EUR/USD – Euro in Holding Pattern Ahead of US Nonfarm Payrolls

The euro has inched higher in the Friday session, as EUR/USD is currently trading at 1.1220. On the release front, the sole eurozone event is Spanish Unemployment Change, which posted a strong drop of 111.9 thousand, slightly better than expectations. In the US, the spotlight remains on employment data, highlighted by Nonfarm Payrolls. The markets are braced for a sharp drop in May, with a forecast of 181 thousand. We’ll also get a look at wage growth, which is expected to dip to 0.2%, and the unemployment rate, which is forecast to remain unchanged at 4.4 percent.

As the eurozone’s largest economy, a strong and reliable German economy has been instrumental in the eurozone’s impressive improvement in the first quarter of 2017. However, retail sales, the primary gauge of consumer spending, has raised concerns with some soft numbers in recent months. In April, retail sales declined 0.2%, compared to a forecast of +0.4%. This marked the third decline in 2017, further contraction in the second quarter could unnerve investor confidence in the German economy and weigh on the euro. Although the German labor market remains strong, this has not translated into higher inflation, which declined 0.2% in May, after a flat reading of 0.0% in April.

With less than two weeks to go before the Federal Reserve’s rate decision on June 14, the markets are ever-more confident that the Fed will press the rate trigger for the second time this year. The odds of a quarter-point rate hike continue to rise, and according to the CME Group, currently stand at 91 percent.  The Fed remains concerned about low levels of inflation, which remain stubbornly low, despite a labor market that remains close to capacity. Janet Yellen & Co. are also scratching their heads over soft consumer spending, which has not kept pace with high levels of consumer confidence. As for additional rate hikes in the second half of 2017, the markets are much more skeptical, as the heady predictions that the Fed could raise rates up to four times this year have faded considerably.

Strong U.S. Job Growth Expected in May

EUR/USD Fundamentals

Friday (June 2)

• 3:00 Spanish Unemployment Change. Estimate -110.2K. Actual -111.9K
• 5:00 Eurozone PPI. Estimate 0.2%. Actual 0.0%
• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 181K
• 8:30 US Unemployment Rate. Estimate 4.4%
• 8:30 US Trade Balance. Estimate -45.5B

*All release times are EDT

*Key events are in bold

EUR/USD for Friday, June 2, 2017

EUR/USD Friday, June 2 at 6:20 EDT

Open: 1.1212 High: 1.1228 Low: 1.1212 Close: 1.1219

EUR/USD Technical

EUR/USD was flat in the Asian session and the lack of movement has continued in the European session

• 1.1122 is providing weak support
• 1.1242 is the next resistance line

Further levels in both directions:

• Below: 1.1122, 1.0985 and 1.0873
• Above: 1.1242, 1.1366, 1.1465 and 1.1534
• Current range: 1.1122 to 1.1242

OANDA’s Open Positions Ratio

EUR/USD ratio continues to have a quiet week, and is unchanged in the Friday session. Currently, short positions have a majority (70%), indicative of EUR/USD reversing directions and moving lower.

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.