EUR/USD – Euro Shrugs off Superb US Nonfarm Payrolls

EUR/USD is flat on Monday, as the pair continues to trade in the mid-1.38 range in the European session. The dollar has not been able to take advantage of an excellent Nonfarm Payrolls release on Friday. In Monday news, Eurozone Sentix Investor Confidence slipped to a four-month low, while Eurozone PPI posted another decline in April. In the US, today’s highlight is ISM Non-Manufacturing PMI. The markets are expecting the index to improve in the April reading.

Inflation, or rather the lack of, continues to weigh on the Eurozone. PPI posted its third straight decline in April, coming in at -0.2%. Last week, German Preliminary CPI did no better, dipping to -0.2%. The ECB finds itself under pressure to take action but so far has balked. ECB head Mario Draghi has stated that negative deposit rates or even QE are on the table, but the markets have heard this often before and these remarks have not had much effect, as the euro remains at high levels against the US dollar. However, if EUR/USD approaches the 1.40 line, we are likely to hear tougher rhetoric from the ECB about the high value of the euro.

US employment releases looked excellent on Friday. Nonfarm Payrolls jumped to 288 thousand, easily beating the estimate of 216 thousand. The Unemployment Rate kept pace, dropping to 6.3%, its lowest level since September 2008. At the same time, the participation rate in the labor force dropped, so slack remains in the US job market, despite the strong releases in April.

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.

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.

EUR/USD for Monday, May 5, 2014

EUR/USD May 5 at 10:15 GMT

EUR/USD 1.3871 H: 1.3882 L: 1.3865

EUR/USD Technical

• EUR/USD is listless in Monday trade.
• 1.3786 continues to provide 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 almost unchanged in Monday trading. This is consistent with the lack of movement we are seeing from the pair at the start of the week. The ratio is made up of a majority of short positions, indicative of the dollar moving upwards.

EUR/USD is flat in Monday trading as the pair is unchanged in the European session.

EUR/USD Fundamentals

• 8:30 Eurozone Sentix Investor Confidence. Estimate 14.2 points. Actual 12.8 points.
• 9:00 Eurozone Economic Forecasts.
• 9:00 Eurozone PPI. Estimate -0.2%. Actual -0.2%.
• All Day – Eurogroup Meetings.
• 13:45 US Final Services PMI. Estimate 54.2 points.
• 14:00 US ISM Non-Manufacturing PMI. Estimate 54.3 points.
• Tentative – US Loan Officer Survey.

*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.