EUR/USD – Euro in Holding Pattern Ahead of US NFP Report

EUR/USD is trading at 1.0950 in Friday’s European session, after posting strong gains on Thursday. On the release front, the sole Eurozone release is Retail PMI. It’s a busy day in the US, with four key events, led by Nonfarm Employment Change. The markets are expecting a strong turnaround in the upcoming release, with an estimate of 195 thousand.

There was positive news out of the Eurozone on Thursday. Services PMIs, which are key indicators of the strength of the services sector, met expectations in the January reports. Spain, Italy, Germany and the Eurozone all posted readings above the 50-line, which indicates expansion. Only French Services PMI indicated contraction. Eurozone Retail Sales looked good with a gain of 0.4%, its best showing in six months. The inflation picture on the continent, however, is not nearly as rosy. PPI, a key gauge of inflation in the manufacturing sector, posted a sharp decline of 1.0% in January, its worst showing since December 2014. Consumer inflation indicators are also pointing downwards. Eurozone CPI missed expectations and dropped into negative territory in January, with a reading of -0.1%. This figure comes on the heels of weak CPI numbers out of France and Spain. The dismal inflation picture is sure to increase the pressure on ECB head Mario Draghi to take monetary action at the ECB’s policy meeting next week. What can we expect from the ECB? Possible moves include adopting negative interest rates or expanding quantitative easing scheme, which currently involves asset purchases of 60 billion euros/mth. Either of these moves would likely push the euro to lower levels, so the markets will be keeping a close eye on next week’s ECB policy meeting.

All eyes are on the US Nonfarm Payroll release on Friday. This event is one of the most important economic indicators and any unexpected reading could have an immediate impact on the movement of EUR/USD. Earlier in the week, ADP Nonfarm Payrolls improved to 214 thousand, crushing the estimate of 185 thousand. Will we see a repeat in the official NFP report? A strong release could revive speculation about a March rate hike by the Federal Reserve, but such a scenario remains unlikely, barring a spectacular surge in employment and inflation indicators in the next two weeks, leading up to the Fed’s policy meeting. In the rosy days of December, when the Fed raised rates by 0.25%, there was talk of a series of hikes during 2016, but the US economy has softened, so another upward move by the Fed could be some time away.

Friday (March 4)

  • 4:10 Eurozone Retail PMI
  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 195K
  • 8:30 US Unemployment Rate. Estimate 4.9%
  • 8:30 US Trade Balance. Estimate -43.5B

*Key events are in bold

*All release times are EST

EUR/USD for Friday, March 4, 2016

EUR/USD March 4 at 3:00 EST

Open: 1.0946 Low: 1.0935 High: 1.0957 Close: 1.0952

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0708 1.0847 1.0941 1.1087 1.1172 1.1278
  • EUR/USD has been flat in the Asian and European sessions
  • There is resistance at 1.1087
  • 1.0941 is busy and has switched to support following strong gains by EUR/USD on Thursday
  • Current range: 1.0941 to 1.1087

Further levels in both directions:

  • Below: 1.0941, 1.0847, 1.0708 and 1.0616
  • Above: 1.1087, 1.1172 and 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement, consistent with the lack of movement from EUR/USD. Long and short positions are close to evenly split, 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.
Kenny Fisher

Latest posts by Kenny Fisher (see all)