EUR/USD – Euro drops below 1.15 despite strong German factory orders

EUR/USD has posted slight losses in the Friday session. Currently, the pair is trading at 1.1494, down -0.18% on the day. On the release front, German data was positive. Factory Orders jumped 2.0% in August, rebounding from a 0.9% decline in July. German PPI edged up from 0.2% to 0.3% in September. In the U.S, the focus will be on key employment data, with the markets braced for some soft numbers. Nonfarm payrolls is expected to fall from 201 thousand to 185 thousand, while wage growth is forecast to drop from 0.4% to 0.3%. The unemployment rate is expected to drop from 3.9% to 3.8%.

All eyes will be on U.S job numbers on Friday, which should be treated as market-movers. Nonfarm payrolls have shown an average increase of 207,000 in 2018, and the September forecast of 185,000 would be significantly softer. Investors will also be monitoring the increase in wage growth. The August release showed a year-over-year gain of 2.9%, and a similar reading for September could bolster the odds of December rate hike. Currently, the likelihood of a December rise is pegged at 80%, according to the CME Group.

Fed Chair Jerome Powell had a hawkish message for the markets on Wednesday. Powell said that interest rates were still accommodative, but were “gradually moving to a place where they will be neutral”. Powell said that extremely accommodative low interest rates were no longer needed, since the economy has strengthened. The hawkish comments helped push the U.S dollar higher on Wednesday. Analysts have noted that there is no precise definition of a neutral rate, but the Fed tends to use the 3 percent level as its yardstick. With the Fed expected to continue its gradual increase in rates, this level could be reached in 2019.

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EUR/USD Fundamentals

Friday (October 5)

• 2:00 Germany Factory Orders. Estimate 0.7%. Actual 2.0%
• 2:00 German PPI. Estimate 0.2%. Actual 0.3%
• 2:45 French Government Budget Balance. Actual -97.3B
• 2:45 French Trade Balance. Estimate -4.5B. Actual -5.6B
• 4:00 Italian Retail Sales. Estimate 0.2%. Actual 0.7%
• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change 185K
• 8:30 US Unemployment Rate. Estimate 3.8%
• 8:30 US Trade Balance. Estimate -53.4B
• 12:40 US FOMC Raphael Bostic Speaks
• 15:00 US Consumer Credit. Estimate 14.9B

*All release times are DST

*Key events are in bold

EUR/USD for Friday, October 5, 2018

EUR/USD for October 5 at 6:05 DST

Open: 1.1515 High: 1.1520 Low: 1.1488 Close: 1.1494

EUR/USD Technical

EUR/USD ticked lower in the Asian session. The pair has been choppy in European trade and is slightly lower

• 1.1434 is providing support
• 1.1553 is the next resistance line

Further levels in both directions:

• Below: 1.1434, 1.1300 and 1.1190
• Above: 1.1553, 1.1637, 1.1718 and 1.1840
• Current range: 1.1434 to 1.1553

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