EUR/USD – Euro Hugs 1.12, US ADP Employment Report Next

EUR/USD continues to have an uneventful week, as the pair trades slightly above the 1.12 line on Wednesday. On the release front, German and Eurozone PMIs dipped in September, but still beat their estimates. Eurozone Retail Sales declined 0.1%, matching the estimate. Over in the US, employment indicators will be in the spotlight during the latter half of the week, starting with ADP Nonfarm Employment Change on Wednesday. The indicator is expected to drop to 166 thousand. We’ll also get a look at ISM Non-Manufacturing PMI, with an estimate of 53.1 points.

Is inflation picking up in the Eurozone? September data showed some improvement, which is welcome news. Eurozone CPI is expected to climb 0.4%, up from 0.2% in August, according to the EU statistical office. This would mark its strongest gain since January. Last week, German Preliminary CPI edged up to 0.1%, above the forecast of 0.0%. Stronger inflation numbers would give the ECB some breathing room, which is under pressure to adopt further easing in order to coax inflation levels upwards.

As if the Mario Draghi & Co. don’t have enough problems to contend with, Deutsche Bank is in trouble and there are concerns that the German government may have to step in and rescue the giant bank. Last week, there were reports that some hedge funds have cut their exposure with Deutsche Bank, raising concerns in the markets and weighing on the euro. The bank has also been hit with a staggering $14 billion fine from the US Justice Department over mortgage securities irregularities, and its shares have plunged over 50% since July 2015. Deutsche Bank’s woes have raised the uncomfortable question about the stability of the entire European banking system, which has had to contend with rock-bottom interest rates and a listless Eurozone economy.

With the odds of a December rate hike priced in at about 55%, Friday’s triple-release of US job numbers will be especially important. The markets are expecting some improvement in the September numbers. Non-farm Employment Change is expected to improve to 171 thousand, while Average Hourly Earnings, which measures wage growth, is forecast to edge up to 0.2%. The unemployment rate has held steady at 4.9% for three months and no change is expected. If the markets are correct and September shows stronger numbers, the US dollar could pick up some ground against the euro.

EUR/USD Fundamentals

Wednesday (October 5)

• 7:15 Spanish Services PMI. Estimate 54.8. Actual 54.7
• 7:45 Italian Services PMI. Estimate 52.1. Actual 50.7
• 7:50 French Final Services PMI. Estimate 54.1. Actual 53.3
• 7:55 German Final Services PMI. Estimate 50.6. Actual 50.9
• 8:00 Eurozone Final Services PMI. Estimate 52.1. Actual 52.2
• 9:00 Eurozone Retail Sales. Estimate -0.1%.
• Tentative – German 10-year Bond Auction 
• 12:15 US ADP Nonfarm Employment Change. Estimate 166K
• 12:30 Trade Balance. Estimate -41.1B
• 13:45 US Final Services PMI. Estimate 51.9
• 14:00 US ISM Non-Manufacturing PMI. Estimate 53.1
• 14:00 US Factory Orders. Estimate -0.4%
• 14:30 US Crude Oil Inventories. Estimate 1.1M

Upcoming Key Events 

Thursday (October 6)

• 8:30 US Unemployment Claims. Estimate 255K

*All release times are EDT

* Key events are in bold

EUR/USD for Wednesday, October 5, 2016

EUR/USD October 5 at 9:40 GMT

Open: 1.1209 High: 1.1233 Low: 1.1206 Close: 1.1221

EUR/USD Technical

• EUR/USD posted small gains in the Asian session and is almost unchanged in European trade
• 1.1150 is providing support
• There is resistance at 1.1278

Further levels in both directions:

• Below: 1.1150, 1.1054, 1.0957 and 1.0821
• Above: 1.1278, 1.1376 and 1.1467
• Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is showing short positions with a majority (56%), indicative of trader bias towards EUR/USD reversing directions 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.