EUR/USD – Euro Subdued, Markets Eye US Jobs Report

EUR/USD is showing marginal change on Tuesday, as the pair trades at 1.0850 in the European session. On the release front, there are no European events on the schedule. In the US, the major event of the day is JOLTS Jobs Openings. The markets are expecting the indicator to improve to 5.41 million.

The US economy has entered 2016 in strong shape, and much of the credit goes to the robust US labor market. December employment numbers have looked sharp, as Nonfarm Employment Change surged to 292 thousand, crushing the estimate of 203 thousand. This was the strongest reading in 10 months. The unemployment rate remained unchanged at 5.0%, within the Federal Reserve’s definition of “full employment”. One area of concern in the employment picture is that of wage growth, which has not kept up with the strong improvement in payrolls. Even if technically the US is at “full employment”, there still remains slack in the labor market, meaning that employers aren’t feeling the need to raise wages. This was underscored by the Average Hourly Earnings in December, which posted a flat reading of 0.0%, short of the forecast of 0.2%. This key event is a leading indicator of consumer inflation, meaning that wages must increase before consumers will spend more, thus leading to more inflation. The minutes from the Federal Reserve’s last policy meeting indicated that inflation remains a key concern of policymakers, and inflation levels will play an important role in the timing and size of upcoming rate hikes in 2016.

Following the historic US rate hike in December, the first in close to a decade, the markets are looking for more. What can we expect from the Federal Reserve? Another move at the next policy meeting in late January is unlikely, coming so soon after the December hike. However, many experts are expecting that the Fed will raise interest rates in March. Such a move would likely make the US dollar assets more attractive to investors and boost the greenback against its rivals. If the US economy continues to heat up, the Fed is expected to continue to tighten monetary policy over the course of 2016.

The euro looked sharp in December, climbing almost 300 points against the US dollar. Despite some volatility to kick off the New Year, the euro has managed to hold its own early in January, as it trades around the 1.09 level. The continental currency has benefited from a number of strong releases out of the Eurozone and Germany, pointing to modest improvement in the Eurozone and German economies. In December, unemployment dropped, while manufacturing and consumer spending numbers improved. Last week, Services PMIs out of Germany and the Eurozone beat the estimates and pointed to expansion in the services sector. These solid releases give the ECB some breathing room with regard to further easing steps, which would likely be bearish for the euro.

EUR/USD Fundamentals

Tuesday (Jan. 12)

  • 5:30 US FOMC Member Stanley Fischer Speaks
  • 6:00 US NFIB Small Business Index. Estimate 95.4 points
  • 10:00 US JOLTS Job Openings. Estimate 5.41M
  • 10:00 US IBD/TIPP Economic Optimism. Estimate 47.6 points
  • 21:00 US President Barack Obama Speaks

*Key events are in bold

*All release times are EST

EUR/USD for Tuesday, January 12, 2016

EUR/USD January 12 at 10:40 GMT

Open: 1.0856 Low: 1.0841 High: 1.0900 Close: 1.0852

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0659 1.0732 1.0847 1.0941 1.1087 1.1172
  • The pair moved higher in the Asian session but has given up these gains in the European session
  • There is resistance at 1.0941
  • 1.0847 was tested earlier in support and is a weak line
  • 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 remains unchanged. Short positions command a strong majority (59%), indicative of trader bias towards the euro continuing to move 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.