EUR/USD – Euro Steady, Eurozone Manufacturing Data Dips

The euro has edged upwards on Friday, after showing little movement in the Thursday session. Currently, EUR/USD is trading at 1.1140. In economic news, German Factory Orders and Italian Industrial Production both posted declines of 0.4%, well below expectations. In the US, employment releases will be on center stage, with three key events – Average Hourly Earnings, Nonfarm Employment Change and the Unemployment Rate. Traders should be prepared for possible volatility from EUR/USD following these important employment releases.

Eurozone manufacturing numbers disappointed on Friday. German Factory Orders, an important indicator, continues to struggle and dropped 0.4% in June, compared to an estimate of +0.5%. The indicator has managed just one gain so far in 2016, pointing to continuing weakness in the manufacturing sector. Italian Industrial Production followed suit with a decline of 0.4%, well short of the estimate of +0.3%. The weak Eurozone economy as well as soft global demand continues to take a toll on the Eurozone manufacturing sector. Still, purchasing managers in the manufacturing sector remain optimistic, as German and Eurozone Manufacturing PMIs posted decent readings earlier in the week. Next week, we’ll get a look at Industrial Production reports from Germany and France. Both indicators posted declines in their most recent releases.

The US dollar remains under pressure, as market expectations of a rate hike in the US this year have decreased following a disappointing GDP report last week. Currently, the odds of a rate hike in September are just 9 percent, while the chances of a December hike stand at 32 percent. However, these numbers could quickly change after Friday’s Nonfarm payrolls report. Fed chair Janet Yellen and her colleagues have sounded cautious about the health of the economy, and the July Fed statement provided no clues as to the timeline of a possible rate hike. Clearly, any rate move will be data-dependent, and the Fed policymakers will want to see stronger inflation or employment numbers before seriously contemplating a rate increase. If Friday’s job releases do not beat expectations, a rate hike in September will almost certainly be off the table. This week’s employment data has been a mix, as ADP Nonfarm Payrolls improved and beat expectations, while Unemployment Claims were up slightly and missed the estimate. Nonfarm Payrolls posted a huge gain of 287 thousand in June, but is expected to return to more normal levels in the July report, with an estimate of 180 thousand.

EUR/USD Fundamentals

Friday (August 5)

• 6:00 German Factory Orders. Estimate +0.5%. Actual -0.4%
• 6:45 French Trade Balance. Estimate -3.9B. Actual -3.4B
• 8:00 Italian Industrial Production. Estimate +0.3%. Actual -0.4%
• 12:30 US Average Hourly Earnings. Estimate 0.2%
• 12:30 US Non-Farm Employment Change. Estimate 180K
• 12:30 US Unemployment Rate. Estimate 4.8%
• 12:30 Trade Balance. Estimate -42.1B
• 19:00 US Consumer Credit. Estimate 15.5B

* Key releases are in bold

*All release times are GMT

EUR/USD for Friday, August 5, 2016

EUR/USD August 5 at 9:35 GMT

Open: 1.1134 High: 1.1152 Low: 1.1127 Close: 1.1144

EUR/USD Technical

• EUR/USD  was flat in the Asian session and has posted small gains in European trade
•  1.1054 is providing support
•  1.1150 was tested earlier in resistance and is a weak line. It could see further action in the Friday session

Further levels in both directions:

• Below: 1.1054, 1.0925 and 1.0821
• Above: 1.1150, 1.1278, 1.1376 and 1.1467
• Current range: 1.1054 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio is showing slight gains in short positions on Friday. Short positions have a strong majority (62%), indicative of trader bias towards EUR/USD breaking out 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.