Euro Edges Higher, German And Eurozone Service PMIs Miss Expectations

The euro has posted slight gains in the Monday session, as EUR/USD trades at 1.1170. On the release front, the Eurozone and German Services PMIs missed their estimates. There are no US events on the schedule, as the US markets are closed for Labor Day, so it could be a quiet day for EUR/USD.

On Friday, US Nonfarm Payrolls plunged to 151 thousand in August, down from 255 thousand a month earlier. Wage growth also disappointed, as Average Hourly Earnings edged lower to 0.1%, shy of the forecast of 0.2%.

Clearly this was not positive news, but August job data is often unreliable and tends to miss market forecasts. This may have helped the US dollar dodge a bullet, as the greenback actually recorded gains against the euro on Friday, despite the dismal payrolls release.

Will the Fed also give a “free pass” and ignore the weak job data? The markets apparently think so, as the odds of a rate hike this year are about the same after the payrolls report – the the likelihood of a September hike is 20 percent, while a December increase is pegged at 60 percent.

Still, even if the August payrolls release is overlooked, the Fed will find it hard to justify a rate increase strictly based on a robust job market.

Stronger inflation numbers for August, for example, would make a rate hike an easier sell to Fed members who remain uneasy about raising rates. Key inflation indicators will be released in mid-September, just before the Fed policy meeting on September 21.

A lot can happen between now and the Federal Reserve’s policy meeting on September 21, so key US releases will be under the market microscope ahead of the Fed’s rate decision.

There were no surprises from Eurozone manufacturing indicators last week, as Eurozone and German Manufacturing PMIs pointed to expansion, while French and Italian readings continue to indicate contraction.

The Eurozone and German readings came in at 51.7 and 53.6 points, respectively. Although the Eurozone release was just shy of the forecast of 51.8 points, it did mark a 3-month low, which could raise concerns.

French Final Manufacturing PMIs have pointed to contraction for months, and the July reading came in at 48.3 points. There was some surprise from the Italian reading of 49.8, as it marked the first contraction since January 2015.

EUR/USD Fundamentals

Monday (September 5)

  • 7:15 Spanish Services PMI. Estimate 55.1. Actual 56.0
  • 7:15 Italian Services PMI. Estimate 51.8. Actual 52.3
  • 7:50 French Final Services PMI. Estimate 52.0. Actual 52.3
  • 7:55 German Final Services PMI. Estimate 53.3. Actual 51.7
  • 8:00 Eurozone Final Services PMI. Estimate 53.1. Actual 52.8
  • 8:30 Eurozone Sentix Investor Confidence. Estimate 5.1. Actual 5.6
  • 9:00 Eurozone Retail Sales. Estimate 0.5%

*All release times are EDT

* Key events are in bold

EUR/USD for Monday, September 5, 2016

EUR/USD Chart

EUR/USD September 5 at 8:30 GMT

Open: 1.1157 High: 1.182 Low: 1.1156 Close: 1.1177

EUR/USD Technical

S1S2S1R1R2R31.09571.10541.11501.12781.13761.1467
  • EUR/USD posted slight gains in the Asian session. The pair is unchanged in European trade
  • 1.1278 is a strong resistance line
  • 1.1150 is providing weak support. It could be tested in the Monday session

Further levels in both directions:

  • Below: 1.1150, 1.1054, 1.0957 and 1.0821
  • Above: 1.278, 1.1376 and 1.1467
  • Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio has shown movement towards short positions. Currently, short positions have a small majority (52%), indicative of slight trader bias towards EUR/USD continuing to move upwards.

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