EUR/USD – Rangebound as Markets Eye US Jobless Claims, Fed Minutes

EUR/USD is not showing much movement on Wednesday, as the pair trades at around 1.1240 in the European session. Taking a look at economic events, German Industrial Production posted a sharp decline of 1.2%, way off expectations. Later in the day, we’ll get a look at US Crude Oil Inventories. The markets are keeping a close look at some key releases on Thursday – US Unemployment Claims and the Federal Reserve Policy Meeting Minutes.

German manufacturing numbers have had a rough week. First, Factory Orders posted a decline of 1.8%, the worst showing in eight months. This was followed by Industrial Production, which recorded a decline of 1.2%. These weak numbers underscore growing concern that the global slowdown is affecting Germany, which is the Eurozone’s largest economy and the economic locomotive of the continent. With both Europe and the US showing signs of economic fatigue, it’s no surprise that many investors have opted to wait on the sidelines, which has resulted in a lack of movement from EUR/USD.

The markets are keeping close tabs on the Federal Reserve, which will release the minutes of its last policy meeting on Thursday. For months, expectations had been running high that the Federal Reserve might press the rate trigger and bump up rates at the September meeting. However, the Fed stayed on the sidelines and maintained rates, and the US dollar faced broad pressure from its rivals as a result. At the same time, the policy statement had a hawkish tone, giving the markets hope that the Fed could still make a move prior to the end of the year. These hopes have been largely dashed by a dismal US Nonfarm Payrolls report late last week, as just 142 thousand jobs were created, compared to an estimate of 201 thousand. However, market sentiment can change fairly quickly, and if the US rebounds with some strong data, we’ll likely see more optimism about a rate hike. With this background in mind, Thursday’s minutes take on added significance and could impact on the movement of EUR/USD.

EUR/USD Fundamentals

Wednesday (Oct. 7)

• 6:00  German Industrial Production. Estimate  +0.3%. Actual -1.2%

This manufacturing indicator posted a sharp decline in August and was nowhere near expectations. This weak reading follows a dismal report from German Factory Orders on Tuesday. These weak readings from the Eurozone’s largest economy is certainly a cause for concern. We’ll get another look at German numbers on Thursday, with the release of Germany Trade Balance. The markets are expecting a smaller surplus in August.

• 6:45 French Trade Balance. Estimate EUR -3.6 billion. Actual EUR -3.0 billion.

France’s trade deficit narrowed in August and beat market expectations. France’s economy has been struggling, so this figure was welcome news from the bloc’s number two economy.

Upcoming Key Events

Wednesday (Oct. 7)

• 14:30 US Crude Oil Inventories. Estimate 2.4 million.

This weekly indicator jumped in the last reading, climbing to +4.0 million, compared to -1.9 million a week earlier. The markets are expecting a smaller gain in the upcoming reading, with an estimate of 2.4 million. A better-than-expected reading could give a boost to the US dollar.

Thursday (Oct. 8)

• 6:00  German Trade Balance. Estimate EUR 20.2 billion

Trade Balance is closely linked to currency demand, so traders should keep a close eye on this indicator. In July, the indicator rose to EUR 22.8 billion which beat expectations, but the markets are predicting a smaller surplus in the August report. This reading follows two disappointing German manufacturing releases, and a reading below expectations could hurt the euro. 

• 11:30 ECB Monetary Policy Meeting Accounts

The ECB started releasing records of its policy meetings earlier this year. These reports provide details of the decision-making process regarding the ECB’s monetary policy, and analysts will be looking for clues as to possible future monetary moves by the central bank.

• 12:30 US Unemployment Claims

This is one of the most important economic indicators, and traders should treat it as a market-mover. Unemployment Claims rose slightly last week to 277 thousand, but this was within expectations. Given the dismal Nonfarm Payrolls report last week, a weaker reading than expected could send the US dollar lower.

• 18:00 Federal Reserve FOMC Meeting Minutes

The markets will be watching this event closely, given the continuing speculation about a rate hike by the Federal Reserve. Any hints about a rate hike could boost the US dollar against the euro.

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Wednesday, October 7, 2015

EUR/USD October 7  at 9:30 GMT

EUR/USD 1.1242 H: 1.1284 L: 1.1222

EUR/USD Technical

• EUR/USD posted slight losses late in the Asian session.
• The pair remains rangebound in European trading.
• 1.1296 is an immediate resistance line.
• 1.1214 is providing weak support.
• Current range: 1.1214 to 1.1296

Further levels in both directions:

• Below: 1.1214, 1.1105, 1.1017 and 1.0928
• Above: 1.1296, 1.1392, 1.1470 and 1.1658

OANDA’s Open Positions Ratio

EUR/USD ratio is showing a strong gain in short positions, which currently make up 60% of the open positions. This points to trader sentiment in favor of the euro losing ground against the dollar.

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.