EUR/USD – Lower as Draghi Vague on Stimulus

EUR/USD is calm on Friday, as the pair trades in the low-1.26 range in the European session. On Thursday, the ECB left interest rates unchanged but said that it would begin purchasing asset-based securities (ABS) in the fourth quarter of 2014. Taking a look at Friday’s releases, Eurozone Service PMIs softened last month. Eurozone Retail Sales exceeded expectations, jumping 1.2%. Over in the US, today’s highlight is the Nonfarm Payrolls, which should be considered a market-mover. As well, the US will release the unemployment rate, Trade Balance and the ISM Non-Manufacturing PMI.

At its October policy meeting, the ECB made no changes to interest rates. The central bank did announce it would start buying covered bonds in October and begin ABS purchases in Q4. However, there were no specifics and no mention of any purchase of government bonds. This left the markets underwhelmed by the ECB announcement and the euro remains at low levels. Given that the ECB shows no signs of introducing a full-blown QE, it’s questionable whether ABS will help boost the anemic Eurozone economy.

In the US, employment numbers are showing improvement. US Unemployment Claims dropped to 287 thousand, beating the estimate of 299 thousand. ADP Nonfarm Payrolls surprised with a strong gain, climbing to 213 thousand, compared to 204 thousand in the previous release. This beat the estimate of 207 thousand. The ADP release precedes the official NFP release, which will be published on Friday. The markets are anticipating a sharp gain, with an estimate of 216 thousand. If the indicator does follow suit with a solid reading, the US dollar could post further gains against its major rivals.

On the manufacturing and housing fronts, this week’s US numbers were disappointing. ISM Manufacturing PMI fell to 56.6 points, down from 59.0 points a month earlier. US Pending Home Sales posted a decline of 1.0%, compared to last month’s gain of 3.3%. On Friday, we’ll get a look at ISM Non-Manufacturing PMI, with the markets braced for a softer reading for September.

EUR/USD for Friday, October 3, 2014

EUR/USD October 3 at 10:10 GMT

EUR/USD 1.2616 H: 1.2669 L: 1.2615

EUR/USD Technical

• EUR/USD moved lower during the Asian session and this trend has continued in European trade.
• 1.2518 is providing strong support.
• 1.2688 has some breathing room as the euro has lost ground.
• Current range: 1.2518 to 1.2688

Further levels in both directions:

• Below: 1.2518, 1.2407, 1.2286 and 1.2144
• Above: 1.2688, 1.2806, 1.2905, 1.2984 and 1.3104

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Friday, continuing the trend we saw day earlier. This is not consistent with the pair’s movement, as the euro has posted losses. The ratio has a slight majority of long positions, indicative of trader bias towards the euro reversing directions and moving to higher ground.

GBP/USD Fundamentals

• 7:15 Spanish Services PMI. Estimate 56.9 points. Actual 55.8 points.
• 7:45 Italian Services PMI. Estimate 49.6 points. Actual 48.8 points.
• 8:00 Eurozone Final Services PMI. Estimate 52.8 points. Actual 52.4 points.
• 9:00 Eurozone Retail Sales. Estimate 0.1%.
• 12:30 US Nonfarm Employment Change. Estimate 216K.
• 12:30 US Trade Balance. Estimate -41.0B.
• 12:30 US Unemployment Rate. Estimate 6.1%.
• 12:30 US Average Hourly Earnings. Estimate 0.2%.
• 13:45 US Final Services PMI. Estimate 58.5 points.
• 14:00 US ISM Non-Manufacturing PMI. Estimate 58.5 points.

* Key releases are highlighted in bold

*All release times are GMT

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.