EUR/USD – Quiet as Euro Manufacturing Data Meets Expectations

EUR/USD is starting November on a quiet note, as the pair trades just above the 1.10 line in Monday’s European session. Taking a look at economic news, the Eurozone released a host of Manufacturing PMIs, with the German and Eurozone releases beating their estimates. Monday’s key event is US ISM Manufacturing PMI, with the index expected to come in at 50.0 points.

The euro is happy to bid goodbye to the month of October, as the currency struggles to stay above the symbolic 1.10 line. EUR/USD was as high as 1.1495 last month, but was hammered by the ECB and the Federal Reserve late in the month, losing some 350 points as a result of statements from the two central banks. In the case of the ECB, it was a broad hint of further easing that sent the euro tumbling. Last week, the euro took it on the chin as the Federal Reserve surprised the markets, stating that a rate hike in December was very much on the table. Fortunately for the euro, there are no ECB press conferences or Federal Reserve statements until December. Still, the continental currency will remain under pressure, as the markets remain glued for any hints of monetary moves from the central banks, and unless Eurozone releases show marked improvement, the euro will have trouble moving higher.

On Monday, German and Eurozone Manufacturing PMIs came in above the 52 line, indicative of modest growth in the manufacturing sectors. On Friday, Eurozone releases were a mix. German Retail Sales came in at a flat 0.0%, well off the estimate of 0.4%. Eurozone CPI came in at 0.0% and Core CPI at 1.0%, both within expectations. Still, these figures are far short of the ECB’s inflation target of 2%, leaving the ECB under strong pressure to increase easing and kick-start the weak economy. There was some positive news on the labor front, as the Eurozone unemployment rate dipped to 10.8%, surprising the markets which had forecast 11.0%. The September report marked just the second time that unemployment has been under the 11.0% level in over three years. Another drop in unemployment next month could boost the euro and ease the pressure on the ECB to increase monetary stimulus.

Last week’s Federal Reserve’s policy statement was surprisingly hawkish and transparent, as the Fed said that a rate hike was a possibility in December, depending on employment and inflation numbers. The markets had essentially written off a move by the Fed before 2016, so the statement caused sharp volatility in the currency markets, with the US dollar showing broad gains after the dust had settled. With the next Fed meeting is mid-December, and the markets will be in alert mode for any further hints about a rate hike. As well, key US numbers will be closely monitored, especially employment and inflation data, as the strength of these numbers in the next several weeks will play a critical role in determining whether the Fed will press the rate trigger in December. Still, traders should keep in mind that the markets sometimes overreact to Fed statements or comments from Fed policymakers, and the central bank could easily continue to wait on the sidelines until 2016.

With the Federal Reserve statement behind us, the markets can once again focus on economic releases. There was much anticipation ahead of the US Advance GDP for the third quarter, which was released on Thursday. As it turned out, this key event didn’t shake up the markets, as the reading of a 1.5% gain was almost identical to the forecast of 1.6%. Still, this figure is much lower than the Q2 Final GDP of 3.9%, pointing to a slowdown in the US economy. Meanwhile, Unemployment Claims beat the estimate for a fourth straight week, coming in at 260 thousand. The estimate stood at 264 thousand. On Friday, US key releases wound up the week on a positive note. Employment Cost Index jumped to 0.6%, pointing to an increase in wages for US workers. The UoM Consumer Sentiment improved to 90.0 points, within expectations.

EUR/USD Fundamentals

Monday (Nov. 2)

• 8:15 Spanish Manufacturing PMI. Estimate 51.9 points. Actual 51.3 points
• 8:45 Italian Manufacturing PMI. Estimate 52.9 points. Actual 54.1 points
• 8:50 French Final Manufacturing PMI. Estimate 50.7 points. Actual 50.6 points
• 8:55 German Final Manufacturing PMI. Estimate 51.6 points. Actual 52.1 points
• 9:00 Eurozone Final Manufacturing PMI. Estimate 52.0 points. Actual 52.3 points
• 14:45 US Final Manufacturing PMI. Estimate 54.0 points
• 15:00 US ISM Manufacturing PMI. Estimate 50.0 points
•  15:00 US Construction Spending. Estimate 0.5%
•  15:00 US ISM Manufacturing Prices. Estimate 39.5 points
• 17:00 FOMC Member John Williams Speaks
• 19:00 US Loan Officer Survey

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Monday, November  2, 2015

EUR/USD November 2 at 11:10 GMT

EUR/USD 1.1025 H: 1.1049 L: 1.1000

EUR/USD Technical

• EUR/USD was flat in the Asian session and has posted marginal losses in the European session.
• 1.10117 continues to vacillate between resistance and support. It is back in a support role but is under strong pressure.
• 1.1105 is an immediate resistance line.
• Current range: 1.1017 to 1.1105

Further levels in both directions:

• Below: 1.1017, 1.0941, 1.0847 and 1.0659
• Above: 1.1105, 1.1214 and 1.1296

OANDA’s Open Positions Ratio

EUR/USD ratio is not showing any movement on Monday, consistent with the lack of movement shown by the pair. The ratio is currently evenly split between long and short positions. This indicates a lack of trader bias as to what direction the pair will take.

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.