EUR/USD – Euro Edges Lower on Soft German Manufacturing Report

EUR/USD has posted slight losses on Thursday, erasing the gains recorded in the Wednesday session. The pair is trading at 1.1070. On the release front, German Industrial Production disappointed with a sharp decline of 1.3%, well off expectations. Later in the day, the ECB will release the minutes of its June policy meeting. Over in the US, employment data will be in focus, with the publication of ADP Nonfarm Employment Change and Unemployment Claims. On Friday, we’ll get a look at the all-important Nonfarm Employment Change, with the markets expecting a strong turnaround after the May shocker of just 38 thousand. The estimate stands at 174 thousand.

German manufacturing data has not looked sharp this week. Industrial Production declined 1.3%, its third decline in the past four months. This figure was well short of the forecast of +0.1%. Earlier in the week, Factory Orders posted a decline of 1.0%, weaker than the forecast of a 0.8% drop. The manufacturing sector in Germany and continues to struggle due to weak global conditions, and as the largest economy in the Eurozone, the weak German numbers likely reflect on a weak manufacturing sector in the Eurozone. We’ll get a look at French Industrial Production on Friday, with the markets braced for a decline of -0.4%.

The Federal Reserve released the minutes of its June policy meeting, and the tone was one of prudence and caution. Policymakers expressed concerns about a slowdown and hiring and the health of the US economy. The June meeting took place just one week before Britain voted to leave the EU, which has caused turmoil in the markets and sent bond yields to record lows. The minutes indicated that Fed members projected two rate increases before the end of the year, but that forecast is likely out-of-date following the shock waves from Brexit. Given the current economic climate, the markets are pessimistic about any rates moves before 2017. Investors have priced in no chance of a rate increase at the next Fed meeting on July 26-27, and just an 8 percent chance of a hike in 2016. However, if US employment and inflation numbers improve in the second half of the year, the likelihood of a rate hike will certainly increase.

EUR/USD Fundamentals

Thursday (July 7)

• 6:00 German Industrial Production. Estimate 0.1%. Actual -1.3%
• 6:45 French Trade Balance. Estimate -4.9B. Actual -2.8B
• 8:50 – Spanish 10-year Bond Auction. Actual 1.06%
• Tentative – French 10-year Bond Auction
• 11:30 ECB Monetary Policy Meeting Accounts
• 11:30 US Challenger Job Cuts
• 12:15 US ADP Nonfarm Employment Change. Estimate 158K
• 12:30 US Unemployment Claims. Estimate 269K
• 14:30 US Natural Gas Storage. Estimate 42B
• 15:00 US Crude Oil Inventories. Estimate -2.1M

Upcoming Key Events

Friday (July 8)

• 12:30 US Average Hourly Earnings. Estimate 0.2%
• 12:30 US Nonfarm Employment Change. Estimate 174K
• 12:30 US Unemployment Rate. Estimate 4.8%

* Key releases are in bold

*All release times are GMT

EUR/USD for Thursday, July 7, 2016

EUR/USD July 7 at 9:05 GMT

Open: 1.1097 Low: 1.1107 High: 1.1056 Close: 1.1076

EUR/USD Technical

• EUR/USD was flat in the Asian session and has posted slight losses in European trade
• There is resistance at 1.1150
• 1.1054 is a weak support line and could break in the Thursday session

Further levels in both directions:

• Below: 1.1054, 1.092 and 1.0821
• Above: 1.1150, 1.1278, 1.1376 and 1.1495
• Current range: 1.1054 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to slight gains in short positions on Thursday. Short positions have a majority (63%), indicative of trader bias towards EUR/USD continuing to move to lower levels.

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.