EUR/USD – Euro in Holding Pattern Ahead of US Nonfarm Payrolls

EUR/USD is showing limited movement in the Friday session, as the pair continues to hug the 1.11 line. On the release front, European Services PMI reports were mixed. In the US, the spotlight is on the labor market, with three key releases – Nonfarm Payrolls, Average Hourly Earnings and the Unemployment Rate. Given the importance of these indicators, traders should be prepared for volatility in the North American session.

Eurozone Service PMIs were a mix in October. The German report jumped to 54.2, edging above the forecast of 54.1. This was significantly higher than the September release of 50.9 points. The Eurozone release improved 52.8, but this fell short of the estimate of 53.5. The euro has shown some improvement, enjoying its best week since late July with gains of over 100 points this week.

The US will release key employment figures for October, and the strength of these numbers could affect the dollar as well as the odds of a December rate hike. The markets are expecting better numbers from all three indicators compared to the September data. Nonfarm Payrolls is expected to rise to 171 thousand, Average Hourly Earnings is forecast to edge up to 0.3% and the unemployment rate is expected to dip to 4.9%.

There were no dramatic developments at the Federal Reserve policy meeting, as the central bank maintained the benchmark interest rate at 0.25 percent. This was widely expected, given that the US election is less than a week away. Still, the Fed sent out a slightly hawkish message with regard to a December hike. The Fed statement said that the economy has improved and the employment market remains strong. The Fed also noted that inflation was moving towards its target of 2 percent. Weak inflation has long been the Achilles heel of the US economy, but this obstacle to a rate hike appears to have been removed. The policy statement hinted strongly at a December hike, noting that “the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives”.  Two FOMC members voted to raise rates immediately, Fed Presidents Esther George and Loretta Mester. With a December hike currently priced at over 70 percent, market sentiment towards the US dollar should remain positive and we could see gains against the euro and other major currencies.

EUR/USD Fundamentals

Friday (November 4)

• 8:15 Spanish Services PMI. Estimate 55.2. Actual 54.6
• 8:45 Italian Services PMI. Estimate 51.6. Actual 51.0
• 8:50 French Final Services PMI. Estimate 52.1. Actual 51.4
• 8:55 German Final Services PMI. Estimate 54.1. Actual 54.2
• 9:00 Eurozone Final Services PMI. Estimate 53.5. Actual 52.8
• 10:00 Eurozone PPI. Estimate 0.0%
• 12:30 US Average Hourly Earnings. Estimate 0.3%
• 12:30 US Nonfarm Employment Change. Estimate 174K
• 12:30 US Unemployment Rate. Estimate 4.9%
• 12:30 US Trade Balance. Estimate -37.5B
• 20:00 US FOMC Member Stanley Fischer Speaks

*All release times are EDT

* Key events are in bold

EUR/USD for Friday, November 4, 2016

EUR/USD November 4 at 9:30 GMT

Open: 1.1099 High: 1.1108 Low: 1.1086 Close: 1.1091

EUR/USD Technical

• EUR/USD has shown limited movement in the Asian and European sessions
• 1.1054 continues to provide support
• There is resistance at 1.1150

Further levels in both directions:

• Below: 1.1054, 1.0957, 1.0821 and 1.0708
• Above: 1.1150, 1.1278 and 1.1366
• Current range: 1.1054 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Friday, consistent with the lack of movement from EUR/USD. Currently, short positions have a strong majority (58%), indicative of trader bias towards EUR/USD breaking out and moving upwards.

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.