EUR/USD – Slight Recovery After Black Friday

The euro slide has halted, at least for now, as EUR/USD has started the new trading week with gains on Monday. In the European session, the pair is trading at 1.0770. In economic news, there are no major releases out of the Eurozone or the US on Monday. In the US, we’ll get another look at employment data, with the release of the US Labor Market Conditions Index.

US employment numbers have looked good in recent readings, but the outstanding Nonfarm Payroll report on Friday surprised the markets. The key indicator jumped to 271 thousand, crushing the forecast of 181 thousand. It was the indicator’s best showing since May. As well, hourly wages were up 0.4%, bringing the annual increase to 2.5%, and the unemployment rate dipped to 5.0%. These excellent readings are further signs that the US economy is close to full employment. Given that the Federal Reserve said in its recent policy statement that it employment data would be an important factor in a rate decision, the strong NFP reading has greatly increased the likelihood of a Fed hike. The effect on the currency markets was predictable, as the euro plunged 150 points following the release. The currency briefly slipped below the 1.08 line, touching lows last seen in April. Still, a Fed rate hike should not be considered a done deal, as not all US releases have been as strong as employment data, such as manufacturing and inflation numbers. Low inflation points to slack in the economy, and the Fed policymakers will need to be assured that the US economy can withstand a rate hike.

Germany, the largest economy in the Eurozone, continues to post soft numbers. On Monday, German Trade Balance was weaker than expected. The trade surplus narrowed to EUR 19.4 billion, shy of the estimate of EUR 20.3 billion. It was Germany’s smallest trade surplus in seven months. As well, the country’s manufacturing sector is in trouble, as underscored by last week’s releases. Factory Orders slipped 1.7%, and Industrial Orders followed on Friday with a decline of 1.1%, well off the estimate of +0.6%. Weaker manufacturing data can be blamed on weaker demand from China and Russia. Recent soft numbers out of Germany and the Eurozone are exactly what the ECB does not want to hear, as they underscore a weak Eurozone economy and add to the pressure on the central bank to increase stimulus, a step which ECB head Mario Draghi has hinted that the ECB is considering taking in December. Market expectations that the ECB could act in December will continue to weigh on the euro. With the Eurozone suffering from weak growth and a lack of inflation, unless Eurozone, particularly German releases show marked improvement, the euro could be in for more turbulence.

EUR/USD Fundamentals

Monday (Nov. 9)

• 7:00 German Trade Balance. Estimate 20.3B. Actual 19.4B
• 9:30 Eurozone Sentix Investor Confidence. Estimate 12.4 points
• All Day – Eurogroup Meetings
• 15:00 US Labor Market Conditions Index

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Monday, November 9, 2015

EUR/USD November 9 at 10:20 GMT

EUR/USD 1.0772 H: 1.0778 L: 1.0727

EUR/USD Technical

• EUR/USD has posted slight gains in the Asian session. The pair is flat in the European session.
• 1.0847 has switched to a resistance role following sharp losses by the euro late last week.
• 1.0732 is a weak support line and was tested earlier.
• Current range: 1.0732 to 1.0847

Further levels in both directions:

• Below: 1.0732, 1.0659 and 1.05
• Above: 1.0847, 1.0941, 1.1017 and 1.1105

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged, with a slight majority for long positions (53:47). This indicates slight trader bias towards the pair continuing to move upwards.

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.