EUR/USD is trading in a narrow range and slightly lower than the highs seen yesterday as markets await the “king of forex”: Non-Farm Payrolls. Figures coming out of Europe have been somewhat better than expected as most countries return from the May Day holiday. The NFP carries high expectations this time. Will it lift the dollar or will the high expectations serve as a recipe for disappointment?
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
- EUR/USD ticked lower in the Asian session, eventually sliding below the minor 1.3865 line.
Current range: 1.3865 to 1.3905.
Further levels in both directions:
- Below: 1.3830, 1.3785, 1.3740, 1.37, 1.3650 and 1.3560, 1.3515 and 1.3450
- Above: 1.3865, 1.3905, 1.3964, 1.40, 1.4055 and 1.4105
- On the upside, 1.3905 is the next line of resistance 1.3964 follows.
- 1.3865 is a weak support line. 1.3830 is next.
- 7:15 Spanish Manufacturing PMI. Exp. 53.2, actual 52.7 points.
- 7:45 Italian Manufacturing PMI. Exp. 53, actual 54 points.
- 8:00 Euro-zone final manufacturing PMI. Exp. 53.3, actual 53.4 points.
- 9:00 Euro-zone unemployment rate. Exp. 11.9%, actual 11.8%.
- 12:30 US Non-Farm Payrolls. Exp. 216K. See how to trade the NFP with EUR/USD.
- 14:00 US Factory orders. Exp. +1.5%.
*All times are GMT
- US economy: Q1 versus Q2: The narrative of a weak US economy in Q1 due to the harsh winter (mentioned also by the Fed) versus a rebound in Q2 is strengthening: Q1 GDP was a shocking 0.1% and could be revised to contraction. On the other hand, the strong ADP report, higher manufacturing PMI and higher Chicago PMI all raise the expectations for a strong Q2 and lead to the highest NFP expectations (excluding the 2010 census period). See how to trade the NFP with EUR/USD.
- QE tapers continues: As widely expected, the Federal Reserve trimmed its QE program by $10 billion on Wednesday. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. The Fed acknowledged the winter effects and left the fireworks for the June decision.
- What will the ECB do?: Euro-zone inflation is up from the bottom but certainly complicates matters. At 0.7% in the headline and 1% in the core figure, April’s initial numbers prove that the “Easter effect” was real. However, the ECB keeps failing on its 2% inflation mission. But is this enough to act? Draghi would like a lower exchange rate of the euro but without having to take action, just like with the OMT. Markets are demanding action and his words are having a diminishing effect.
- German numbers look OK: Another drop in unemployment and ongoing positive PMIs outweigh the weak retail sales number. All in all, for those looking at the euro as an investment in Germany, there are reasons to be bullish.