EUR/USD – Strong Gains on Strong German Manufacturing Report

The euro has gained over 100 points on Thursday, reversing the direction we saw a day earlier. In the European session, EUR/USD is trading in the low-1.14 range. On the release front, German Factory Orders was excellent, posting a gain of 4.2%. In the US, today’s major events are Trade Balance and Unemployment Claims.

Are Greece and its international creditors on a collision course? The new Greek government has declared that it will not honor the current bailout agreement and has put a halt to the sale of major public assets to help pay back debt. The ECB hit back late on Wednesday, saying that it would no longer accept Greek government bonds as collateral for ECB loans. This will put pressure on Greek banks and serves as a warning that the ECB will not stand idly by as Greece tries to avoid its bailout obligations. The drama will continue next week, as German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras attend an EU meeting in Brussels next week.

In the US, ADP Non-Farm Employment Change was well off expectations, falling to 213 thousand. The estimate stood at 224 thousand. The markets are bracing for more bad news on Thursday, as Unemployment Claims is expected to rise to 287 thousand. If the forecasts prove correct that the labor market has started off 2015 on a weak note, we could see the US dollar lose ground.

German Factory Orders impressed in December, jumping 4.2%, crushing the estimate of 1.4%. Earlier in the week, there was good news from European PMI reports, as Spanish, Italian and Eurozone Services PMIs all improved in January. All three readings were above the 50 level, indicative of expansion in the services sector. Meanwhile, Eurozone Retail Sales, the primary gauge of consumer spending, weakened to 0.3% in December, down from 0.6% a month earlier. The indicator managed to beat the forecast of -0.1%.

EUR/USD for Thursday, February 5, 2015

EUR/USD February 5 at 10:25 GMT

EUR/USD 1.1436 H: 1.1396 L: 1.1316

EUR/USD Technical

• EUR/USD showed slight gains in the Asian session. The pair has posted strong gains in the European session, breaking above resistance at 1.1426.
• 1.1426 has reverted to a support role as the euro has posted strong gains. 1.1340 is stronger.
• 1.1525 is a strong resistance line.
• Current range: 1.1426 to 1.1525

Further levels in both directions:

• Below: 1.1426, 1.1340, 1.1231, 1.1154 and 1066
• Above: 1.1525, 1.1634, 1.1754 and 1.1871

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in long positions on Thursday, continuing the trend seen a day earlier. This is not consistent with the movement of the pair, as the euro has posted strong gains. The ratio has a majority of short positions, indicative of trader bias towards the euro reversing directions and moving lower.

EUR/USD Fundamentals

• 7:00 German Factory Orders. Estimate 1.4%. Actual 4.2%.
• 9:00 ECB Economic Bulletin.
• 9:10 Eurozone Retail PMI. Actual 46.6 points.
• 10:00 EU Economic Forecasts.
• 10:00 French 10-year Bond Auction. Actual 0.61%.
• 12:30 US Challenger Job Cuts.
• 13:30 US Trade Balance. Estimate -38.2B.
• 13:30 US Unemployment Claims. Estimate 287K.
• 13:30 US Preliminary Nonfarm Productivity. Estimate 0.3%.
• 13:30 US Preliminary Unit Labor Costs. Estimate 1.3%.
• 15:30 US Natural Gas Storage. Estimate -119B.

*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.