EUR/USD – Higher As Euro Punches Past 1.13

EUR/USD has posted gains on Thursday, and the pair has punched above the 1.13 line for the first time this week. In economic events, German numbers continued to disappoint, as the country’s trade surplus slipped to EUR 19.6 billion, well below expectations. Later in the day, the ECB releases a summary of its most recent policy meeting. Traders should keep a close eye on two market-moving events in the US on Thursday – Unemployment Claims and the Federal Reserve Policy Meeting Minutes.

Is the European locomotive in trouble? Germany, the Eurozone’s largest economy, has posted three poor readings this week. First, Factory Orders posted a decline of 1.8%, its worst showing in eight months. This was followed by Industrial Production, which recorded a decline of 1.2%. Thursday brought more bad news, as the German trade surplus contracted to EUR 19.6 billion in August, compared to EUR 22.8 billion a month earlier. This was short of the estimate of EUR 20.2 billion. These weak numbers underscore growing concern that the global slowdown is affecting Germany, and investors are nervous that a contraction in the German economy could quickly affect the rest of the bloc and send the fragile Eurozone economy into a tailspin.

Thursday’s key US releases could have a strong impact on the movement of EUR/USD. This week’s unemployment claims report will be carefully monitored, as it follows last week’s awful Nonfarm Payroll report, which pointed to a gain of only 142 thousand jobs, compared to an estimate of 201 thousand. Unemployment Claims are expected to remain steady, so any major movement would be a surprise and could affect EUR/USD.

Later in the day, the Federal Reserve releases the minutes of its most recent policy meeting. For months, expectations had been running high that the Federal Reserve might press the rate trigger and bump up rates at the September meeting. However, the Fed stayed on the sidelines and maintained rates, and the US dollar faced broad pressure from its rivals as a result. At the same time, the policy statement had a hawkish tone, giving the markets hope that the Fed could still make a move prior to the end of the year. A dismal US Nonfarm Payrolls report late last week poured cold water on these hopes, but market sentiment can change fairly quickly, and if the US rebounds with some strong data, such as unemployment claims, we could see more optimism about a rate hike. If the Fed minutes give a vote of confidence to the US economy or provide any clues about a rate hike, the dollar could respond with gains.

EUR/USD Fundamentals

Thursday (Oct. 8)

• 6:00 German Trade Balance. Estimate EUR 20.2 billion. Actual EUR 19.6 billion.

Upcoming Events

Thursday (Oct. 8)

• 11:30 ECB Monetary Policy Meeting Accounts

The ECB started releasing records of its policy meetings earlier this year. Although the ECB is not releasing the actual minutes of these policy meetings, these reports provide details of the decision-making process regarding the ECB’s monetary policy, and analysts will be looking for clues as to possible future monetary moves by the ECB, such as an increase in asset purchases.

• 12:30 US Unemployment Claims. Estimate 277 thousand. 

Analysts are always interested in US employment releases, and traders should treat unemployment claims as a market-mover. Unemployment claims rose slightly last week to 277 thousand, but this was within expectations. Given the dismal Nonfarm Payrolls report last week, a weaker reading than expected could send the US dollar lower.

• 18:00 Federal Reserve FOMC Meeting Minutes

The markets will be watching this event closely, given the continuing speculation as to whether a rate hike by the Federal Reserve is still in the cards. Any hints about a rate hike or  positive statements about the health of the US economy could boost the US dollar against the euro.

• 19:30 Federal Reserve FOMC Member John Williams Speaks.

Traders and investors will be looking for any hints regarding the timing of a rate hike by the Federal Reserve.

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Thursday, October 8, 2015

EUR/USD October 8 at 9:30 GMT

EUR/USD 1.1307 H: 1.1310 L: 1.1237

EUR/USD Technical

• EUR/USD was steady in the Asian session and has picked up ground in European trading.
• The euro has broken above resistance above 1.1296, which has switched to a support role.
• 1.1392 is a strong resistance line.
• Current range: 1.1214 to 1.1296

Further levels in both directions:

• Below: 1.1296, 1.1214, 1.1105, 1.1017 and 1.0928
• Above: 1.1392, 1.1470, 1.1658 and 1.1712

OANDA’s Open Positions Ratio

EUR/USD ratio is showing a gain in short positions, which are a majority of the positions (63%). This points to trader sentiment in favor of the euro reversing directions and losing ground against the dollar.

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.