EUR/USD – Euro Hugging 1.06 Ahead of US Nonfarm Payrolls Next

EUR/USD has posted slight gains in the Friday session. Currently, the pair is trading just above the 1.06 line. On the release front, German numbers were mixed. The trade surplus was almost unchanged at EUR 18.5 billion, short of the estimate of 19.2 billion. There was better news on the inflation front, as German WPI posted a gain of 0.5%, beating the forecast of 0.3%. In the US, employment numbers will be on center stage, with the release of three key indicators – Nonfarm Payrolls, Average Hourly Earnings and the unemployment rate. The Nonfarm payrolls report is expected to drop to 200 thousand, while wages are forecast to improve to 0.3%. Traders should be prepared for some volatility in the currency markets during the North American session.

As expected, the ECB held course and maintained interest rates at a flat 0.00% on Thursday. ECB President Mario Draghi focused on nuances, noting that the central bank removed one phrase from its standard introductory statement – “using all the instruments available within its mandate”. Draghi added that the removal of this phrase means that the ECB “no longer has a sense of urgency in taking further actions …. prompted by the risk of deflation”. With growth and inflation showing signs of improvement, the ECB has been under pressure to tighten policy and reduce its asset-purchase program. Germany, in particular, is unhappy with the ECB’s ultra-loose policy. On Thursday, German Finance Minister Wolfgang Schaeuble bluntly stated that he wanted to see a “timely start to the exit” from the ECB’s asset-purchase scheme. For his part, Mario Draghi must balance the improved economy with upcoming elections in France, Germany and the Netherlands. Euro-skeptics are a strong force throughout Europe and Draghi is reluctant to make any moves which could be seized on by politicians. The ECB’s asset-purchase program is slated to end in December, but economic and political circumstances could trigger an earlier end to the program.

The Federal Reserve waited an entire year to raise rates in December, but appears ready to make a March move. The odds of a March hike continue to climb, and are currently at 88% percent, according to the CME Group. Fed policymakers have been dropping hints of a March move, and a red-hot labor market and higher inflation levels present further arguments in favor of higher rates. Earlier in the year, the Fed had said that it wanted to wait until it had a clearer idea of President Trump’s economic policy before it tightened monetary policy. However, Trump has not backed up his promises to reform the tax code and increase fiscal spending with any details. Some Fed policymakers wanted to raise rates earlier this year, so Fed Chair Yellen is under pressure to make a move, and it appears virtually certain that the Fed will raise rates by a quarter-point on March 15.

Only a Woeful Jobs Report Should Derail Fed Hike

D-Day for NFP

EUR/USD Fundamentals

Friday (March 10)

  • 2:00 German Trade Balance. Estimate 19.2B. Actual 18.5B
  • 2:00 German WPI. Estimate 0.3%. Actual 0.5%
  • 2:45 French Industrial Production. Estimate +0.6%. Actual -0.3%
  • 4:00 Italian Quarterly Unemployment Rate. Estimate 11.6%
  • Day 2 – ECOFIN Meetings
  • 8:30 US Average Hourly Earnings. Estimate 0.3%
  • 8:30 US Nonfarm Employment Change. Estimate 185K
  • 8:30 US Unemployment Rate. Estimate 4.7%
  • 14:00 US Federal Budget. Estimate -150.0B

*All release times are EST

*Key events are in bold

EUR/USD for Friday, March 10, 2017

EUR/USD March 10 at 6:10 EST

Open: 1.0580 High: 1.0603 Low: 1.0578 Close: 1.0608

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0333 1.0414 1.0506 1.0616 1.0708 1.0873

EUR/USD ha shown little movement in the Asian and European sessions

  • 1.0506 is providing support
  • 1.0616 is a weak resistance line. It could see action in the Friday session

Further levels in both directions:

  • Below: 1.0506, 1.0414 and 1.0333
  • Above: 1.0616, 1.0708, 1.0873 and 1.0985
  • Current range: 1.0506 to 1.0616

OANDA’s Open Positions Ratio

EUR/USD ratio has reversed directions and is showing slight gains in short positions. Currently, long positions have a slender majority (52%), indicative of a slight bias towards EUR/USD continuing to move upwards.

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.