EUR/USD – Euro Edges Lower, Few Economic Cues To Start Week

EUR/USD has edged lower on Monday, as the pair trades slightly above the 1.10 level.

On the release front, it’s a quiet start to the week. There is just one Eurozone release on the schedule, with Italian Industrial Production posting a decline of 0.6%. Eurozone finance ministers will gather for a meeting in Brussels. Over in the US there is one minor release, the Labor Market Conditions Index. As well, FOMC Esther George will speak at an event in Missouri.

US employment numbers were positive on Friday, but the US dollar failed to make any headway against the euro. The Nonfarm Employment Change surged to 287 thousand in June, crushing the estimate of 175 thousand. This followed a dismal reading of 37 thousand a month earlier.

There was further encouraging news as the work participation rate improved, following two straight declines. At the same time, Average Hourly Earnings remains weak, as the wage growth indicator posted a weak gain of 0.1%, shy of the forecast of 0.2%. The unemployment rate rose to 4.9%, above the estimate of 4.8%. The employment picture remains bright, but weak wage growth continues to be the Achilles heel of the US labor market.

Weak manufacturing numbers out of the Eurozone continue to raise concerns. The top three Eurozone economies all posted declines in industrial production last week. German Industrial Production declined 1.3 percent, the French reading dropped 0.5%, and on Monday, Italian Industrial Production dipped 0.6%.

These figures point to a struggling manufacturing industry across the Eurozone, which has been hit hard by weak global conditions and soft Chinese demand. The Brexit vote, which has created political and economic uncertainty in Europe and the UK, could make matters worse for manufacturers until the Brexit aftershocks subside.

The Federal Reserve released the minutes of its June policy meeting last week and there were no real surprises. Policymakers expressed concerns about a slowdown in hiring and the health of the US economy, and the underlying tone was one of prudence and caution.

The June meeting took place just one week before the Brexit referendum vote, and the minutes showed that Fed policymakers adopted a “wait and see” attitude about Brexit. The vote by Britain to leave the EU stunned the markets, causing turmoil in the markets and sending bond yields to record lows.

The minutes indicated that Fed members projected two rate increases before the end of the year, but that forecast is likely out-of-date following the shock waves from the Brexit earthquake.

Given the current economic climate, the markets are pessimistic about any rates moves before 2017. Investors have priced in no chance of a rate increase at the next Fed meeting on July 26-27, and just an eight percent chance of a hike in 2016. However, if US employment and inflation numbers improve in the second half of the year, the likelihood of a rate hike will certainly increase.

EUR/USD Fundamentals

Monday (July 11)

  • 8:00 Italian Industrial Production. Estimate 0.1%. Actual -0.6%
  • All Day – Eurogroup Meetings
  • 14:00 US FOMC Member Esther George Speaks
  • 14:00 US Labor Market Conditions Index

* Key releases are in bold

*All release times are GMT

EUR/USD for Monday, July 11, 2016


EUR/USD July 11 at 10:40 GMT

Open: 1.1044 Low: 1.1015 High: 1.1055 Close: 1.1027

EUR/USD Technical

  • EUR/USD was flat in the Asian session and has posted small losses in European trade
  • 1.1054 is a weak resistance line
  • 1.0925 is providing support

Further levels in both directions:

  • Below: 1.0925, 1.0821 and 1.0665
  • Above: 1.1054, 1.1150, 1.1278 and 1.1376
  • Current range: 1.0925 to 1.1054

OANDA’s Open Positions Ratio

EUR/USD ratio is showing some movement towards short positions. Short positions have a strong majority (59%), indicative of strong trader bias towards EUR/USD breaking out and moving to lower levels.

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