EUR/USD - Euro Firm Ahead Of ECB Decision, Unemployment Claims

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Includes: DRR, ERO, EUFX, EUO, FXE, ULE, URR
by: Dean Popplewell

By Kenny Fisher

EUR/USD has edged higher in Thursday, as the euro trades in the high-1.37 range in the European session. We could see some strong movement from the pair during the day, as the ECB issues its interest rate decision and the US releases Unemployment Claims. German Factory Orders bounced back strongly, posting a gain of 1.2%. On Wednesday, ADP Non-Farm Payrolls fell way short of the estimate for a second straight month, as US employment numbers continue to struggle.

The ECB didn’t take any action last month and kept the benchmark interest rate at 0.25%. There is little room for the interest rate to go lower, but the ECB does have some other options available, such as a negative interest rate or even a mini-QE. ECB head Mario Draghi will hold a press conference after the rate decision, and the markets will be listening closely, as Draghi has surprised the markets in the past.

There was good news from Eurozone Retail Sales, as the key consumer spending indicator jumped 1.6%, easily beating the estimate of 0.9%. Eurozone Services PMIs painted a mixed picture of the services sector. Spain’s numbers dropped to 53.7 in February, well below the estimate of 55.3. There was better news from Italian Services PMI, which pushed above the 50-point line for the first time since September. The index rose to 52.9 points, beating the estimate of 50.6. A reading above the 50-point level indicates expansion. Eurozone Final Services PMI climbed to 52.6 points, above the estimate of 51.7. With recent Eurozone numbers looking respectable, ECB head Mario Draghi may opt to hold the course and not make any monetary moves this week.

Meanwhile, nervous markets are glued to the Ukraine, as Russia has effectively taken over Crimea following the ousting of the Ukrainian president, who has fled to Russia. The US and Russia continue to talk tough as the standoff between Russia and the Ukraine continue. Until this tense situation subsides, traders should be prepared for volatility in the currency markets, especially the euro.

Over in the US, it could be the start of another nasty streak of soft releases. ADP Non-Farm Employment Change posted another sharp drop in February, coming in at 139 thousand, down from 175 thousand a month earlier. The weak reading was well off the estimate of 159 thousand. With Unemployment Claims and the official Nonfarm Payrolls still to come, the dollar could take a hit if these releases fail to meet expectations. Meanwhile, the news was not much better from the services sector, as ISM Non-Manufacturing PMI dropped to 51.6 points, down sharply from 54.0 a month ago. This was well below the estimate of 53.8, and the index’s lowest level since August 2010.

EUR/USD for Thursday, March 6, 2014

Forex Rate Graph 21/1/13

EUR/USD March 6 at 12:20 GMT

EUR/USD 1.3748 H: 1.3765 L: 1.3722

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3410 1.3585 1.3649 1.3786 1.3893 1.4000
Click to enlarge
  • EUR/USD has edged higher in Thursday trading. The pair has touched a high of 1.3765 in the European session.
  • On the downside, 1.3649 is providing strong support. The next support line is at 1.3585.
  • 1.3786 is the first line of resistance. This line could face pressure if the euro continues to move higher. This is followed by resistance at 1.3893, which is protecting the 1.39 level.
  • Current range: 1.3649 to 1.3786

Further levels in both directions:

  • Below: 1.3649, 1.3585, 1.3410, 1.3347 and 1.3255
  • Above: 1.3786, 1.3893, 1.4000 and 1.4149.

OANDA’s Open Positions Ratio

EUR/USD ratio has reversed directions on Thursday, pointing to gains in long positions. This is consistent with the pair’s current movement, as the euro has pushed higher. Short positions retain a strong majority, indicative of trader bias towards the dollar moving higher.

The euro is steady in Thursday trading. EUR/USD has edged higher in the European session.

EUR/USD Fundamentals

  • 00:00 US FOMC Member Richard Fisher Speaks.
  • 9:10 Eurozone Retail PMI. Actual 48.5 points.
  • 9:45 Spanish 10-year Bond Auction. Actual 3.34%.
  • 10:00 French 10-year Bond Auction. Actual 2.20%.
  • 11:00 German Factory Orders. Estimate 1.1%. Actual 1.2%.
  • 12:30 US Challenger Job Cuts.
  • 12:45 ECB Minimum Bid Rate. Exp. 025%, Actual 0.25%.
  • 13:15 US FOMC Member William Dudley Speaks.
  • 13:30 ECB Press Conference.
  • 13:30 US Unemployment Claims. Estimate 336K.
  • 13:30 US Revised Nonfarm Productivity. Estimate 2.6%.
  • 13:30 US Revised Unit Labor Costs. Estimate -1.0%.
  • 15:00 US Factory Orders. Estimate -0.4%.
  • 15:30 US Natural Gas Storage. Estimate -134B.
  • 18:00 US FOMC Member Charles Plosser Speaks.

*Key releases are highlighted in bold

*All release times are GMT