EUR/USD – Unchanged as Market Looks for Cues

The euro is unchanged to start off the week, as EUR/USD is trading at the 1.11 level. In economic news, there are no major events out of the Eurozone or the US. German Industrial Production rebounded with a gain of 0.8%, within expectations. Eurozone Sentix Investor Confidence improved to 4.2 points, beating the estimate. In the US, the sole event is the Labor Market Conditions Index.

There was positive news out of the manufacturing sector on Monday. German Industrial Production posted a gain of 0.8% in June, rebounding after a sharp decline of 1.3% in the previous release. This figure was just shy of the forecast of 0.9%. Manufacturing numbers were weaker on Friday. German Factory Orders, an important indicator, continues to struggle and dropped 0.4% in June, compared to an estimate of +0.5%. The indicator has managed just one gain so far in 2016, pointing to continuing weakness in the manufacturing sector. Italian Industrial Production followed suit with a decline of 0.4%, well short of the estimate of +0.3%. The manufacturing sector has been hit hard by weak global demand, and the economic instability caused by Britain’s decision to leave the EU could take a further toll on the Eurozone economy.

Sharp US employment numbers on Friday pushed the dollar higher, as EUR/USD dropped below the 1.11 level. Nonfarm Employment Change, one of the most important indicators, surprised the markets with a huge gain of 255 thousand, crushing the estimate of 180 thousand. US wage growth has been a soft spot in the robust labor market, but there was positive news as Average Hourly Earnings gained 0.3%, edging above the forecast of 0.2%. As well, Unemployment Claims remained steady at 4.9%. These strong numbers will likely increase the odds of a September rate hike by the Federal Reserve. The Fed has made no secret of the fact that any rate move will be data-dependent, and upcoming employment and inflation reports will be critical factors in the Fed’s decision. The recent US GDP report, which was much softer than expected, had dampened speculation about a rate hike before next year, but the stellar job numbers has increased the likelihood a move by Fed before the end of the year.

EUR/USD Fundamentals

Monday (August 8)

• 6:00 German Industrial Production. Estimate 0.9%. Actual 0.8%
• 8:30 Eurozone Sentix Investor Confidence. Estimate 3.6. Actual 4.2
• 14:00 US Labor Market Conditions Index

* Key releases are in bold

*All release times are GMT

EUR/USD for Monday, August 8, 2016

EUR/USD August 8 at 9:20 GMT

Open: 1.1086 High: 1.1105 Low: 1.1080 Close: 1.1094

EUR/USD Technical

• EUR/USD has shown limited movement in the Asian and European sessions
•  1.1054 is providing support
•  There is resistance at 1.1150

Further levels in both directions:

• Below: 1.1054, 1.0925 and 1.0821
• Above: 1.1150, 1.1278, 1.1376 and 1.1467
• Current range: 1.1054 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio has shown gains towards long positions. Short positions have a strong majority (57%), indicative of trader bias towards EUR/USD breaking out and moving to lower levels.

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.