EUR/USD – Euro Pushes Above 1.11, Markets Eye US Jobs Report

EUR/USD has posted gains on Tuesday, as the pair trades just above the 1.11 level. It’s another quiet day on the release front. The only Eurozone events on the schedule are German inflation indicators. Final CPI dipped to 0.1%, matching the forecast. The Wholesale Price Index (WPI) posted a gain of 0.6%, beating the estimate. In the US, today’s key event is JOLTS Job Openings, with the indicator expected to dip to 5.74 million. We’ll also hear from three FOMC members during the day.

German inflation numbers dipped in June, although they managed to meet market expectations. Final CPI gained just 0.1%, down from 0.3% in the previous release. WPI climbed 0.6%, compared to 0.9% in the May report. We’ll get a look at Eurozone Final CPI on Friday, with the estimate standing at just 0.1%. With inflation mired at low levels, the ECB is under pressure to adopt further monetary easing, but even this may not be enough to kick-start a languishing economy. Japan has demonstrated that cutting interest rates, even into negative territory, does not translate into higher inflation levels. Meanwhile, manufacturing numbers out of the Eurozone continue to raise concerns. The top three Eurozone economies all posted declines in industrial production in May. German Industrial Production declined 1.3 percent, the French reading dropped 0.5% and  on Monday, Italian Industrial Production dipped 0.6%. These figures point to a struggling manufacturing industry across the Eurozone, which has been hit hard by weak global conditions and soft Chinese demand. The Brexit vote, which has created political and economic uncertainty in Europe and the UK, could make matters worse for manufacturers until the Brexit aftershocks subside.

The Federal Reserve has stayed on the sidelines in the first half of 2016, and the markets aren’t expecting a dramatic shift anytime soon. Last week’s minutes from the June policy meeting indicated that Janet Yellen & Co. remain cautious about the strength of the US economy. Although some Fed members have said that rates could be raised up to two times in 2016, clearly the markets aren’t buying it. 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 eight percent chance of a hike in 2016. Still, market sentiment can change very quickly, so if US employment and inflation numbers improve in the second half of the year, the likelihood of a rate hike sometime this year will increase.

EUR/USD Fundamentals

Tuesday (July 12)

• 1:30 FOMC Member Loretta Mester Speaks
• 6:00 German Final CPI. Estimate 0.1%. Actual 0.1%.
• 6:00 German WPI. Estimate 0.3%. Actual 0.6%
• 10:00 US NFIB Small Business Index. Estimate 94.1
• 13:15 US FOMC Member Daniel Tarullo Speaks
• 13:35 US FOMC Member James Bullard Speaks
• 14:00 US JOLTS Job Openings. Estimate 5.74M
• 14:00 US Wholesale Inventories. Estimate 0.2%
• 17:01 US 10-year Bond Auction

* Key releases are in bold

*All release times are GMT

EUR/USD for Tuesday, July 12, 2016

EUR/USD July 12 at 10:10 GMT

Open: 1.1056 High: 1.1126 Low: 1.1052 Close: 1.1107

EUR/USD Technical

• EUR/USD has posted gains in the Asian and European sessions
• 1.1054 is providing support
• There is resistance at 1.1150

Further levels in both directions:

• Below: 1.1054, 1.0925, 1.0821 and 1.0665
• Above: 1.1150, 1.1278 and 1.1376
• Current range: 1.1054 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Tuesday. Short positions have a strong majority (60%), indicative of strong trader bias towards EUR/USD reversing directions and moving 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.