- 53% of all SWFX market positions are short, down from 59% yesterday
- Pending orders are broadly mixed on EUR/USD
- Key support lies at 1.1376 (weekly/monthly PPs/20-day SMA), now just 28 pips below the spot
- Both daily and weekly technical indicators are giving signals to buy EUR
- Economic events to watch over the next 24 hours: US Non-Farm Employment Change, Average Hourly Earnings and Unemployment Rate (Apr)
The number of Americans applying for unemployment benefits increased more than expected last week, recording the biggest gain in more than a year, but the underlying trend still continued to indicate a strengthening labour market. Initial claims for jobless benefits rose by 17,000 to a seasonally adjusted 274,000 in the week ended April 30, according to the Labor Department. Despite the higher-than-expected rise, claims are still near historically low levels. Claims hit a four-decade low of 248,000 in the week ended April 16 week, the lowest level since 1973. Last week was also the 61st straight week that initial claims were below 300,000, extending the longest streak since 1973 amid steady job growth. The four-week moving average of claims, considered a better gauge of labour market trends as it smoothes out week-to-week volatility, increased 2,000 to 258,000 last week. The Labor Department is expected to report later in the day that nonfarm payrolls advanced by 202,000 jobs in April following a gain of 215,000 in March. The unemployment rate is seen to remain unchanged at 5.0% and average hourly earnings are predicted climbing 0.3% for a second consecutive month. The job market has continued to improve this year, averaging monthly nonfarm payroll gains of 209,000 despite weak first-quarter growth of just 0.5%. Workforce participation is on the rise and the unemployment rate in March was 5%.
Britain's services sector faced its worst month of growth in more than three years in April, indicating a further slowdown in total GDP growth in the short term ahead of the EU referendum. The Markit/CIPS PMI measure of business activity in Britain's services sector, which accounts for 79% of the UK's GDP, dropped further to 52.3 last month, reaching the lowest level since February 2013, down from 53.7 recorded in March, and below the estimate of 53.5. The UK economy expanded by 0.4% in the first three months of the year, compared with the 0.6% growth in the final quarter of 2015. Recent surveys for the manufacturing and construction sectors for April suggested growth has since continued to slow, as businesses and consumers hold back amid concerns over the outcome of the referendum on June 23. The UK manufacturing sector encountered a surprise contraction in April that reflected in the PMI, as it entered negative territory for the first time in 4 years, plummeting under the 50 point mark to show 49.2 points. At the same time the UK's construction output rose at the slowest pace in nearly three years in April, with the PMI gauge of business activity within Britain's construction sector falling to 52 last month from 54.2 in March.
Upcoming fundamentals: US April labour market data in key focus
There are no fundamentals released in Europe on Friday, meaning the full focus will inevitably turn to the US labour market statistics due at 12:30 GMT. Analysts are forecasting a gain of 200,000 new jobs in April, down from the pace of 215,000 new positions in March. However, weaker ADP that was released on Wednesday indicates that the trend of job creation has probably slowed down more than expected. While the ADP report does not necessarily predict the result of official Labour Department's data, it is normally able to forecast the direction of travel. The jobless rate is estimated to stay flat at 5.0%. In the meantime, monthly wages are forecasted to increase by 0.3%, which is going to push the pace of annual salary increases up to 2.4%.
EUR/USD to approach weekly/monthly PPs
EUR/USD posted a considerable 80-pip decrease in value on May 6, but no major technical levels were breached. This is because the closest demand is placed as low as 1.1376, namely the weekly/monthly pivot points and 20-day SMA. However, if bearish pressure persists throughout Friday, then the pair is likely to try and tackle this area. Success here would expose the second support for today, the weekly and monthly S1s at 1.1288. On the other hand, daily technical indicators are pointing to the upside, but we are not expecting a climb as high as the closest resistance at 1.1538 (weekly/monthly R1s).Daily chart
Finally, the spot price has neared the point of testing the 200-hour SMA in the 1H chart. Flirting with this support is raising downside risks for the European currency. By closing below 1.1412 today, namely the moving average's present location, EUR/USD may become a subject to a future sell-off in the direction of the April low at 1.1215.
Hourly chart
Bullish market portion rises to 5-week high
64% (66% yesterday) of OANDA clients are betting the EUR/USD currency pair will slump in value, while SAXO Bank traders are maintaining the same view on the matter in 65.18% (68.9% yesterday) of all cases.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy Community members are divided on this week's perspectives of EUR/USD
Dukascopy Community members are divided equally in their expectations, as a consensus forecast stands at 1.1370. Still, the level is more than 70 pips above the last week's average price, meaning the pair continues trading in a strong uptrend.
Both Daytrader21 and Jignesh are bearish with respect to the common European currency. Daytrader21 suggests that "the ECB's commitment to its aggressive easing stance, coupled with a resumption in the US Dollar bullish trend, should keep EUR/USD under pressure in coming week. I am looking for a retest of the 1.1080 support level". Alongside, Jignesh is suggesting the following: "Last week's price action gave us a clue for a bullish cycle in the USD. [...] Though the pair remains in a bullish cycle for 2016, the Dollar Index is showing USD strength, which translates into a correction of the pair that can last at least over the next week or two."