- Long sentiment worsened to 51% in light of upcoming US non-farm payrolls
- Pending orders are also set to sell the Euro in the majority of cases (55%)
- Positive US numbers to send EUR/USD below 1.08; negative data may refocus attention on 1.10
- Daily technical indicators support the pair's sell-off at the moment; weekly ones are largely mixed
- Economic events to watch in the next 24 hours: German Industrial Production (Sep); French Trade Balance (Sep); US Non-Farm Payrolls, Unemployment Rate and Average Hourly Earnings (Oct); FOMC Member Brainard Speaks
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Euro zone retail sales declined for the first time in six months in September, as spending on food and beverages decreased sharply in the reported period. According to Eurostat, retail sales in the Euroland dropped 0.1% in September, whereas economists had predicted a 0.2% rise. In annual terms, sales at European retailers climbed 2.9% up from a revised 2.2% advance in August. Sentiment in the retail sector has improved steadily since June, with a pickup in the views of both present and future sales. Retail sales were flat in Germany, the Euro zone's star economy, and dropped by 0.4% in France.
Meanwhile, factory order in Germany unexpectedly extended a series of drops in September due to a decline in demand for investment goods in the Euro zone. Orders fell a seasonally adjusted 1.7% from August, when they plunged 1.8%, marking the third consecutive decline. Economists, however, had predicted a 1% gain. Measured on an annual basis, orders dropped 1%. The Bundesbank said last month that an upward trend in economic activity in Germany continued in the three months through September, albeit less dynamically.
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Upcoming fundamentals: US payrolls to drive Fed hike expectations
Apart from less influential European fundamentals on Friday, market participants will pay all attention to the monthly employment report from the United States. Data will be released at 13:30 GMT and will include employment change in October as well as unemployment rate and wage growth for the same month. Currently analysts expect the payrolls to surge by 181,000 in October, up from 142,000 in September. Jobless rate is therefore estimated to decrease from 5.1% to 5.0%, the lowest level since April 2008. Earnings growth is, however, forecasted to remain subdued with an advance of just 0.2% in October after no increase in the preceding month. This statistics will be crucial for the Fed, which is going to decide whether to hike interest rates in December for the first time in almost a decade. Currently odds for a December move give the probability of 56%, but this percentage will most probably change in either direction after today's data.
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EUR/USD steady before US payrolls report
Thursday trading was tranquil in terms of volatility, while the EUR/USD currency pair decided to wait for more pronounced fundamental impetus on Friday. At the moment it is hovering slightly below the weekly S1 at 1.09, thus supporting our medium term bearish outlook. Short traders remain focused on the 1.08 mark, where May and July lows are reinforced by the weekly S2. This area is highly likely to be tested on Friday in case of positive US jobs report. On the other hand, a disappointment from the fundamental front may send EUR/USD higher, and bulls are determined to regain 1.10 (weekly PP).Daily chart
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Even though EUR/USD ticked marginally higher on Thursday, the overall sentiment stays largely unchanged and mostly bearish. Optimistic US jobs report is likely to trigger losses down to 1.07, according to the one-hour chart. At the same time, any rallies should be capped by 200-hour SMA at 1.0974 and a trend-line at 1.10.
Hourly chart
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EUR/USD's pending orders are constantly swinging between gains and losses
Bullish views are supported by OANDA clients as 55% of them are keeping long open positions on the Euro versus US Dollar. However, SAXO Bank traders are unwilling to go long on the common European currency, while bears hold an advantage of 57% against a 43% share for bulls.
Spreads (avg,pip) / Trading volume / Volatility
Community members forecast the Euro to lose value against the US Dollar this week
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According to Dukascopy Community members, the most traded currency pair will prolong its bearish tendency throughout this week. This idea is supported by the 61% of Dukascopy traders.
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"After dropping below the weekly uptrend line, it is expected that pair will continue it downward trend. If it will break above 1.11 level on the daily chart, then, the pair will resume recent uptrend, and will try to reach recent resistance which is at 1.14" - said trader Drishti.
Average forecast says EUR/USD will trade at 1.13 by February
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Oct 6 and Nov 6 expect, on average, to see the currency pair around 1.13 by the end of February 2016. Though the majority of participants, namely 55% of them, believe the exchange rate will be generally below 1.14 in ninety days, with 38% alone seeing it below 1.10. Alongside, only 18% of those surveyed reckon the price will trade in the range between 1.14 and 1.20 by the end of February. © Dukascopy Bank SA