EUR/USD – Euro Edges Higher as German Services PMI Beat Expectations

It’s been an uneventful week for the euro, which is showing little movement in the Thursday session. Currently, EUR/USD is trading just above the 1.09 line. On the release front, German and Eurozone Services PMIs continue to show expansion and were above expectations. Later in the day, ECB President Mario Draghi will speak at an event in Switzerland. In the US, today’s major event is unemployment claims, which is expected to drop to 246 thousand. On Friday, the US releases wage growth and nonfarm payrolls reports, so traders should be prepared for some movement from EUR/USD.

As expected, the Federal Reserve stayed on the sidelines on Wednesday, holding the benchmark rate at 0.75 percent. The Fed rate statement was hawkish, as policymakers emphasized the positives and downplayed a soft first quarter. The statement noted that consumer spending remains strong and that inflation was “running close” to the Fed’s 2 percent target. The Fed’s message is clearly one of optimism, as the central bank remains on track to raise interest rates twice more in 2017. The Fed’s bullish statement immediately raised the likelihood of a rate hike at June meeting, which jumped to 74 percent after the statement, up from 63% before meeting. The Fed has two key goals which have been achieved, namely full employment and an inflation rate of 2%. One area of concern is the balance sheet, which stands at $4.5 trillion. The minutes of the March meeting stated that policymakers want to start reducing this figure before the end of 2017, and we could see another reference to the balance sheet in the April minutes.

The eurozone has enjoyed a solid first quarter, and more growth has meant more jobs and lower unemployment figures. Just a year ago, the eurozone unemployment rate was at 10.3%, but the rate has been steadily decreasing since then. The March release remained unchanged at 9.5%, within expectations. Germany has led the way, with the unemployment rate dropping to 5.9% in February. Unemployment rolls continue to shrink in Germany, and the decline of 15,000 unemployed persons was better than the estimate of 10,000. Services PMI reports for March have also looked solid, with the eurozone, Germany and France all posting figures pointing to expansion.

There are just three days left until Election Day, with Emmanuel Macron and Marine Le Pen vying for the presidency of France. The euro and European stock markets have been very steady in the second round of the campaign, as opinion polls continue to show a comfortable majority for Macron:

The polling average line looks at the five most recent national polls and takes the median value, ie, the value between the two figures that are higher and two figures that are lower.

Source – BBC

French Election Timeline

May 3 – TV debate between the two remaining candidates

May 5 – [from midnight] Poll blackout

May 7 – Second round of French presidential elections. Last polls close at 19:00 BST / 14:00 EDT, with an exit poll result announced immediately.

May 11 – Official proclamation of the new President.

May 14 – [from midnight] End of Francois Hollande’s mandate

June 11 – First round of legislative elections

June 18 – Second round of legislative elections.

France Prepares for Fiery Presidential Debate

Forget the Fed, France TV Debate to Shift FX

EUR/USD Fundamentals

Thursday (May 4)

• 3:00 Spanish Unemployment Change. Estimate -78.2K. Actual -129.3K
• 3:15 Spanish Services PMI. Estimate 57.7. Actual 57.8
• 3:45 Italian Services PMI. Estimate 53.7. Actual 56.2
• 3:50 French Final Services PMI. Estimate 57.7. Actual 56.7
• 3:55 German Final Services PMI. Estimate 54.7. Actual 55.4
• 4:00 Eurozone Final Services PMI. Estimate 56.3. Actual 56.4
• 5:00 Eurozone Retail Sales. Estimate 0.1%. 
• Tentative – Spanish 10-y Bond Auction
• Tentative -French 10-y Bond Auction
• 7:3o US Challenger Job Cuts
• 8:30 US Unemployment Claims. Estimate 246K
• 8:30 US Preliminary Nonfarm Productivity. Estimate 0.1%
• 8:3o US Preliminary Unit Labor Costs. Estimate 2.5%
• 8:30 US Trade Balance. Estimate -44.9B
• 10:00 US Factory Orders. Estimate 0.6%
• 10:30 US Natural Gas Storage. Estimate 61B
• 12:30 ECB President Mario Draghi Speech

*All release times are EST

*Key events are in bold

EUR/USD for Thursday, May 4, 2017

EUR/USD Thursday, May 4 at 4:30 EST

Open: 1.0884 High: 1.0920 Low: 1.0873 Close: 1.0912

EUR/USD Technical

EUR/USD was flat in the Asian session and has edged higher in European trade

• 1.0873 remains a weak support level
• 1.0985 is the next line of resistance

Further levels in both directions:

• Below: 1.0873, 1.0708, 1.0616 and 1.0506
• Above: 1.0985, 1.1122 and 1.1242
• Current range: 1.0873 to 1.0985

OANDA’s Open Positions Ratio

EUR/USD ratio continues to show little movement this week. Currently, short positions have a majority (62%), indicative of EUR/USD continuing to move to lower ground.

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.