Euro In Holding Pattern, U.S. Nonfarm Payrolls Next

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Includes: FXE, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

The euro is flat on Friday, after posting more gains in the Thursday session. EUR/USD is trading at 1.1380 in the European session. On the release front, German and Eurozone Manufacturing PMIs came in slightly above their estimates. Today’s highlight is the Eurozone Unemployment Rate, with the markets expecting the rate to remain unchanged at 10.3%. Over in the US, we’ll get a look at Nonfarm Payrolls for February, a critical indicator which can have an immediate impact on the currency markets. The estimate stands at 206 thousand.

Weak inflation levels across the Eurozone has been a major headache for Mario Draghi & Co., and the ECB recently reduced interest rates and expanded its QE program in order to kick-start the economy and create some inflation. Eurozone CPI posted a second straight decline, coming in at -0.1%. Eurozone Core CPI posted a gain of 1.0%, within expectations. These readings came on the heels of a positive German CPI release on Wednesday, which showed a gain of 0.8% in March, the index’s best showing since February 2015. However, other German readings disappointed on Thursday. Retail Sales, the primary gauge of consumer spending, fell 0.4%, compared to an estimate of +0.3%. Unemployment Change failed to record a decline for the first time in five months, coming in at zero.

The US economy continues to look solid, so why did Federal chair Janet Yellen sound so cautious about the US economy in her speech in New York earlier this week? In her speech, she acknowledged the strong US labor market, but spoke of risks to the US economy from uncertainty in the global markets and the slowdown in China. Yellen was likely reacting to recent comments by several Fed members, which were very hawkish in tone, some going as far as calling for a rate hike this month. Left unchecked, these comments would likely have created a fever pitch in the markets about an imminent rate hike. If the Fed failed to deliver at its April policy meeting, the result could have led to strong volatility in the markets. Yellen may have poured cold water on any rate hike enthusiasm in order not to rock the markets over rate hike projections. However, this had created another problem – the Fed appears to be talking with more than one voice and sending out contradictory messages to the markets. Will Yellen’s cautious assessment be reinforced or challenged by Fed members? Public comments from Fed officials will be under the market microscope, and any hints of a rate hike in April or June could send the US dollar sharply higher against its rivals.

EUR/USD Fundamentals

Friday (April 1)

  • 7:15 Spanish Manufacturing PMI. Estimate 53.8. Actual 53.4
  • 7:45 Italian Manufacturing PMI. Estimate 52.6
  • 7:50 French Final Manufacturing PMI. Estimate 49.6. Actual 49.6
  • 7:55 German Final Manufacturing PMI. Estimate 50.4. Actual 50.7
  • 8:00 Eurozone Final Manufacturing PMI. Estimate 51.4. Actual 51.6
  • 8:00 Italian Monthly Unemployment Rate. Estimate 11.5%. Actual 11.7%
  • 9:00 Eurozone Unemployment Rate. Estimate 10.3%
  • 12:30 US Average Hourly Earnings. Estimate 0.2%.
  • 12:30 US Nonfarm Employment Change. Estimate 206K
  • 12:30 US Unemployment Rate. Estimate 4.9%
  • 13:45 US Final Manufacturing PMI. Estimate 5.15
  • 14:00 US ISM Manufacturing PMI. Estimate 50.8
  • 14:00 US Revised UoM Consumer Sentiment. Estimate 90.6 points
  • 14:00 US Construction Spending. Estimate 0.2%
  • 14:00 US ISM Manufacturing Prices. Estimate 44.5 points
  • 14:00 Revised UoM Inflation Expectations
  • All Day – US Total Vehicles Sales. Estimate 17.6M
  • 16:00 US FOMC Member Loretta Mester Speaks

*Key events are in bold

*All release times are GMT

EUR/USD for Friday, April 1, 2016

EUR/USD April 1 at 7:30 GMT

Open: 1.1379 Low: 1.1366 High: 1.1390 Close: 1.1380

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1172 1.1278 1.1378 1.1495 1.1609 1.1712
Click to enlarge
  • EUR/USD has been flat in the Asian and European sessions
  • There is resistance at 1.1495
  • 1.1378 has switched to a support role following strong gains by EUR/USD on Thursday. It could see more action during the day

Further levels in both directions:

  • Below: 1.1278, 1.1172 and 1.1087
  • Above: 1.1495, 1.1609 and 1.1712
  • Current range: 1.1378 to 1.1495

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Friday, consistent with the lack of movement from EUR/USD. Short positions have a strong majority (64%), which is indicative of strong trader bias towards EUR/USD reversing directions and dropping 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.