 1, 2016

EUR/USD September 1 at 9:45 GMT

Open: 1.1156 High: 1.1166 Low: 1.1127 Close: 1.1143

EUR/USD Technical

• EUR/USD was flat in the Asian session and has been choppy in European trade
•  1.1054 is a strong support line
• 1.1150 remains fluid and could see more action in the Thursday session. Currently it is a weak resistance line

Further levels in both directions:

• Below: 1.1054, 1.0957 and 1.0821
• Above: 1.1150, 1.1278, 1.1376 and 1.1467
• Current range: 1.1054 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Thursday, consistent with the lack of movement from EUR/USD. Currently, short positions have a majority (54%), indicative of trader bias towards EUR/USD reversing directions and moving upwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.