EUR/USD – Steady As Spanish Employment Data Sparkles

EUR/USD is showing little movement on Wednesday, as the pair trades just shy of the 1.38 line in the European session. In economic news, Spanish Unemployment Change dipped to a three-month low and easily beat the estimate. Today’s highlight is the ADP Nonfarm Payrolls, the first US employment release of the week.

Spanish Unemployment Change is notorious for its sharp fluctuations, resulting in market forecasts that are often well off the mark. The March release was no exception, as the reading of -16.6 thousand was much better than the estimate of -5.3 thousand. The indicator has rolled off four declines in the past five releases, which points to some improvement in the Spanish economy. Spanish Manufacturing PMI met expectations on Monday, and we’ll get a look at Services PMI on Thursday.

Earlier in the week, Fed chair Janet Yellen said that inflation and employment levels needed to improve considerably, and the Federal Reserve would continue to provide monetary stimulus for some time. Currently, the Fed is purchasing $55 billion in assets under its QE scheme. There have been three tapers to QE so far, and Yellen plans to wind up the program in the fall, provided that the US economy does not run into any serious turbulence. At the same time, the Federal Reserve has stated that it has no plans to raise interest rates until sometime in 2015.

With the Eurozone weighed down by with persistently low inflation and the euro continuing to trade at high levels, the ECB has been looking for ways to improve matters, and has openly discussed implementing QE or negative deposit rates. Last week, German Bundesbank head Jens Weidmann gave support to negative deposit rates in order to respond to the strong euro. He also raised the possibility of a QE scheme for the ECB, whereby the central bank would purchase loans or other assets in order to fight deflation, which remains a serious concern. Mario Draghi also spoke on the issue, saying that the ECB is ready to act if inflation slips further.

German data continues to impress. On Tuesday, Retail Sales posted a strong gain of 1.3%, cruising past the estimate of -0.5%. German Unemployment Change continues to show improvement, as the indicator dropped to -12 thousand, down from -14 thousand a month earlier. German Consumer Climate and Business Climate also looked sharp in February, pointing to stronger confidence in the German economy, the largest in the Eurozone.

EUR/USD for Wednesday, April 2, 2014

EUR/USD April 2 at 9:00 GMT

EUR/USD 1.3794 H: 1.3816 L: 1.3769

EUR/USD Technical

• EUR/USD hit a high of 1.3816 in the Asian session, but was unable to consolidate and has dropped back  below the 1.38 line.
• 1.3786 is providing weak support and could be tested during the day. 1.3649 is a stronger support line.
• There is strong resistance at 1.3893, which is protecting the 1.39 line.
• Current range: 1.3786 to 1.3893

Further levels in both directions:

• Below: 1.3786, 1.3649, 1.3585, 1.3410 and 1.3335
• Above: 1.3893, 1.4000, 1.4149 and 1.4307

OANDA’s Open Positions Ratio

EUR/USD ratio has posted gains in short positions on Wednesday, continuing the trend we have seen throughout the week. This is consistent with the pair’s current movement, as the euro has posted slight losses. Short positions retain a strong majority, indicative of trader bias towards the dollar posting more gains at the expense of the euro.

EUR/USD has dropped below the 1.38 line in the European session. With the US releasing key employment numbers later in the day, we could see stronger movement from the pair during the North American session.

EUR/USD Fundamentals

• 7:00 Spanish Unemployment Change. Estimate -5.3K. Actual -16.6K.
• 9:00 Eurozone Final GDP. Estimate 0.3%.
• 9:00 Eurozone PPI. Estimate 0.0%.
• Day 2 – ECOFIN Meetings.
• 12:15 US ADP Nonfarm Employment Change. Estimate 192K.
• 14:00 US Factory Orders. Estimate 1.3%.
• 14:30 US Crude Oil Inventories. Estimate 1.3M.

*Key releases are highlighted in bold

*All release times are GMT

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.