EUR/USD – Euro Shrugs Off Soft Services PMI, US Employment Data Next

EUR/USD has posted slight gains on Friday, erasing the gains seen on Thursday. Currently, the pair is trading at 1.1959, up 0.24% on the day. On the release front, German and Eurozone Services PMIs for April came in at 53.0 and 54.7 points, respectively, as both missed their estimates. In the US, the focus is on employment numbers, with the markets expecting mixed news. Wage growth is expected to edge lower to 0.2%, while nonfarm payrolls are forecast to rebound sharply, with an estimate of 190 thousand. We’ll also hear from four FOMC members during the day.

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. German numbers are raising concerns about the strength of the eurozone’s largest economy. Manufacturing PMI weakened for a fourth consecutive month in April, and retail sales posted a fourth straight decline. Inflation is also under pressure and remains well below the ECB target of 2 percent.

As expected, the Federal Reserve maintained the benchmark rate at a target of 1.5% to 1.75% on Wednesday. The rate statement was significant, with policymakers noting that “overall inflation has moved closer to 2 percent”. This was more hawkish than the March statement, in which the rate statement said that inflation indicators “have continued to run below 2 percent”. With inflation moving closer to the Fed target of 2 percent, there is a stronger likelihood that the Fed will upgrade its rate projection from three to four hikes in 2018. The odds of a fourth rate hike this year stand at 50%. The Fed rate statement also noted that “market-based measures of inflation compensation remain low”, a reference to soft wage growth, which is at 2.7%, lower than the 3% rate that the Fed would like to see.

U.S Dollar steady ahead of Jobs Report

EUR/USD Fundamentals

Friday (May 4)

  • 2:45 French Government Budget Balance. Actual -33.1B
  • 2:45 French Trade Balance. Estimate -4.9B. Actual -5.3B
  • 3:00 Spanish Employment Change. Estimate -100.2K. Actual -86.7K
  • 3:15 Spanish Services PMI. Estimate 56.1. Actual 55.6
  • 3:45 Italian Services PMI. Estimate 53.0. Actual 52.6
  • 3:50 French Final Services PMI. Estimate 57.4. Actual 57.4
  • 3:55 German Final Services PMI. Estimate 54.1. Actual 53.0
  • 4:00 Eurozone Final Services PMI. Estimate 55.0. Actual 54.7
  • 5:00 Eurozone Retail Sales. Estimate 0.5%. Actual 0.1%
  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 190K
  • 8:30 US Unemployment Rate. Estimate 4.0%
  • 9:00 German Buba President Weidmann Speaks
  • 12:00 US FOMC Member William Dudley Speaks
  • 15:00 US FOMC Member John Williams Speaks
  • 17:30 US FOMC Member Randal Quarles Speaks
  • 20:00 US FOMC Member Raphael Bostic Speaks

*All release times are DST

*Key events are in bold

EUR/USD for Friday, May 4, 2018

EUR/USD for May 4 at 6:15 DST

Open: 1.1989 High: 1.1996 Low: 1.1956 Close: 1.1959

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1718 1.1809 1.1915 1.2025 1.2092 1.2235

EUR/USD was flat in the Asian session and has edged lower 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 unchanged in the Friday session. Currently, short and long positions are evenly split, 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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.