EUR/USD – Limited Movement Ahead of ADP Employment Report

EUR/USD is showing little movement on Wednesday, as the pair continues to hug the 1.09 line in the European session. On the release front, Eurozone and German Services PMI dipped in the December. In the US, there are two major events, ADP Nonfarm Employment Change and ISM Non-Manufacturing PMI.

Eurozone Manufacturing PMIs were positive in December, with the German and Eurozone reports pointing to slight expansion. Still, growth has been hobbled by weak inflation numbers. There was a bit of good news to start off the week, as Eurozone CPI improved to 0.4%, its strongest gain since September 2014. Core CPI edged up to 1.0%, ahead of the forecast of 0.9%. Despite these stronger numbers, the euro has failed to gain any ground, as the markets remain pessimistic about the inflation picture. Weak oil prices may be a boon for consumers, but threaten to push inflation levels into negative territory, and deflation would pose a serious headache for the ECB. The central bank is expected to announce major monetary moves at its March meeting, which would mark a significant departure from the lack of action we’ve become accustomed to from Draghi & Co. There is market bias towards a reduction of the benchmark rate by 10 basis points, and QE purchasing program could be raised from 60 billion euros to 80 billion euros/mth. If the ECB opts to implement additional easing, traders can expect the euro to lose ground against the greenback.

Strong numbers from the US labor market helped convince the Federal Reserve to raise interest rates in December, but employment numbers have been lukewarm in early 2016. Next up is ADP Nonfarm Employment Change, with the official Nonfarm Payrolls report to follow on Friday. The markets are braced for a weak ADP report, with the estimate standing at just 193 thousand for January, compared to 257 thousand a month earlier. If the indicator does indeed slip badly, traders can expect the dollar to take a hit during the North American session. Employment numbers will be closely monitored by the Fed, which will have to decide if the economy is ready for another rate hike 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.

Wednesday (Feb. 3)

• 3:15 Spanish Services PMI. Estimate 54.6 points. Actual 54.6 points
• 3:45 Italian Services PMI. Estimate 54.2 points. Actual 53.6 points
• 3:50 French Final Services PMI. Estimate 50.6 points. Actual 50.3 points
• 3:55 German Final Services PMI. Estimate 55.4 points. Actual 55.0 points
• 4:00 Eurozone Final Services PMI.  Estimate 53.6 points. Actual 53.6 points
• 5:00 Italian Preliminary CPI. Estimate -0.1%
• 5:00 Eurozone Retail Sales. Estimate 0.4%
• 8:15 US ADP Nonfarm Employment Change. Estimate 193K
• 9:45 US Final Services PMI. Estimate 53.7 points
• 10:00 US ISM Non-Manufacturing PMI. Estimate 55.1 points
• 10:30 US Crude Oil Inventories. Estimate 3.7M

Thursday (Feb. 4)

• 3:00 ECB President Mark Draghi Speaks
• 8:30 US Unemployment Claims. Estimate 279K

*Key events are in bold

*All release times are EST

EUR/USD for Wednesday, February 3, 2016

EUR/USD February 3 at 6:05 EST

Open: 1.0918 Low: 1.0903 High: 1.0936 Close: 1.0911

EUR/USD Technical

• EUR/USD has been marked by limited movement in the Asian and European sessions
• 1.0847 continues to provide support
• There is weak resistance at 1.0941
• Current range: 1.0847 to 1.0941

Further levels in both directions:

• Below: 1.0847, 1.0732, 1.0659 and 1.0537
• Above: 1.0941, 1.1087 and 1.1172

OANDA’s Open Positions Ratio

EUR/USD is currently showing little movement. Short positions retain a strong majority of positions (63%). This points to trader bias towards the euro 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.