EUR/USD – Euro Flat, Markets Eye US Jobs Report

EUR/USD is showing limited movement on Tuesday, as the pair trades slightly at 1.0850 in the European session. After posting huge gains last week after the ECB  policy meeting, the euro has since retracted. Taking a look at economic events, the French Government Budget Balance and French Trade Balance both posted higher deficits than last month. Eurozone Revised GDP posted a gain of 0.3%, matching the forecast. In the US, the key event is JOLTS Jobs Openings, with the markets expecting the indicator to improve to 5.59M.

With a Federal Reserve rate hike widely expected next week, Friday’s Nonfarm Payrolls report took on added significance. The key indicator dropped to 211 thousand in November, much lower than the previous release of 271 thousand. Still, this was good enough to beat the estimate of 201 thousand. This indicator is often a market-mover, and the positive reading will lend support to Federal Reserve policymakers who are in favor of raising interest rates later this month. The Federal Reserve will obviously not confirm that a rate hike is imminent, but Fed chair Janet Yellen testified on Capitol Hill on Thursday, and signaled that a rate increase is likely in December, barring some unforeseen disastrous economic data before the rate decision on December 16. Last week, Yellen added that the Fed is satisfied with the progress shown by the US labor market and “looked forward” to a rate hike. Persistently low inflation levels have hampered the recovery and are well below the Fed target of 2 percent, and is a key reason why the Fed did not raise rates earlier this year. However, Yellen stated that she expects inflation numbers to improve, so weak inflation is unlikely to be an impediment to an historic rate hike, with Fed Funds futures pricing in a 79% chance of an increase.

ECB head Mario Draghi often finds a way to surprise the markets, and last week he sent the euro surging, courtesy of the rabbit he didn’t pull out of his pocket. The markets had expected some significant monetary measures from the ECB, but the central bank opted to play it safe, and merely tweaked current monetary policy. The ECB announced that the interest on deposits would be lowered from -0.20 percent to -0.30 percent, and the QE asset purchase program of EUR 60 billion/year would be extended for an additional six months, to March 2017. Given the lethargic Eurozone economy, the markets had expected much more, such as a substantial increase to the asset purchase program or reductions to other interest rates. The lack of any substantial moves by the ECB clearly caught the markets by surprise, and the euro not only dodged a bullet, but responded with gains of some 3 percent against the dollar, its sharpest jump since March 2009. The euro came close to the 1.10 line before settling down and closing at 1.0920. However, the euro has since reversed directions and given up about 100 points since Thursday. Will these minor steps help a struggling Eurozone? 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. The euro may have received a pass for now, but could slide towards parity, especially if the Federal Reserve raises rates next week, as is widely expected.

US PMIs reports, which are key gauges of economic activity, had a rough week. On Tuesday, ISM Manufacturing PMI slipped to 48.6 points in November. This figure fell short of the estimate of 50.6 points, and marked the first contraction of the index since May 2013. Recent manufacturing releases were also soft, as the US manufacturing sector continues to struggle. There wasn’t any relief from ISM Non-Manufacturing PMI on Thursday, as the index slipped to 55.9 points, well short of the forecast of 58.1 points. This marked a six-week low for the indicator. The silver lining is that although the index took a hit in November, the reading was still above the 50 line, indicative of expansion.

EUR/USD Fundamentals

Tuesday (Dec. 8)

  • 7:45 French Government Budget Balance. Actual -76.2B
  • 7:45 French Trade Balance. Estimate -3.3B. Actual -4.6B
  • 10:00 Eurozone Revised GDP. Estimate 0.3%. Actual 0.3%
  • All Day – ECOFIN Meetings
  • 11:00 US NFIB Small Business Index. Estimate 96.6 points. Actual 94.8 points
  • 15:00 US JOLTS Job Openings. Estimate 5.59M
  • 15:00 US IBD/TIPP Economic Optimism. Estimate 45.2 points

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Tuesday, December 8, 2015

EUR/USD December 8 at 12:15 GMT

EUR/USD 1.0860 H: 1.0882 L: 1.0830

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0659 1.0732 1.0847 1.0941 1.1052 1.1187
  • EUR/USD has shown limited movement in the Asian and European sessions.
  • 1.0847 was tested earlier in support and is a weak line.
  • 1.0941 is an immediate resistance line.
  • Current range: 1.0847 to 1.0941

Further levels in both directions:

  • Below: 1.0847, 1.0732 and 1.0659
  • Above: 1.0941, 1.1087 and 1.1172

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged, consistent with a lack of movement by the pair. Long positions are currently a minority (41%), indicative of trader bias towards the euro continuing to lose ground.

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.