EUR/USD – Euro Edges Lower, US Nonfarm Payrolls Loom

EUR/USD has edged lower on Friday, as the pair trades at 1.1130. On the release front, German Industrial Production posted a strong gain of 2.5%, well above the forecast of 1.1%. In the US, the focus is on employment indicators, with three key events on the schedule – Nonfarm Payrolls, Average Hourly Earnings and the unemployment rate. The markets will also be paying close attention as three FOMC members speak at public engagements. 

US unemployment claims sparkled last week, dropping to just 249 thousand, beating the estimate of 255 thousand. Unemployment claims have come in below the forecast for 10 straight weeks, pointing to a tight labor market. Jobless filings have been below 300,000 for 83 straight weeks, marking the longest streak since 1970. With a December rate hike up in the air, Friday’s triple-release of US job numbers will be especially important.

The markets are expecting positive news from US payrolls and wage growth reports for September and if the forecasts are accurate, the greenback could push higher. Non-farm Employment Change is expected to improve to 171 thousand, while Average Hourly Earnings is forecast to edge higher to 0.2%. The unemployment rate has held steady at 4.9% for three months and no change is expected. These releases could also be an important factor in the Fed’s rate decision in December. If the market predictions are correct and September shows stronger job numbers, the case for a Fed rate hike in December will have improved. If these releases are soft, however, the Fed might get cold feet and a rate hike could remain on hold until 2017.

Is the Eurozone banking sector in trouble? According to recent reports, giant Deutsche Bank, one of the largest banks in Europe is facing financial difficulties and may have to be bailed out by the German taxpayer. The bank has been hit with a staggering $14 billion fine from the US Justice Department over mortgage securities irregularities, and its shares have plunged over 50% since July 2015. Although the German promptly government denied the bailout claim, Deutsche’s problems have put the spotlight on the banking sector, which has seen profits drop due to the ECB’s ultra-low interest stance. This week, Citi released a report that found that European banks are among the worst performing over the past decade compared to other global regions. With the Eurozone bracing for further fallout from Brexit once negotiations commence between Britain and the EU, further signs of instability in the banking sector could weigh on the euro.

EUR/USD Fundamentals

Friday (October 7)

• 6:00 German Industrial Production. Estimate 1.1%. Actual 2.5%
• 6:45 French Government Budget Balance. Actual -96.0B
• 6:45 French Industrial Production. Estimate 0.7%. Actual 2.1%
• 6:45 French Trade Balance. Estimate -4.3B. Actual -4.3B
• 12:30 US Average Hourly Earnings. Estimate 0.2%
• 12:30 US Nonfarm Employment Change. Estimate 171K
• 12:30 US Unemployment Rate. Estimate 4.9%
• 14:00 US Final Wholesale Inventories. Estimate -0.1%
• 14:30 US FOMC Member Stanley Fischer Speaks
• 16:45 US FOMC Member Loretta Mester Speaks
• 19:00 US FOMC Member Esther George Speaks
• 19:00 US Consumer Credit. Estimate 16.8B
• 20:00 US FOMC Member Lael Brainard Speaks

*All release times are EDT

* Key events are in bold

EUR/USD for Friday, October 7, 2016

EUR/USD October 7 at 9:30 GMT

Open: 1.1142 High: 1.1146 Low: 1.1104 Close: 1.1124

EUR/USD Technical

• EUR/USD posted small losses in the Asian session and is choppy in European trade
• 1.1054 has switched to support following losses by EUR/USD in the Thursday session
• 1.1150 is a weak resistance line and could see action on Friday

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 has shown strong movement towards short positions. Currently, long and short positions are 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.