EUR/USD – Euro Under Pressure as German Factory Orders Decline

EUR/USD has started the week with losses, continuing the downward trend seen on Friday. In the Monday session, the pair is trading at 1.1926, down 0.30% on the day. On the release front, eurozone data disappointed. Germany Factory Orders declined 0.9%, missing the estimate of a 0.5% gain. Eurozone Retail PMI dropped to 48.6, marking the first contraction since March 2017. As well, Eurozone Sentix Investor Confidence dipped to 19.2, well short of the forecast of 21.2 points. This marked a fourth straight drop. There are no major releases in the US. On Tuesday, Germany releases Industrial Production and Trade Balance, and the US publishes PPI and JOLTS Job Openings. We’ll also hear from Federal Reserve Chair Jerome Powell, who will speak at an event in Zurich.

Soft German numbers are raising concerns about the strength of the eurozone’s largest economy. German Factory Orders posted a second decline in the past three months, pointing to weakness in the manufacturing sector. The markets will be hoping for better news from Industrial Production on Tuesday, with an estimate of 0.8%. The indicator has posted three straight declines. Last week’s PMI reports also disappointed. German Services PMI was the weakest since September 2016, and the eurozone reading also softened compared to March. This points to weaker expansion in services business activity, another indication of weaker eurozone growth in the first quarter of 2018. Manufacturing PMI weakened for a fourth consecutive month in April, and retail sales posted a fourth straight decline.

US employment numbers were mixed on Friday, but the euro was unable to make any headway. In the US, nonfarm payrolls rebounded with a gain of 164 thousand, although this fell short of the estimate of 190 thousand. Wage growth dropped from 0.3% to 0.1%, missing the estimate of 0.2 percent. There was some good news from the unemployment rate, which dropped to 3.9%, beating the estimate of 4.1%. The Fed will likely be pleased that nonfarm payrolls were not red hot, as they April report justifies its policy of gradual rate hikes.

All eyes will be on this week’s US CPI report

EUR/USD Fundamentals

Monday (May 7)

• 2:00 Germany Factory Orders. Estimate 0.5%. Actual -0.9%
• 4:10 Eurozone Retail PMI. Actual 48.6
• 4:30 Eurozone Sentix Investor Confidence. Estimate 21.2. Actual 19.2
• 8:25 US FOMC Member Raphael Bostic Speaks
• 14:00 US FOMC Member Thomas Barkin Speaks
• Tentative – US Loan Officer Survey
• 15:00 US Consumer Credit. Estimate 16.2B

Tuesday (May 8)

• 2:00 German Industrial Production. Estimate 0.8%
• 2:00 German Trade Balance. Estimate 19.9B
• 3:15 Federal Reserve Chair Jerome Powell Speaks
• 8:30 US PPI. Estimate 0.2%
• 8:30 US Core PPI. Estimate 0.2%
• 10:00 US JOLTS Job Openings. Estimate 6.02M

*All release times are DST

*Key events are in bold

EUR/USD for Monday, May 7, 2018

EUR/USD for May 7 at 6:35 DST

Open: 1.1962 High: 1.1978 Low: 1.1921 Close: 1.1926

EUR/USD Technical

EUR/USD inched lower in the Asian session and has edged downwards in European trade

• 1.1915 is providing support
• 1.2025 is providing resistance

Further levels in both directions:

• Below: 1.1915, 1.1809 and 1.1718
• Above: 1.2025, 1.2092, 1.2235 and 1.2319
• Current range: 1.1915 to 1.2025

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged in the Monday session. Currently, long positions have a small majority (51%), indicative of a lack of trader bias towards EUR/USD.

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.