Euro quiet ahead of US nonfarm payrolls

• German Factory Orders rebound with 3.6% gain
• US nonfarm payrolls projected to ease to 170,000

The euro is almost flat on Friday after two straight daily gains. In the European session, EUR/USD is trading at 1.0554, up 0.04%.

Germany’s economy is struggling, as the traditional locomotive of the eurozone is grappling with high inflation and weak growth. The manufacturing sector has been in a deep decline but the week ended on a high note as Factory Orders rose 3.9% m/m in August, bouncing back from an 11.3% decline in July and beating the forecast of a 1.8% gain. Domestic and foreign orders rose both rose around 4% and the June-August report showed a 4.9% gain compared to the previous three-month report.

Will US nonfarm payrolls surprise?

In an era of high inflation, nonfarm payroll reports have been in the back seat while inflation releases have been on center stage. That may be changing as US inflation has fallen closer to the 2% target and today’s nonfarm payrolls, which is being closely watched, could be a market-mover for the US dollar.

The US labour market is in good shape but is showing some cracks. The unemployment rate has been creeping higher and hit 3.8% in August, the highest level in 18 months. Nonfarm payrolls have fallen below the 200,000 level for three straight months and is expected to slow to 170,000 in September, down from 187,000 in August.

Will nonfarm payrolls surprise to the upside? The JOLTS Job Openings report on Monday climbed to 9.61 million in August, up sharply from 8.92 million in July and much higher than the market consensus of 8.8 million.

The markets pay close attention to employment releases just prior to the nonfarm payrolls report, although it’s questionable if they provide much guidance. Still, the strong job openings release raised speculation that the Fed could maintain elevated interest rates and the US dollar posted broad gains on Monday. A stronger-than-expected nonfarm payrolls would likely provide a boost for the US dollar. Conversely, I would expect a soft nonfarm payrolls to weigh on the US dollar.

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EUR/USD Technical

• 1.0572 is a weak resistance line. Above, there is resistance at 1.0657
• There is support at 1.0489 and 1.0404

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