EUR/USD – Euro Dips Below 1.06 on Weak Eurozone CPI

EUR/USD has weakened on Wednesday, as the pair trades at 1.0580 in the European session. In economic news, Spanish Unemployment Change sparkled, dropping by 27.1 thousand. There were no surprises from Eurozone CPI, which met expectations. In the US, today’s key event is ADP Nonfarm Employment Change.

After slight gains on Tuesday, the euro has reversed directions on Wednesday. There was good news from Spanish Unemployment Change, which was down sharply with a reading of -27.1 thousand. This was much better than the forecast of -10.3 thousand and marked the first decline in three months. Meanwhile, Eurozone CPI remained weak, with a small gain of 0.1% in November. This was close to the forecast of 0.2%. The Eurozone economy is in deep trouble, beset by inflation, high unemployment and weak growth. Germany, the bloc’s largest economy, although in better shape than the rest of the bloc, has also been affected by the malaise which has hit the continent as well as the global slowdown. This means that the markets are expecting the ECB to make a move at its policy meeting on Thursday. Possible scenarios include lowering the deposit rate below the current -0.20% or expanding the current QE program. Either of these steps will likely weigh on the struggling euro, which is trading at its lowest levels since April. There is also talk of some structural changes, as the central bank considers implementing two-tier negative rates on deposits to protect the banking sector profitability.

In the US, this week’s employment numbers kick off with the ADP Nonfarm Payrolls. The markets are expecting the ADP release to improve to 191 thousand. On Thursday, we’ll get a look at Unemployment Claims, followed by the official NFP on Friday. With the markets abuzz over continuing speculation about a rate hike later in the month, these employment releases will be under the market microscope and could result in strong volatility on the currency markets.

US manufacturing data has been anything but impressive in recent readings, and this was underlined by a soft reading from ISM Manufacturing PMI on Tuesday. The key index slipped to 48.6 points in November. This figure fell short of the estimate of 50.6 points, and marked the first contraction from the index since May 2013. Manufacturing data in October was also soft – the Empire State Manufacturing Index posted a dismal reading of -10.7 points, worse than the estimate of -5.3 points. This marked a fourth straight decline by the important indicator. As well, Philly Fed Manufacturing Index posted a weak gain of 1.9 points. This negative trend points to trouble in the manufacturing sector and could weigh on the US dollar.

EUR/USD Fundamentals

Wednesday (Dec. 2)

  • 1:00 US FOMC Member Lael Brainard Speaks
  • 8:00 Spanish Unemployment Change. Estimate -10.3K. Actual -27.1K
  • 10:00 Eurozone CPI Flash Estimate. Estimate 0.2%. Actual 0.1%
  • 10:00 Eurozone Core CPI Flash Estimate. Estimate 1.1%. Actual 0.9%
  • 10:00 Eurozone PPI. Estimate -0.4%. Actual -0.3%
  • 13:10 US FOMC Member Dennis Lockhart Speaks
  • 13:15 ADP Nonfarm Employment Change. Estimate 191K
  • 13:30 US Fed Chair Yellen Speaks
  • 13:30 US Revised Nonfarm Productivity. Estimate 2.2%
  • 13:30 US Revised Unit Labor Costs. Estimate 1.1%
  • 15:30 US Crude Oil Inventories. Estimate -0.6M
  • 17:25 Fed Chair Janet Yellen Speaks
  • 19:00 US Beige Book
  • 20:40 US FOMC Member John Williams Speaks

Upcoming Key Events

Thursday (Dec. 3)

  • 12:45 ECB Minimum Bid Rate. Estimate 0.05%
  • 13:30 ECB Press Conference
  • 13:30 US Unemployment Claims. Estimate 269K
  • 15:00 US Fed Chair Janet Yellen Testifies
  • 15:00 ISM Non-Manufacturing PMI. Estimate 58.1 points

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Wednesday, December 2, 2015

EUR/USD December 2 at 1230 GMT

EUR/USD 1.0587 H: 1.0633 L: 1.0581

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0287 1.0359 1.05 1.0659 1.0732 1.0847
  • EUR/USD was flat in the Asian session and has posted losses in the European session.
  • 1.0659 has strengthened as the pair trades at lower levels.
  • 1.0500 is providing support.
  • Current range: 1.0500 to 1.0659

Further levels in both directions:

  • Below: 1.05, 1.0359 and 1.0287
  • Above: 1.0659, 1.0732, 1.0847 and 1.0941

OANDA’s Open Positions Ratio

EUR/USD ratio is showing movement towards short positions, as the ratio is close to an even split between short and long positions. This is indicative of a lack of trader bias as to what direction the pair will take next.

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.