EUR/USD – Euro Remains Subdued, Markets Eye German and Eurozone GDP Reports

EUR/USD continues to have an uneventful week, as the pair trades slightly below the 1.14 line in Wednesday’s European session. In economic news, there are no Eurozone events on the schedule. It’s a light day in the US, with just three indicators, highlighted by Crude Oil Inventories. The markets are expecting a surplus of 0.7 million.

As the largest economy in the Eurozone, German economic data is as a bellwether of economic trends in the Eurozone. 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. Earlier in the week, Factory Orders jumped 1.9%, crushing the estimate of 0.7%. On Friday, 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%. Eurozone Flash GDP will also be released on Friday, with the estimate standing at 0.6%. If these GDP numbers match or beat the forecast, the subdued euro could break out and move to higher ground.

JOLT Job Openings looked sharp in April, jumping to 5.76 million. This figure was much stronger than the estimate of 5.56 million. However, last week’s host of employment numbers were a mix, which predictably has raised concerns about the strength of the US labor market. Last week, Nonfarm Payrolls looked awful, 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. Other employment indicators disappointed, as ADP Nonfarm Payrolls and Unemployment Claims both missed their estimates. ADP Nonfarm Payrolls and Unemployment Claims both missed their estimates. 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%.

Will the Federal Reserve make a move in June? In its April policy statement, the Fed stayed on the sidelines, 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 statement appeared to leave the open to a June rate hike, but last week’s soft payrolls report has put a damper on speculation about an imminent hike. Last week, 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. Upcoming data, especially employment and inflation indicators, will be major factors as the Fed must decide whether to press the rate trigger in June.

EUR/USD Fundamentals

Wednesday (May 11)

  • 14:30 US Crude Oil Inventories. Estimate 0.7M
  • 17:01 US 10-year Bond Auction
  • 18:00 US Federal Budget Balance. Estimate 116.2B

Upcoming Key Events

Thursday (May 12)

  • 8:30 US Unemployment Claims. Estimate 277K

*Key events are in bold

*All release times are GMT

EUR/USD for Wednesday, May 11, 2016

EUR/USD May 11 at 9:30 GMT

Open: 1.1374 Low: 1.1373 High: 1.1397 Close: 1.1391

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1172 1.1278 1.1378 1.1495 1.1609 1.1711
  • EUR/USD posted small gains in the Asian session and is flat in the European session
  • There is strong resistance at 1.1495
  • 1.1378 remains a weak support line and was tested earlier in the Wednesday 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 almost unchanged on Wednesday, consistent with limited activity from EUR/USD. Short positions command a strong majority (59%). 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.

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.