EUR/USD – Euro Dips Below 1.09, US Nonfarm Payrolls Next

EUR/USD has reversed directions on Friday, as the pair has posted slight losses. In the European session, the pair is trading at 1.0870. In economic news, German Industrial Production came in at -0.3%, below expectations. In the US, today’s key event is Nonfarm Payrolls, which could have a sharp impact on the currency markets. The estimate stands at 203 thousand, weaker than the previous reading of 211 thousand.

The first week of the New Year has seen plenty of volatility from EUR/USD. The pair registered impressive gains on Thursday, climbing 150 points and punching past the 1.09 level. The euro has benefited from a number of positive releases out of the Eurozone and Germany, the bloc’s largest economy. Eurozone Unemployment Change dipped to 10.5%, marking a third consecutive drop, and beat the forecast of 10.7%. In Germany, Factory Orders posted a strong gain of 1.5%, while Retail Sales gained 0.2%, marking the first gain in four months. Earlier in the week, Services PMIs out of Germany and the Eurozone beat the estimates and indicated expansion in the services sector. These solid releases give the ECB some breathing room with regard to further easing steps, which would likely push the euro lower.

US employment numbers continue to hold the attention of the markets, with the release on Friday of Nonfarm Payrolls, one of the most important economic indicators, as well as the Unemployment Rate. An unexpected reading could have a sharp impact on the movement of EUR/USD, so we could see some volatility in the North American session. Earlier in the week, ADP Nonfarm Payrolls surged to 257 thousand in December. This crushed the forecast of 193 thousand, and was the strongest gain since June 2014. This week’s employment readings will be carefully monitored by the Federal Reserve, and strong numbers will increase speculation about another rate hike early in 2016.

The Federal Reserve released the minutes of its historic December policy meeting, at which it raised rates by 0.25 percent. The minutes were noteworthy in highlighting differences among policymakers as to whether US inflation levels will improve. Indeed, some FOMC members said that their vote in favor of a rate hike was a close call because of concerns that low inflation levels will continue in 2016. What’s next? The Fed has hinted that the December rate is the first of a series of incremental moves in 2016, but inflation levels will play an important role in the timing and size of future rate hikes.

EUR/USD Fundamentals

Friday (Jan. 8)

  • 2:00 German Industrial Production. Estimate +0.4%. Actual -0.3%
  • 7:00 German Trade Balance. Estimate 20.1B. Actual 19.7B
  • 2:45 French Industrial Production. Estimate -0.2%. Actual -0.9%
  • 2:45 French Trade Balance. Estimate -4.0B. Actual -4.6B
  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 203K
  • 8:30 US Unemployment Rate. Estimate 5.0%
  • 10:00 US Wholesale Inventories. Estimate 0.0%
  • 15:00 US Consumer Credit. Estimate 18.7B

*Key events are in bold

*All release times are EST

EUR/USD for Friday, January 8, 2016

EUR/USD January 8 at 10:20 GMT

EUR/USD 1.0925  H: 1.0927 L: 1.0855

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0659 1.0732 1.0847 1.0941 1.1087 1.1172
  • The pair lost ground in the Asian session and has leveled in European trade
  • 1.0941 is a weak resistance line
  • 1.0847 continues to be busy and has switched to a support role
  • Current range: 1.0847 to 1.0941

Further levels in both directions:

  • Below: 1.0847, 1.0732, 1.0659 and 1.0537
  • Above: 1.0941, 1.1087 and 1.1172

OANDA’s Open Positions Ratio

EUR/USD ratio is showing some gains by short positions, consistent with the sharp gains by the euro on Thursday, which led the covering of long positions. Short positions command a strong majority (59%), indicative of trader bias towards the euro moving downwards.

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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.