EUR/USD – Euro Drops After Strong ADP Jobs Report, US Unemployment Claims Next

The euro has edged lower on Thursday, following considerable losses in the Wednesday session. Currently, EUR/USD is trading at 1.1130. In economic news, there are no major Eurozone releases on the schedule. In the US, today’s highlight is Unemployment Claims, with the indicator expected to remain steady at 265 thousand. On Friday, Germany releases Factory Orders, an important gauge of manufacturing activity. US employment numbers will be in the spotlight, with three key releases – Average Hourly Earnings, Nonfarm Employment Change and the Unemployment Rate. Traders should be prepared for possible volatility from EUR/USD following these important employment releases.

Eurozone Services PMIs were very close to estimates on Thursday, as the market forecasts were accurate. German and Eurozone Final Services PMIs both posted readings above the 50-point level, pointing to expansion in the services sectors. However, the news was not nearly as positive from Retail Sales, the primary gauge of consumer spending. The indicator dropped to 0.0% in June, compared to a 0.4% gain in the previous release. Earlier in the week, there was some good news on the inflation front, as Eurozone PPI posted a respectable gain of 0.7%, edging above the forecast of 0.6%. This marked the highest monthly gain since October 2012, and follows a CPI reading of 0.2%, which beat expectations. Is inflation on the rise? If so, there will be less pressure on the ECB to adopt easing measures in order to stimulate the economy and raise inflation levels, which have languished near the zero level or lower.

US  releases were a mixed bag on Wednesday. July employment numbers started off on the right foot, as ADP Nonfarm Payrolls improved to 179 thousand, beating the estimate of 171 thousand. However, the ISM Non-Manufacturing PMI disappointed, as the index dipped to 55.5 points, missing the estimate of 56.0 points. On Thursday, we’ll get a look at Unemployment Claims, followed by the all-important Nonfarm Payrolls on Friday. Market sentiment has soured on the US dollar since last week’s GDP report, as the gain of 1.2% was well short of the forecast of a 2.6% gain.  The markets have circled September and December as the most likely dates for possible rate hikes. The Fed and the markets will be keeping a keen eye on wage growth and payroll reports on Friday, and if these numbers are sharp, the likelihood of a September rate hike will increase.

EUR/USD Fundamentals

Thursday (August 4)

• 8:00 ECB Economic Bulletin
• 8:10 Eurozone Retail PMI
• Tentative – French 10-year Bond Auction
• 11:30 US Challenger Job Cuts
• 12:30 US Unemployment Claims. Estimate 265K
• 14:00 US Factory Orders. Estimate -1.8%
• 14:30 US Natural Gas Storage. Estimate 3B

Upcoming Key Events

Friday (August 5)

• 12:30 US Average Hourly Earnings. Estimate 0.2%
• 12:30 US Non-Farm Employment Change. Estimate 180K
• 12:30 US Unemployment Rate. Estimate 4.8%

* Key releases are in bold

*All release times are GMT

EUR/USD for Thursday, August 4, 2016

EUR/USD August 4 at 7:00 GMT

Open: 1.1150 High: 1.1156 Low: 1.1127 Close: 1.1133

EUR/USD Technical

• EUR/USD has been flat in the Asian and European sessions
•  1.1050 is providing support
•  1.1150 was tested earlier in resistance and is a weak line. It could see further action in the Thursday session

Further levels in both directions:

• Below: 1.1054, 1.0925 and 1.0821
• Above: 1.1150, 1.1278, 1.1376 and 1.1467
• Current range: 1.1054 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Thursday, consistent with the lack of movement from EUR/USD. Short positions have a strong majority (62%), indicative of trader bias towards EUR/USD breaking out 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.