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Euro Climbs To 2-Week Highs As All Eyes On U.S. Payrolls

Euro Climbs To 2-Week Highs As All Eyes On U.S. Payrolls

EUR/USD is unchanged on Friday, after posting strong gains in the Thursday session. Currently, the pair is trading at 1.0660. On the release front, Spanish Unemployment Change swelled by 24.8 thousand. The markets had predicted a decline of 25.8 thousand. In the US, the spotlight is on employment numbers, with three key releases – Nonfarm Employment Change, Average Hourly Earnings and the unemployment rate.

Traders should be prepared for some volatility in the currency markets during the North American session. On Sunday, Italy is holding a referendum, and a “No” vote could lead the government to resign, which would likely push the euro downwards on Monday.

The markets are anxiously awaiting Friday’s US employment reports. The US labor market has been red-hot and is close to capacity. Solid job numbers have boosted market expectations for a rate hike next week, which is considered a virtual certainty (the markets have priced in a rate hike at over 90%).

Traders will want to keep a close eye on today’s indicators, as any unexpected readings can have a sharp impact on the currency markets. We could see mixed numbers, with Nonfarm Payrolls expected to improve to 177 thousand, while Average Hourly Earnings, which measure wage growth, is expected to dip to 0.2%.

NFP Still Important Despite Upcoming Rate Hike

Eurozone indicators were solid on Thursday. German and Eurozone manufacturing reports indicate expansion in the manufacturing sector, and the unemployment rate dropped to 9.8%, its lowest level since December 2011. On the inflation front, Eurozone CPI Flash Estimate continued to rise, gaining 0.6% in November. This is a significant improvement from the first half of the year, when this inflation index posted four consecutive declines.

Still, inflation remains well below the ECB target of 2.0%, despite record low interest rates pegged at 0.00%. Earlier this week, Draghi said that the Eurozone growth had been “moderate but steady” despite the effects of global economic and political uncertainty. Draghi also said that he expected the economy’s recovery to continue. The ECB holds a policy meeting next week and is expected to maintain rates at current levels.

EUR/USD Fundamentals

Friday (December 2)

  • 8:00 Spanish Unemployment Change. Estimate -25.8K. Actual 24.8K
  • 10:00 Eurozone PPI. Estimate 0.4%
  • 13:30 US Average Hourly Earnings. Estimate 0.2%
  • 13:30 US Nonfarm Employment Change. Estimate 177K
  • 13:30 US Unemployment Rate. Estimate 4.9%
  • 13:45 US FOMC Member Lael Brainard Speech
  • 18:00 US FOMC Member Daniel Tarullo Speech

*All release times are GMT

* Key events are in bold

EUR/USD for Friday, December 2, 2016


EUR/USD December 2 at 8:55 GMT

Open: 1.0662 High: 1.0690 Low: 1.0660 Close: 1.0666

EUR/USD Technical

  • EUR/USD posted slight gains in the Asian session but has retracted in European trade
  • 1.0616 is a weak support line
  • 1.0708 is the next resistance line

Further levels in both directions:

  • Below: 1.0616, 1.0506, 1.0414 and 1.0287
  • Above: 1.0708, 1.0821 and 1.0957
  • Current range: 1.0616 to 1.0708

OANDA’s Open Positions Ratio

EUR/USD ratio showed no movement during the week, but is currently showing gains in short positions. Currently, short positions have a majority (60%), indicative of trader bias towards EUR/USD breaking out and moving lower.

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