EUR/USD: Euro Drifting Continues, US Services PMI, Trade Balance Next

The euro is flat on Tuesday, continuing the lack of movement that has characterized the pair so far this week. In the European session, EUR/USD is trading at 1.1370. On the release front, German Factory Orders declined by 1.2%, missing expectations. Later in the day, we’ll get a look at a host of Eurozone Services PMIs as well as Eurozone Retail Sales. In the US, it’s a busy day, with the release of ISM Non-Manufacturing PMI, Trade Balance and JOLTS Jobs Openings.

The German manufacturing sector has been hurt by the Chinese slowdown, as the Asian giant is one of Germany’s major exports markets. This was underscored on Tuesday, as German Factory Orders posted a sharp decline of 1.2%, marking a third straight decline. The markets had expected a gain of 0.5%. Last week, German Manufacturing PMI came in at 50.7 points, pointing to negligible growth in manufacturing. Softness in Germany’s manufacturing sector is reflected in Eurozone numbers, as Eurozone Manufacturing PMI posted only a slightly better reading of 51.4 points.

The US labor market remains robust, as underscored by Friday’s employment numbers. Nonfarm Payrolls came in at 215 thousand, above the estimate of 205 thousand. The unemployment rate edged up to 5.0%. However, wage growth remains weak, as Average Hourly Earnings posted a small gain of 0.3%, close to the estimate of 0.2%. The markets will be treated to more employment data on Tuesday, with the release of JOLTS Jobs Openings. The estimate for February stands at 5.57 million, which would be an improvement from the previous month’s reading of 5.54 million. Strong employment numbers are critical to continued economic growth and are an important factor in the Fed’s decision-making process regarding another rate hike.

Janet Yellen sent the US dollar flying on its backside last week, following a surprisingly dovish speech in New York. EUR/USD surged some 230 points, its strongest weekly gain in eight weeks. Yellen warned of risks to the US economy from uncertainty in the global markets and the slowdown in China, and poured cold water on speculation of an April rate hike. Prior to her speech, several Fed members issued hawkish comments, some going as far as calling for a rate hike at the April policy meeting. The contradictory messages coming out of Fed points to a split in the FOMC concerning monetary policy, although Yellen is likely to have the last word. Mixed messages out of the Fed creates uncertainty that the markets could do without, so analysts will be paying close attention to the Fed minutes on Wednesday, looking for clues as to further rate projections. Traders should be prepared for some volatility after the release of the minutes.

EUR/USD Fundamentals

Tuesday (April 5)

  • 6:00 German Factory Orders. Estimate +0.5%. Actual -1.2%
  • 7:15 Spanish Services PMI. Estimate 54.2
  • 7:45 Italian Services PMI. Estimate 54.3
  • 7:50 French Services PMI. Estimate 51.2
  • 7:55 German Services PMI. Estimate 55.5
  • 8:00 Eurozone Final Services PMI. Estimate 54.1
  • 9:00 Eurozone Retail Sales. Estimate 0.2%
  • 12:30 US Trade Balance. Estimate -46.3B
  • 13:45 US Final Services PMI. Estimate 51.0
  • 14:00 US ISM Non-Manufacturing PMI. Estimate 54.1 
  • 14:00 US JOLTS Jobs Openings. Estimate 5.57M
  • 14:00 US IBD/TIPP Economic Optimism. Estimate 47.7 

Upcoming Key Events

Wednesday (April 6)

  • 18:00 FOMC Meeting Minutes

*Key events are in bold

*All release times are DST

EUR/USD for Tuesday, April 5, 2016

EUR/USD April 5 at 9:05 DST

Open: 1.1385 Low: 1.1343 High: 1.1405 Close: 1.1369

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1087 1.1172 1.1278 1.1378 1.1495 1.1609
  • EUR/USD has shown marginal movement in the Asian an European sessions
  • 1.1378 was tested earlier in resistance and remains under strong pressure
  • 1.1278 is providing strong support

Further levels in both directions:

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

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged, consistent with the lack of movement we’re seeing from EUR/USD. Long positions have a strong majority (69%), indicative of strong trader bias towards EUR/USD breaking out and moving to higher 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.

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.