EUR/USD – Euro Quiet Ahead of US Nonfarm Payrolls

It’s been an uneventful week for EUR/USD, which continues to trade between 1.06 and 1.07. Currently, the pair is trading at 1.0640. On the release front, German indicators continue to impress, as Industrial Trade and Trade Balance both beat expectations. In the US, employment numbers will be in focus, highlighted by Nonfarm Payrolls. The markets are braced for a weak reading of 174 thousand. Traders should be prepared for movement from EUR/USD around the release time of the employment numbers, at the start of the North American session.

The ECB plans to hold the course on monetary policy, according to the minutes of its March policy meeting. The minutes indicated that the ECB plans to maintain its monetary policy, with no changes to interest rate levels or the central bank’s asset-purchase scheme. The minutes added that there was “considerable risk surrounding the economic outlook and the robustness of inflation convergence”, which warranted maintaining the downward bias on interest rates. Essentially, the ECB has promised “more of the same”, with the asset-purchase scheme scheduled to remain in place until December. The powerful German central bank is not of the same view, however, as it would like to see tighter monetary policy, given the improvement in the economic data and higher inflation levels. March PMI reports impressed, as German and Eurozone Services and Manufacturing PMIs pointed to expansion. If the Eurozone economy continues to improve, we can expect the calls in favor of higher rates to get louder.

There were no surprises from the Federal Reserve policy minutes, which were released on Wednesday. The minutes had a slightly hawkish tone, as policymakers noted upside risk to the US economy. However, policymakers remain divided on whether inflation will rise to the Fed target of 2.0% percent. The minutes also stated FOMC members were in favor of taking steps to trim the $4.5 trillion balance sheet, which has ballooned since the Fed implemented its aggressive quantitative easing program back in 2008. However, the Fed is unlikely to make any moves on this front till later in the year, as President Trump’s fiscal policy remains a big question mark. So what’s next for the Federal Reserve? According to the CME’s Fed Watch, the odds of a rate hike at the May meeting are just 5 percent, while the likelihood of a rate hike in June stand at 63 percent.

Fed Minutes Show a Divided Central Bank on Trump and Inflation

EUR/USD Fundamentals

Friday (April 7)

• 2:00 German Industrial Production. Estimate -0.1%. Actual +2.2%
• 2:00 German Trade Balance. Estimate 19.4B. Actual 21.0B
• 2:45 French Government Budget Balance. Estimate -21.5B
• 2:45 French Industrial Production. Estimate +0.5%. Actual -1.6%
• 2:45 French Trade Balance. Estimate -4.9B. Actual -6.6B
• 4:00 Italian Retail Sales. Estimate -0.1%. Actual -0.3%
• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 174K
• 8:30 US Unemployment Rate. Estimate 4.7%
• 10:00 US Final Wholesale Inventories. Estimate 0.1%
• 12:15 US FOMC Member Esther Dudley Speech
• 15:00 US Consumer Credit. Estimate 14.2B

*All release times are EST

*Key events are in bold

EUR/USD for Friday, April 7, 2017

EUR/USD April 7 at 6:35 EST

Open: 1.0643 High: 1.0660 Low: 1.0632 Close: 1.0638

EUR/USD Technical

EUR/USD was flat in the Asian session and has edged lower in the European session

• 1.0616 is  a weak resistance line. It could be tested in the Friday session
• 1.0708 is the next resistance line

Further levels in both directions:

• Below: 1.0616, 1.0506 and 1.0340
• Above: 1.0708, 1.0873, 1.0985 and 1.1097
• Current range: 1.0616 to 1.0708

OANDA’s Open Positions Ratio

EUR/USD ratio is showing slight gains in long positions. Currently, long positions have a majority (57%), indicative of trader bias towards EUR/USD breaking out and moving upwards.

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