EUR/USD – Euro Subdued Ahead of US Nonfarm Payrolls

EUR/USD has posted slight losses on Friday, following modest losses in the Thursday session. The pair is slightly below the 1.11 level. On the release front, German Trade Balance slipped in May but was within expectations. Next up is French Industrial Production. Over in the US, employment data will be in the spotlight with three key events, highlighted by Nonfarm Employment Change.

US employment numbers looked sharp on Thursday. ADP Nonfarm Employment Change was almost unchanged in June, with a reading of 172 thousand. This figure was well above the forecast of 158 thousand. This was followed by a solid unemployment claims release, as the indicator dropped to 254 thousand, marking an 11-week low. All eyes are now on the official Nonfarm Payrolls report which will be released on Friday. A strong release would confirm that the labor market is improving and job creation is gaining steam.

The Federal Reserve released the minutes of its June policy meeting earlier this week. Policymakers expressed concerns about a slowdown and hiring and the health of the US economy, and the underlying tone was one of prudence and caution. The June meeting took place just one week before the Brexit referendum vote, and in the minutes showed that Fed policymakers adopted a “wait and see” attitude about Brexit. The vote by Britain to leave the EU stunned the markets, causing turmoil in the markets and sending bond yields to record lows. The minutes indicated that Fed members projected two rate increases before the end of the year, but that forecast is likely out-of-date following the shock waves from the Brexit earthquake. 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. However, if US employment and inflation numbers improve in the second half of the year, the likelihood of a rate hike will certainly increase.

German manufacturing data has not looked sharp this week. Industrial Production declined 1.3%, its third decline in the past four months. This figure was well short of the forecast of +0.1%. Earlier in the week, Factory Orders posted a decline of 1.0%, weaker than the forecast of a 0.8% drop. The manufacturing sector in Germany and continues to struggle due to weak global conditions, and as the largest economy in the Eurozone, weak German numbers likely reflect on a weak manufacturing sector elsewhere in the Eurozone. We’ll get a look at French Industrial Production on Friday, with the markets braced for a decline of -0.4%.

EUR/USD Fundamentals

Friday (July 8)

• 6:00 German Trade Balance. Estimate 22.3B. Actual 22.2B
• 6:45 French Government Budget Balance
• 6:45 French Industrial Production. Estimate -0.4%
• 12:30 US Average Hourly Earnings. Estimate 0.2%
• 12:30 US Nonfarm Employment Change. Estimate 175K
• 12:30 US Unemployment Rate. Estimate 4.8%
• 19:00 US Consumer Credit. Estimate 16.7B

* Key releases are in bold

*All release times are GMT

EUR/USD for Friday, July 8, 2016

EUR/USD July 8 at 7:00 GMT

Open: 1.1063 Low: 1.1061 High: 1.1090 Close: 1.1082

EUR/USD Technical

• EUR/USD has posted small gains in the Asian session and is steady in European trade
• 1.1150 continues to provide resistance
• 1.1054 is a weak support line and could be tested during the Friday session

Further levels in both directions:

• Below: 1.1054, 1.092 and 1.0821
• Above: 1.1150, 1.1278, 1.1376 and 1.1495
• Current range: 1.1054 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement on Friday, consistent with the lack of movement from EUR/USD. Short positions have a strong majority (63%), indicative of strong 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.