EUR/USD – Euro Little Changed, US Services PMI Next

The euro has posted slight gains in the Tuesday session, as EUR/USD trades at 1.1160. On the release front, there are no major releases out of the Eurozone. German Factory Orders improved to 0.2%, but this was short of expectations. Eurozone Retail PMI improved to 51.0 points, but Eurozone GDP came in at 0.0%, short of the forecast of 0.3%. In the US, today’s major release is ISM Non-Manufacturing PMI. The indicator is expected to remain steady, with an estimate of 55.4 points.

Eurozone data started the week with mixed results. German and Eurozone Service PMIs pointed to slight expansion in August, but both indicators fell short of their estimates. The German reading of 51.7 was shy of the estimate of 53.3 points and was down sharply from the July reading of 54.4 points. The Eurozone reading was almost unchanged at 52.8 points, shy of the estimate of 53.1 points. There was better news from Eurozone Sentix Investor Confidence, which jumped to 5.6 points, above the forecast of 5.1 points. As well, Eurozone Retail Sales jumped 1.1%, compared to estimate of 0.5%. It was the indicator’s strongest gain since January 2015.

The robust US labor market hit a bump in August, as US employment numbers were dismal on Friday. Nonfarm Payrolls plunged to 151 thousand in August, down from 255 thousand a month earlier. This was well short of the forecast of 180 thousand. Wage growth also disappointed, as Average Hourly Earnings edged lower to o.1%, shy of the forecast of 0.2%. Clearly this was not positive news, but August job data is often unreliable and tends to miss market forecasts. This may have helped the US dollar dodge a bullet, as the greenback actually recorded gains against the euro on Friday, despite the dismal payrolls release. Will the Fed also look the other way and ignore the weak job data? The markets apparently think so, as the odds of a rate hike this year are about the same after the payrolls report – the  the likelihood of a September hike is 20 percent, while a December increase is pegged at 60 percent. Still, even if the August payrolls release is overlooked, many FOMC members remain uneasy about a rate hike, especially given the persistent lack of inflation in the economy. Key inflation indicators will be released in mid-September, just before the Fed policy meeting on September 21. These releases could play a critical role in determining if the Fed presses the rate trigger this month, or decides to revisit the rate question in December, which would be exactly a year from the last rate hike. 

EUR/USD Fundamentals

Tuesday (September 6)

• 6:00 German Factory Orders. Estimate 0.5%. Actual 0.2%
• 8:10 Eurozone Retail PMI. Actual 51.0 
• 9:00 Eurozone Revised GDP. Estimate 0.3%. Actual 0.0%
• 14:00 US ISM Non-Manufacturing PMI. Estimate 55.4
• 14:00 US IBD/TIPP Economic Optimism. Estimate 48.6
• 14:00 US Labor Market Conditions Index

*All release times are EDT

* Key events are in bold

EUR/USD for Tuesday, September 6, 2016

EUR/USD September 6 at 8:00 GMT

Open: 1.1150 High: 1.1169 Low: 1.1138 Close: 1.1159

EUR/USD Technical

• EUR/USD was flat in the Asian session and has posted slight gains in European trade
• 1.1278 is a strong resistance line
• 1.1150 was tested earlier in support and remains a weak line

Further levels in both directions:

• Below: 1.1150, 1.1054, 1.0957 and 1.0821
• Above: 1.278, 1.1376 and 1.1467
• Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Tuesday. Currently, long and short positions are almost evenly split, indicative of a lack of trader bias as to what direction EUR/USD will take next.

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.