EUR/USD: Euro Hugging 1.05, U.S. Employment and Services Reports Next

EUR/USD has ticked higher on Thursday, as the pair trades at the 1.05 line. On the release front, there are a host of indicators on the schedule. In the Eurozone, Retail PMI pushed above the 50-point level for the first time since August. PPI slipped to 0.3%, edging above the forecast of 0.2%. In the US, ADP Nonfarm Employment Change is expected to drop to 171 thousand. The estimate for ISM Non-Manufacturing PMI is 56.6 points.

The Federal Reserve released the minutes of its December meeting, when the Fed raised rates by a quarter point for the only time in 2016. The minutes indicated that FOMC members are concerned about higher inflation levels, given the “prospects for more expansionary fiscal policies in the coming years”.

This is a clear reference to president-elect Trump’s plans to increase fiscal spending and cut taxes, which would likely result in higher inflation, something the US hasn’t had to deal with for years. Still, policymakers appear unchanged in their view that gradual rate hikes remains an appropriate monetary policy. The Fed members acknowledged that there is “considerable uncertainty” regarding future fiscal and economic programs. Many analysts are predicting another rate hike in June, but this could of course change, depending on how the effect that Trump’s economic platform has on the US economy.

Eurozone numbers have started the New Year on a positive note. Inflation and manufacturing numbers have been solid. CPI Flash Estimate climbed to 1.1% in December, up from 0.6% in the November reading. German Manufacturing PMI improved to 55.6 points, edging above the forecast of 55.5 points. Eurozone Manufacturing PMI rose to 54.9, matching the forecast. What is particularly encouraging is that the indicator has now risen over four straight months, pointing to stronger growth in the fourth quarter. On Friday, Germany releases Factory Orders and Retail Sales. After strong gains in November, both indicators are expected to post declines in the December reports.

USD Pares Gains After Fed Minutes, Data Eyed

EUR/USD Fundamentals

Thursday (January 5)

  • 9:10 Eurozone Retail PMI. Actual 50.4
  • 9:50 Spanish 10-year Bond Auction. Actual 1.45
  • 10:00 Eurozone PPI. Estimate 0.2%. Actual 0.3%
  • 10:03 French 10-year Bond Auction. Actual 0.78%
  • 12:30 US Challenger Job Cuts
  • 13:15 US ADP Nonfarm Employment Change. Estimate 171K
  • 13:30 US Unemployment Claims. Estimate 262K
  • 14:45 US Final Services PMI. Estimate 53.4
  • 15:00 US ISM Non-Manufacturing PMI. Estimate 56.6
  • 15:30 US Natural Gas Storage. Estimate -97B
  • 16:00 US Crude Oil Inventories. Estimate -1.8M

Friday (January 6)

  • 13:30 US Average Hourly Earnings. Estimate 0.3%
  • 13:30 US Nonfarm Employment Change. Estimate 175K
  • 13:30 US Unemployment Change. Estimate 4.7%

*All release times are GMT

*Key events are in bold

EUR/USD for Thursday, January 5, 2017

EUR/USD Jan 4 – 6 Chart

EUR/USD January 5 at 10:40 GMT

Open: 1.0497 High: 1.0575 Low: 1.0495 Close: 1.0511

EUR/USD Technical

  • EUR/USD posted slight gains in the Asian session. In European trade, the pair posted further gains but has retracted
  • 1.0506 is fluid – currently it is a weak support line
  • 1.0616 is the next resistance line

Further levels in both directions:

  • Below: 1.0506, 1.0414, 1.0287 and 1.0170
  • Above: 1.0616, 1.0708 and 1.0873
  • Current range: 1.0506 to 1.0616

OANDA’s Open Positions Ratio

EUR/USD ratio is close to an even split between long and short positions. This is indicative of a lack of trader bias as to what direction EUR/USD will take next.

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