After the fireworks we were treated to last week, the euro continues to have a quiet week. EUR/USD is trading at 1.0740 in Tuesday’s European session. In economic news, there are no major releases out of the Eurozone or the US for a second straight day, as traders continue to look for cues which could affect EUR/USD. French Industrial Production posted a weak gain of 0.1%, matching the forecast.
US employment numbers have looked good in recent readings, but the outstanding Nonfarm Payroll report on Friday surprised the markets. The key indicator jumped to 271 thousand, crushing the forecast of 181 thousand. It was the indicator’s best showing since May. As well, hourly wages were up 0.4%, bringing the annual increase to 2.5%, and the unemployment rate dipped to 5.0%. These excellent readings are further signs that the US economy is close to full employment. The positive news continued on Monday, as the Labor Market Conditions Index gained 1.6 points in October, up from a flat reading of 0.0 points a month earlier.
Given that the Federal Reserve said in its recent policy statement that employment data would be an important factor in a rate decision, the strong NFP reading on Friday has greatly increased the likelihood of a Fed hike. The US dollar posted broad gains as a result, as the euro took a beating. Still, a Fed rate hike should not be considered a done deal, as not all US releases have been as strong as employment data, such as manufacturing and inflation numbers. Low inflation points to slack in the economy, and the Fed policymakers will need to be assured that the US economy can withstand an interest rate hike before voting in favor of raising rates.
Meanwhile, the Eurozone economy continues to sputter. Germany, the largest economy in the Eurozone, has posted a host of disappointing numbers. On Monday, German Trade Balance was weaker than expected. The trade surplus narrowed to EUR 19.4 billion, shy of the estimate of EUR 20.3 billion. It was Germany’s smallest trade surplus in seven months. As well, the country’s manufacturing sector is in trouble, as underscored by last week’s releases. Factory Orders slipped 1.7%, and Industrial Orders followed on Friday with a decline of 1.1%, well off the estimate of +0.6%. Weaker manufacturing data can be blamed on weaker demand from China and Russia. Recent soft numbers out of Germany and the Eurozone are exactly what the ECB does not want to hear, as they underscore a weak Eurozone economy and add to the pressure on the central bank to increase stimulus, a step which ECB head Mario Draghi has hinted that the ECB is considering taking in December. Market expectations that the ECB could act in December will continue to weigh on the euro. With the Eurozone suffering from weak growth and a lack of inflation, unless Eurozone, particularly German releases show marked improvement, the euro could be in for more turbulence.
Tuesday (Nov. 10)
- 7:45 French Industrial Production. Estimate 0.1%. Actual 0.1%
- 9:00 German Buba President Jens Weidmann Speaks
- 9:00 Italian Industrial Production. Estimate 0.5%. Actual 0.2%
- All Day – ECOFIN Meetings
- 11:00 NFIB Small Business Index. Estimate 96.4 points
- 13:30 US Import Prices. Estimate -0.1%
- 15:00 US Wholesale Inventories. Estimate 0.0%
- 18:01 US 10-year Bond Auction
- 19:30 US FOMC Member Charles Evans Speaks
*Key releases are highlighted in bold
*All release times are GMT
EUR/USD for Tuesday, November 10, 2015
EUR/USD November 10 at 10:25 GMT
EUR/USD 1.0742 H: 1.0764 L: 1.0730
- EUR/USD has posted marginal movement in the Asian session and European sessions.
- 1.0847 is an immediate resistance line.
- On the downside, 1.0732 is under strong pressure and could break during the day.
- Current range: 1.0732 to 1.0847
Further levels in both directions:
- Below: 1.0732, 1.0659 and 1.05
- Above: 1.0847, 1.0941, 1.1017 and 1.1105
OANDA’s Open Positions Ratio
EUR/USD ratio is showing slight movement towards short positions and is close to an even split (51:49). This indicates a lack of trader bias as to what direction the pair will take next.