EUR/USD – Euro in Holding Pattern Ahead of Key NFP

The euro slide has halted, at least for now, as EUR/USD trades quietly at 1.0870 line in Friday’s European session. In economic news, German numbers continue to disappoint, as Industrial Production declined by 1.1%. The markets are keeping a close watch on US employment data, as Nonfarm Payrolls and the unemployment rate will be released later on Friday.

Germany, the largest economy in the Eurozone, continues to post soft numbers. The country’s manufacturing sector is clearly in trouble, as underscored by this week’s releases. Factory Orders slipped 1.7%, and Industrial Orders followed on Friday with a decline of 1.1%, well off the estimate of +0.6%. Weaker manufacturing data can be blamed on weaker demand from China and Russia. Recent soft numbers out of Germany and the Eurozone are exactly what the ECB does not want to hear, as they underscore a weak Eurozone economy and add to the pressure on the central bank to increase stimulus, a step which ECB head Mario Draghi has hinted that the ECB is prepared to take. Market expectations that the ECB could act in December will continue to weigh on the euro. The currency continues to struggle, and has slipped below the 1.09 line, as it flirts with lows last seen in July. The continental currency has not recovered since last week’s Fed statement a rate hike was still on the table in 2015. With the Eurozone suffering from weak growth and a lack of inflation, unless Eurozone, particularly German releases show marked improvement, the euro could be in for more turbulence.

All eyes are on US Nonfarm Payrolls, which will be released on Friday. NFP is expected to rise sharply to 181 thousand, so the dollar could be a big winner as we wrap up the trading week. However, the markets haven’t forgotten the dismal NFP report in September, which came in at 142 thousand, well short of the estimate of 201 thousand. Will the forecast for the October release be more accurate? Aside from employment numbers acting as an important gauge of the US economy, these releases have added significance, since strong job numbers will increase the likelihood of a rate hike in December. Conversely, a poor performance will damper expectations of a move by the Fed before 2016. Traders should expect volatility after the Nonfarm Payrolls release.

On Thursday, US unemployment claims disappointed, as the key indicator jumped to 276 thousand, way above the forecast of 263 thousand. This marked a 5-week high. Still, recent jobless claim releases point to close to full employment in the US, and the four-week average of jobless claims, which is less volatile than the weekly release, remains at its lowest level since December 1973. The unemployment rate stands at just 5.1%, and is expected to nudge lower to an even 5.0%.

EUR/USD Fundamentals

Friday (Nov. 6)

• 7:00 German Industrial Production. Estimate +0.6%. Actual -1.1%
• 7:45 French Government Balance. Actual -74.5B
• 7:45 French Trade Balance. Estimate -3.1B. Actual -3.4B
• 13:30 US Average Hourly Earnings. Estimate 0.2%
• 13:30 US Nonfarm Employment Charge. Estimate 181K
• 13:30 US Unemployment Rate. Estimate 5.0%
• 20:00 US Consumer Credit. Estimate 17.6B
• 21:15 FOMC Member Lael Brainard Speaks

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Friday, November 6, 2015

EUR/USD November 6 at 9:50 GMT

EUR/USD 1.0867 H: 1.0894 L: 1.0862

EUR/USD Technical

• EUR/USD has shown limited movement in the Asian and European sessions.
• 1.0847 continues to provide support, but is a weak line.
• 1.0941 is an immediate resistance line.
• Current range: 1.0847 to 1.0941

Further levels in both directions:

• Below: 1.0847, 1.0732, 1.0659 and 1.05
• Above: 1.0941, 1.1017, 1.1105, 1.1214 and 1.1296

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged, consistent with the lack of movement from the pair on Friday. The ratio has a slight majority of long positions (54:46), indicating slight trader bias towards the pair 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.