EUR/USD – Euro Remains Subdued After Weak US Payrolls Report

EUR/USD is showing limited activity on Monday, as the pair is trading at the 1.14 line in the European session. There are no major releases out of the Eurozone or the US on the schedule, so we could see a lackluster Monday session. German Factory Orders jumped 1.9%, well above expectations. The Eurozone Sentix Investor Confidence improved to 6.2 points, within expectations. Today’s sole US release is the Labor Market Conditions Index.

Eurozone retail sales indicators continue to post soft numbers. Retail sales are a key gauge of consumer spending, which is a critical driver of economic growth. On Friday, Eurozone Retail PMI dropped to 47.9 points, its weakest reading since February 2015. The indicator has pushed above the 50-level, which indicates expansion, only once since October. Eurozone Retail Sales declined 0.5%, surprising the markets which had expected a 0.1% gain. German Retail Sales in April also dropped, coming in at -1.1%. This marked a second straight decline and was the weakest reading since June 2015. These weak numbers are likely to raise alarm bells at the ECB, as it ponders what steps to take in order to revitalize a struggling economy.

US Nonfarm Payrolls was dismal in April, as the key indicator slid to just 160 thousand, well short of the forecast of 203 thousand. This marked the lowest reading in seven months. There was concern that NFP, one of the most important indicators, would post soft numbers after weak job numbers earlier this week. The ADP Nonfarm Payroll report dropped to 156 thousand, compared to an estimate of 205 thousand and Unemployment Claims jumped to 274 thousand, missing the estimate of 261 thousand. In other releases on Friday, wage levels showed no change, as Average Hourly Earnings posted a weak gain of 0.3%. The unemployment rate remained steady at 5.0%.

In its April policy statement, the Fed didn’t raise rates, but the message to the markets with regard to the US economy was one of cautious optimism. The statement noted continuing improvement in the labor market but added that it was keeping a watchful eye on low inflation levels. The Fed appeared to leave the open to a June hike, but the weak payrolls report has greatly reduced the likelihood of a June move. On Friday, New York Fed president William Dudley said he remains confident that the Fed could raise rates as much as twice this year, but many analysts are skeptical if the Fed will raise rates before 2017.

EUR/USD Fundamentals

Monday (May 9)

  • 6:00 German Factory Orders. Estimate 0.7%. Actual 1.9%
  • 8:30 Eurozone Sentix Investor Confidence. Estimate 6.1 points. Actual 6.2 points.
  • All Day – Eurogroup Meetings
  • 14:00 US Labor Market Conditions Index

*Key events are in bold

*All release times are GMT

EUR/USD for Monday, May 9, 2016

EUR/USD May 9 at 9:20 GMT

Open: 1.1383 Low: 1.1380 High: 1.1419 Close: 1.1392

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1172 1.1278 1.1378 1.1495 1.1609 1.1711
  • EUR/USD has shown limited movement in the Asian and European sessions
  • There is strong resistance at 1.1495
  • 1.1378 remains a weak support line. It could see activity in the Monday session

Further levels in both directions:

  • Below: 1.1378, 1.1278 and 1.1172
  • Above: 1.1495, 1.1609, 1.1711 and 1.1800
  • Current range: 1.1378 to 1.1495

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Monday, consistent with limited activity from the EUR/USD. Short positions command a strong majority (61%). This is indicative of strong trader bias towards EUR/USD 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.

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.