EUR/USD – Euro Inches Lower, Eurozone Numbers Mixed

EUR/USD is almost unchanged on Thursday, continuing the lack of activity which has marked the pair for most of the week. In the European session, the pair is trading at the 1.14 line. On the release front, German WPI came in at 0.3%, above the estimate. Eurozone Industrial Production came in at -0.8%, well below expectations. In the US, today’s key release is Unemployment Claims. This release will be closely watched after last week’s very soft NFP report. The indicator is expected to rise slightly to 277 thousand. We’ll also hear from two FOMC members, Eric Rosengren and Esther George. Friday is a data-heavy day, with the US publishing retail sales, inflation and consumer confidence reports.

The Eurozone manufacturing sector continues to struggle, as the soft global economy has meant less demand for European products. Eurozone Industrial Production declined 0.8% in April, compared to a forecast of -0.2%. The indicator is in trouble, as this marked the third decline in four months. Earlier in the week, German Industrial Production was dismal posting a decline of 1.3%, well off the forecast of -0.2%. This marked the fourth decline in the past five readings. The markets had hoped  for better news after German Factory Orders surprised with a strong gain. The markets are predicting a solid gain of 0.6%, considerably higher than the Final GDP in Q4 of 0.3%. Eurozone Flash GDP will also be released on Friday, with the estimate standing at 0.6%. If these GDP numbers match or beat the forecast, the drifting euro could break out and move to higher ground.

May flowers, June rate hike? The markets are busy looking for clues as to what the Fed has planned next. In its April policy statement, the Fed stayed on the sidelines, but the message to the markets with regard to the US economy was one of cautious optimism. The statement noted continuing improvement in the labor market but added that it was keeping a watchful eye on low inflation levels. The Fed statement appeared to leave the open to a June rate hike, but last week’s soft payrolls report has put a damper on speculation about an imminent hike. Last week, New York Fed president William Dudley said he remains confident that the Fed could raise rates as much as twice this year, but many analysts are skeptical if the Fed will raise rates before 2017. The minutes of the April Fed meeting will be released next week, and any clues about a June hike could send the dollar higher against its rivals.Upcoming data, especially employment and inflation indicators, will be major factors as the Fed must decide whether to press the rate trigger in June.

US employment indicators appear to be taking one step forward, one step backward. On Tuesday, JOLT Job Openings looked sharp in April, jumping to 5.76 million. This figure was much stronger than the estimate of 5.56 million. However, last week’s host of employment numbers were a mix, which predictably has raised concerns about the strength of the US labor market. Last week, Nonfarm Payrolls looked awful, as the key indicator slid to just 160 thousand, well short of the forecast of 203 thousand. On a brighter note, wages showed growth, as Average Hourly Earnings posted a second straight gain of 0.3%. Will we see any improvement from the upcoming Unemployment Claims report?

EUR/USD Fundamentals

Thursday (May 12)

• 6:00 German WPI. Estimate 0.2%. Actual 0.3%
• 6:45 French Final CPI. Estimate 0.1%. Actual 0.1%
• 9:00 Eurozone Industrial Production. Estimate 0.1%. Actual -0.8%
• 12:30 US Unemployment Claims. Estimate 277K. 
• 12:30 US Import Prices. Estimate 0.6%
• 14:30 US Natural Gas Storage. Estimate 60B
• 15:45 US FOMC Member Eric Rosengren Speaks
• 17:01 US 30-year Bond Auction
• 17:30 US Member Esther George Speaks

Upcoming Key Events

Friday (May 13)

• 12:30 US Core Retail Sales. Estimate 0.3%
• 12:30 US PPI. Estimate 0.3%
• 12:30 US Retail Sales. Estimate -0.3%
• 14:00 US Preliminary UoM Consumer Sentiment. Estimate 89.9 points

*Key events are in bold

*All release times are GMT

EUR/USD for Thursday, May 12, 2016

EUR/USD May 12 at 7:10 GMT

Open: 1.1424 Low: 1.1388 High: 1.1429 Close: 1.1400

EUR/USD Technical

• EUR/USD was flat in the Asian session and has posted small losses in the European session
• There is strong resistance at 1.1495
• 1.1378 is a weak support line. It could break during the day

Further levels in both directions:

• Below: 1.1378, 1.1278 and 1.1172
• Above: 1.1495, 1.1609, 1.1711 and 1.1800
• Current range: 1.1378 to 1.1495

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Thursday, consistent with the lack of movement from EUR/USD. Short positions command a strong majority (58%). This is indicative of strong trader bias towards EUR/USD breaking out and dropping 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.