EUR/USD – Euro Continues to Drift, Eurozone Industrial Reports Disappoint

EUR/USD continues to show little movement this week, as the pair is trading slightly below the 1.14 line in Tuesday’s European session. In economic news, German Industrial Production declined 1.3% and French Industrial Production dropped 0.3%. Both readings missed expectations. German Trade Balance improved to EUR 23.6 billion, well above the estimate. Over in the US, the major release on the schedule is JOLTS Jobs Openings, with the markets expecting a reading of 5.55 million.

German manufacturing numbers have been mixed this week. Industrial Production was dismal, posting a decline of 1.3%, well off the forecast of -0.2%. This marked the fourth decline in the past five readings. On Monday, Industrial Production jumped 1.9%, compared to an estimate of 0.7%. Later in the week, Germany will release Preliminary GDP for the first quarter. The markets are predicting a solid gain of 0.6%, considerably higher than the Final GDP in Q4 of 0.3%. As the largest economy in the Eurozone, German numbers act as a bellwether of economic trends in the Eurozone.

Is the US labor market showing signs of fatigue? Nonfarm Payrolls looked awful 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%. Gold took advantage of the soft payrolls number and posted gains on Friday, but has reversed directions on Monday. We’ll get another look at US job numbers on Tuesday, with JOLTS Job Openings expected to climb to 5.55 million.

What’s next from the Federal Reserve? 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

Tuesday (May 10)

• 6:00 German Industrial Production. Estimate -0.2%. Actual -1.3%
• 6:00 German Trade Balance. Estimate 20.4B. Actual 23.6B
• 6:45 French Government Budget Balance. Actual -27.5B
• 6:45 French Industrial Production. Estimate 0.6%. Actual -0.3%
• 7:45 US FOMC Member William Dudley Speaks
• 8:00 Italian Industrial Production. Estimate 0.3%. Actual 0.0%
• 10:00 US NFIB Small Business Index. Estimate 93.2
• 14:00 US JOLTS Openings. Estimate 5.55M
• 14:00 US Wholesale Inventories. Estimate 0.2%

*Key events are in bold

*All release times are GMT

EUR/USD for Tuesday, May 10, 2016

EUR/USD May 10 at 8:50 GMT

Open: 1.1383 Low: 1.1369 High: 1.1402 Close: 1.1390

EUR/USD Technical

• EUR/USD has been flat in the Asian and European sessions
• There is strong resistance at 1.1495
• 1.1378 remains a weak support line and was tested earlier in the Tuesday session. It could see further action during the day

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 Tuesday, consistent with limited activity from EUR/USD. Short positions command a strong majority (61%). This is indicative of strong trader bias towards EUR/USD breaking out 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.