EUR/USD – Euro Surges on Weak US Employment, PMI Reports

EUR/USD is trading above the 1.11 line in Thursday’s European session, following sharp gains a day earlier. On the release front, there are no major Eurozone events. ECB President Mario Draghi will deliver remarks at an event in Frankfurt. In the US, today’s key event is Unemployment Claims, with the indicator expected to remain steady at 279 thousand.

The euro enjoyed outstanding gains on Wednesday, climbing 180 points and pushing above the 1.11 line. This marked the euro’s highest level since late October. EUR/USD took full advantage of disappointing US numbers. ADP Nonfarm Payrolls, which precedes the official NFP report on Friday, dropped to 205 thousand in January, compared to 257 thousand a month earlier. The figure did beat the estimate of 193 thousand, but recent employment data has been lukewarm, raising eyebrows in the markets about the health of the US economy. There was no relief from ISM Non-Manufacturing PMI, a key gauge of the services sector. The index dipped to 53.2 points in January, its worst showing since March 2014. We’ll get another look at US job numbers later on Thursday, with the release of Unemployment Claims. A weak reading could help the euro continue to rally against the greenback.

A robust labor market in the second half of 2015 was a key factor in the Federal Reserve decision to raise interest rates in December, but employment numbers have been lukewarm in early 2016. Next up is Unemployment Claims, followed by Nonfarm Payrolls on Friday. EUR/USD was up sharply following the ADP report, and if the upcoming employment indicators are soft, this trend could continue. Employment numbers will be closely monitored by the Fed, which will have to decide if the economy is ready for another rate increase in March. In the heady days following the Fed’s historic rate hike, there was talk of up to four rate hikes in 2016, but this appears unlikely, given current economic conditions and the collapse of oil prices, which has kept low inflation in check.

Thursday (Feb. 4)

• 2:15 US FOMC Member Eric Rosengren Speaks
• 3:00 ECB President Mario Draghi Speaks
• 4:00 ECB Economic Bulletin
• 4:10 Eurozone Retail PMI
• Tentative – Spanish 10-year Bond Auction
• Tentative- French 10-year Bond Auction
• 7:30 US Challenger Job Cuts
• 8:30 US Unemployment Claims. Estimate 279K
• 8:30 US Preliminary Nonfarm Productivity. Estimate -1.5%
• 8:30 US Preliminary Unit Labor Costs. Estimate 3.9%
• 10:00 US Factory Orders. Estimate -2.5%
• 10:30 US Natural Gas Storage. Estimate -170B

Upcoming Key Events

Friday (Feb. 5)

• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 189K

*Key events are in bold

*All release times are EST

EUR/USD for Thursday, February 4, 2016

EUR/USD February 4 at 3:40 EST

Open: 1.1093 Low: 1.1069 High: 1.1137 Close: 1.1117

EUR/USD Technical

• EUR/USD broke through several resistance lines as the pair rose sharply on Wednesday. EUR/USD showed limited movement in Thursday’s Asian session and has posted slight gains in European trade
• 1.1087 is a weak support line
• There is resistance at 1.1172
• Current range: 1.1087 to 1.1172

Further levels in both directions:

• Below: 1.1087, 1.0941 and 1.0847
• Above: 1.1172, 1.1214 and 1.1349

OANDA’s Open Positions Ratio

EUR/USD has shown little movement, despite sharp gains by the pair on Wednesday. Short positions retain a strong majority of positions (61%). This points to trader bias towards the euro reversing directions and heading 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.