EUR/USD – Euro Dips Despite Solid German, Eurozone Services PMIs

The euro has ticked lower in the Monday session, as EUR/USD is currently trading at 1.1260. Traders can expect a quiet day from the pair, as German and French banks are closed for a holiday. In economic news, the German and Eurozone service sectors continue to expand. German Services PMI was unchanged in May, with a reading of 55.4, just above the forecast of 55.2 points. Eurozone Services PMI inched lower to 56.3, edging above the forecast of 56.2 points. In the US, today’s key event is ISM Non-manufacturing PMI, which is expected to drop to 57.1 points.

The US labor market has looked very strong, so there was genuine surprise at the Nonfarm Payrolls report, which was released on Friday. The economy produced just 131 thousand jobs, well short of the forecast of 181 thousand. Wage growth remains weak, and edged down from 0.3% to 0.2%. The unemployment rate dropped to 4.3%, but this reading can be largely explained by a decline in the participation rate. The downbeat employment reports are unlikely to alter the Fed’s plan to raise rates next week, but policymakers will remain very cautious about additional rate hikes in the second half of the year.

The Federal Reserve holds its policy meeting on June 14, and the odds of a quarter-point increase continue to climb. The odds of a hike have climbed to 96%, according to the CME Group, up from 88% just a week ago. The markets have priced in a June move, and a dismal Nonfarm Payroll report has failed to put a dent in market confidence in a June rate hike. Traders should note that ahead of the March hike, the odds of a rate hike were also close to 100%, and the dollar actually lost ground after the Fed followed through with a quarter-point increase. An increase in interest rates represents a vote of confidence in the US economy, but the Fed continues to have some concerns. Inflation remains stubbornly low, despite a labor market that remains close to capacity. Fed policy makers are also scratching their heads over soft consumer spending, which has not kept pace with high levels of consumer confidence. As for additional rate hikes in the second half of 2017, the markets are skeptical, with the odds of a September rate hike at just 26%.

Non-Farm Payrolls Send Oil and Gold Higher

Geopolitics to Guide Dollar This Week

EUR/USD Fundamentals

Monday (June 5)

• 3:15 Spanish Services PMI. Estimate 57.5. Actual 57.3
• 3:45 Italian Services PMI. Estimate 55.4. Actual 55.1
• 3:50 French Final Services PMI. Estimate 58.0. Actual 57.2
• 3:55 German Final Services PMI. Estimate 55.2. Actual 55.4
• 4:00 Eurozone Final Services PMI. Estimate 56.2. Actual 56.3
• 8:30 US Revised Nonfarm Productivity. Estimate -0.6%.
• 8:30 US Revised Unit Labor Costs. Estimate 3.0%
• 9:45 US Final Services PMI. Estimate 54.1
• 10:00 US ISM Non-Manufacturing PMI. Estimate 57.1
• 10:00 US Factory Orders. Estimate -0.2%
• 10:00 US Labor Market Conditions Index

*All release times are EDT

*Key events are in bold

EUR/USD for Monday, June 5, 2017

EUR/USD Monday, June 5 at 6:45 EDT

Open: 1.1283 High: 1.1284 Low: 1.1243 Close: 1.1248

EUR/USD Technical

EUR/USD was flat in the Asian session and has lost ground in European trade

• 1.1242 is under pressure in support
• 1.1366 is the next resistance line

Further levels in both directions:

• Below: 1.1242, 1.1122, 1.0985 and 1.0873
• Above: 1.1366, 1.1465 and 1.1534
• Current range: 1.1242 to 1.1366

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Monday session. Currently, short positions have a majority (69%), indicative of EUR/USD continuing to move lower.

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.