EUR/USD – Euro Falls to 2-Week Low, US Nonfarm Payrolls Ahead

The euro continues to lose ground this week. In the Friday session, EUR/USD is trading at 1.1735, down 0.32% on the day. The euro is down 1.0% this week, and is currently at its lowest level since November 22.

In economic news, Germany’s trade surplus fell to EUR 19.9 billion, missing the estimate of EUR 22.0 billion. This marked a 3-month low. There was better news out of France, as Industrial Production surged 1.9%, crushing the estimate of -0.1%. This marked the strongest manufacturing output reading since May. In the US, the focus is on employment numbers. Nonfarm payrolls is expected to soften to 198 thousand, while wage growth is forecast to rebound with a gain of 0.3%. The unemployment rate, which stands at a sizzling 4.1%, is expected to remain unchanged.

November’s ADP nonfarm payrolls managed to beat expectations earlier this week, but the reading was sharply lower than the October release. Will the official nonfarm payrolls follow suit? The markets are bracing for a soft NFP, with a forecast of 200 thousand, down from 261 thousand in the previous release. Wage growth has been stubbornly low, despite a strong labor market and assurances from Fed policymakers that inflation and wages will move upwards. The markets are expecting some good news on Friday, with Average Hourly Earnings expected to gain 0.3%. The October reading of 0.0% was a disappointment, missing the forecast of 0.2%.

On Friday, EU Commissioner Jean-Claude Juncker announced that sufficient progress had been made on non-trade issues, and if the EU accepts this recommendation, the sides will move to trade talks. The two non-trade sticking points are the status of the Irish border and the role of the European Court of Justice after Brexit. Ireland wants some arrangement whereby EU regulations also apply to Northern Ireland, but the small DUP party, which is keeping the May government afloat, is against any steps which could be seen as separating Northern Ireland from the UK mainland. A solution that will satisfy the UK, the EU and the DUP over the Irish border has still not been reached. Another thorny issue is whether the European Court of Justice will apply to European citizens in the UK after Brexit. While the EU is in favor of the court having authority over these citizens, many British lawmakers feel that such a move would undermines British sovereignty. After months of difficult talks, moving on to trade issues would be a major breakthrough.

“Sufficient Progress” Made in Brexit Talks

EUR/USD Fundamentals

Friday (December 8)

• 2:00 German Trade Balance. Estimate 22.0B. Actual 19.9B
• 2:45 French Government Budget Balance. Actual -77.1B
• 2:45 French Industrial Production. Estimate -0.1%. Actual +1.9%
• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 198K
• 8:30 US Unemployment Rate. Estimate 4.1%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 99.0
• 10:00 US Final Wholesale Inventories. Estimate -0.4%
• 10:00 US UoM Preliminary Inflation Expectations

*All release times are GMT

*Key events are in bold

EUR/USD for Friday, December 8, 2017

EUR/USD for December 8 at 6:10 EDT

Open: 1.1773 High: 1.1777 Low: 1.1732 Close: 1.1735

EUR/USD Technical

EUR/USD ticked lower in the Asian session and continues to move lower in European trade

• 1.1657 is providing support
• 1.1777 is the next resistance line

Further levels in both directions:

• Below: 1.1657, 1.1574 and 1.1434
• Above: 1.1777, 1.1876, 1.1961 and 1.2092
• Current range: 1.1657 to 1.1777

OANDA’s Open Positions Ratio

EUR/USD is showing slight movement towards long positions. Currently, short positions have a majority (57%), indicative of EUR/USD continuing to move downwards.

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