EUR/USD – Euro Edges Higher as Investor Confidence Improves

EUR/USD has started the new trading week with gains. Currently, the pair is trading at 1.1912, up 0.44% on the day. With US banks closed for Labor Day, traders can expect an uneventful day from EUR/USD. On the release front, there are no major events in the eurozone. Eurozone Sentix Investor Confidence climbed to 28.2, above the forecast of 27.4 points. Eurozone PPI continues to improve, coming in at 0.0%, still shy of the estimate of 0.1%.

The eurozone economy continues to pick up speed, as economic indicators point upwards. The Sentix Investor Confidence rose in September, as investors and analysts like what they see from the euro-area economy. Germany, the largest economy in the bloc, continues to look very strong, but other countries such as France and Italy have also posted better numbers in 2017. In August, the German and eurozone manufacturing sectors continued to show strong expansion, buoyed by domestic demand as well as a stronger global economy which has increased demand for German and European exports. The stronger economy has raised speculation that the ECB will finally taper its ultra-accommodative monetary policy. The bank’s asset purchases program is scheduled to end in December, and analysts expect the ECB to withdraw stimulus in early 2018. Still, the ECB has not provided much guidance as to its plans. ECB President Mario Draghi was mum on monetary policy at last week’s meeting of central bankers at Jackson Hole, following the lead of Federal Reserve Chair Janet Yellen. However, the ECB head will not get another free pass this week, as the ECB holds its next policy meeting on Thursday. Any discussion about tapering the ECB’s asset purchase program could have a strong effect on the euro’s movement.

US employment numbers were unexpectedly soft on Friday, but the dollar shrugged off the weak numbers and managed to post gains against the euro. Nonfarm employment change slowed to 156 thousand, well below the estimate of 180 thousand. This marked a 3-month low. However, with the US labor market still close to capacity (the unemployment rate is just 4.4%), the markets can be forgiving about a softer nonfarm payroll report. Wage growth, or the lack of it, is a more pressing concern. Average Hourly Earnings posted a small gain of 0.1%, missing the estimate of 0.2%. This was down from 0.3% in the previous report, and matched the weakest gain seen in 2017. The lack of wage gains has impacted on inflation levels, which remain well below the Fed’s inflation target of 2%. Soft inflation has dampened enthusiasm for a final rate hike in 2017, with the odds of December increase pegged at just 37%.

EUR/USD Fundamentals

Monday (September 4)

• 3:00 Spanish Unemployment Change. Estimate 16.3K. Actual 46.4K
• 4:30 Eurozone Sentix Investor Confidence. Estimate 27.4. Actual 28.2
• 5:00 Eurozone PPI. Estimate 0.1%. Actual 0.0%

*All release times are GMT

*Key events are in bold

EUR/USD for Monday, September 4, 2017

EUR/USD Monday, September 4 at 6:55 EDT

Open: 1.1860 High: 1.1922 Low: 1.1860 Close: 1.1912

EUR/USD Technical

EUR/USD was flat in the Asian session and has posted small gains in European trade

• 1.1876 is providing support
• 1.1996 is the next resistance line

Further levels in both directions:

• Below: 1.1876, 1.1712, 1.1616 and 1.1509
• Above: 1.1996, 1.2108 and 1.2221
• Current range: 1.1876 to 1.1996

OANDA’s Open Positions Ratio

EUR/USD ratio has started the new week unchanged. Currently, long positions have a majority (61%), indicative of EUR/USD continuing to move higher.

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.