EUR/USD – Euro in Holding Pattern Ahead Of Nonfarm Payrolls

EUR/USD is steady on Friday, as the pair trades in the mid-1.38 range in the European session. The markets are keeping a close eye on the highlight of the week, US Nonfarm Payrolls. The US will release the Unemployment Rate at the same time. In the Eurozone, Manufacturing PMIs were pointing in all directions. The Spanish reading dipped, the Italian release improved, while the Eurozone figure was very close to the estimate. There was good news on the employment front, as the Eurozone Unemployment Rate dipped to 11.8%, edging below the estimate of 11.9%. This was the lowest level since January 2013.

Manufacturing PMIs are an important gauge of the health of the manufacturing sector in the Eurozone and the major members in the region. On Thursday, PMIs painted a mixed picture.  Spanish Manufacturing PMI missed the estimate, while the Italian release hit its highest level in three years. Meanwhile, Eurozone Final Manufacturing PMI showed little change and practically matched the estimate. The positive news is that all three indicators remained above the 50-point range, indicative of expansion in these respective manufacturing sectors.

Nonfarm Payrolls is a critical release, and traders should be prepared for some movement from EUR/USD after its publication later on Friday. The indicator has been improving throughout 2014, and the markets are expecting the upward trend to continue, with a rosy estimate of 216 thousand. Earlier in the week, ADP Nonfarm Payrolls looked sharp, jumping to 220 thousand, marking a four-month high. This easily beat the estimate of 203 thousand. Will the official Nonfarm Payrolls follow suit on Friday?

As expected, the Federal Reserve trimmed its QE program by $10 billion on Wednesday. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a “considerable time” after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.

German numbers were a mix on Wednesday. Retail Sales, the primary gauge of consumer spending, weakened in March, coming in at -0.7%, marking a three-month low. This was slightly lower than the estimate of -0.6%. On the bright side, Unemployment Change dropped by 25 thousand, much better than the estimate of -12 thousand. As the Eurozone’s largest and most important economy, German releases have particular significance and are often market-movers.

EUR/USD for Friday, May 2, 2014

EUR/USD May 2 at 9:15 GMT

EUR/USD 1.3863 H: 1.3870 L: 1.3852

EUR/USD Technical

• EUR/USD is showing little movement in Friday trade.
• 1.3786 is providing strong support to the pair.
• On the upside, 1.3893 remains under pressure. Will the pair break through? This is followed by the key level of 1.40, which has not been breached since October 2011.
• Current range: 1.3786 to 1.3893

Further levels in both directions:

• Below: 1.3786, 1.3649, 1.3585, 1.3410 and 1.3335
• Above: 1.3893, 1.4000, 1.4149 and 1.4307

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in long positions in Friday trading, reversing the direction seen a day earlier. This is not consistent with the movement we are seeing from the pair, as the euro has edged lower. The ratio is made up of a majority of short positions, indicative of the dollar moving upwards.

EUR/USD is flat in Friday trading, but that could change in the North American session, with the release of the all-important US Nonfarm Payrolls.

EUR/USD Fundamentals

• 7:15 Spanish Manufacturing PMI. Estimate 53.2 points. Actual 52.7 points.
• 7:45 Italian Manufacturing PMI. Estimate 53.0 points. Actual 54.0 points.
• 8:00 Eurozone Final Manufacturing PMI. Estimate 53.4 points. Actual 53.3 points.
• 9:00 Eurozone Unemployment Rate. Estimate 11.9%. Actual 11.8%.
• 12:30 US Non-Farm Employment Change. Estimate 216 thousand.
• 12:30 US Unemployment Rate. Estimate 6.6%.
• 12:30 US Average Hourly Earnings. Estimate 0.2%.
• 14:00 US Factory Orders. Estimate 1.5%.

*Key releases are highlighted in bold

*All release times are GMT

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.