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EURUSD: flat expected leading up to payrolls

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On Thursday, the 5th of October, trading on the euro/dollar pair closed down. The euro shed 0.68% (-80 pips), dropping from its session high of 1.1779 to 1.1699. First, the pound dragged the other majors down with it. The dollar was later propped up by the release of positive data in the US and some statements from Fed representatives.

America’s trade deficit has been reduced, the number of jobless claims has decreased, factory orders have risen, and Fed representatives Williams and Harker have increased expectations of a rate hike by the Federal Reserve before the end of the year.

Harker announced that he expected one more rate hike in December and another three in 2018. Williams is expecting a gradual increase in rates.

Fed Fund futures, which are tracked by CME Group, show that market participants put the probability of a rate hike in December at 86.7% against 77.5% for the 4th of October, and 71.4% for a week earlier.

US data:

  • Initial jobless claims (29 Sep): 260,000 (forecast: 265,000, previous: 272,000)
  • Trade balance (Aug): -42.4bn USD (forecast: -42.7bn USD, previous: -43.6bn USD)
  • Factory orders (Aug): 1.2% (forecast: 1.0%, previous: -3.3%).

Day’s news (GMT 3):

  • 09:00 Germany: factory orders (Aug);
  • 10:00 Switzerland: foreign currency reserves (Aug);
  • 10:30 UK: Halifax house prices (Sep);
  • 15:00 UK: MPC member Haldane’s speech;
  • 15:30 Canada: participation rate (Sep), unemployment rate (Sep);
  • 15:30 US: average hourly earnings (Sep), nonfarm payrolls (Sep), unemployment rate (Sep);
  • 17:00 Canada: Ivey PMI (Sep);
  • 17:00 US: wholesale inventories (Aug);
  • 19:15 US: Fed’s Dudley speech;
  • 19:45 US: Fed’s Kaplan speech;
  • 22:00 US: consumer credit change (Aug).

Fig 1. EURUSD rate on the hourly. Source: TradingView

My predictions for yesterday came off in full. The euro restored to the 67th degree (1.1778) at the beginning of the European session as a result of the dynamics on the euro/pound cross, before correcting to 1.1699. In Asia, the euro slid against the dollar to 1.1686.

Today’s chart doesn’t contain any predictions. I don’t make predictions on payrolls day. The NFP indicator is too unpredictable due to the constant revision of previous readings. So, we don’t know what kind of data to expect today and what the reaction to it will be.

The euro has dropped to 1.1686. I don’t think that it’ll stop here. If the payrolls data doesn’t disappoint markets, we could see the euro fall as far as 1.1520 if we get a correction on the cross. Looking downwards, there are two levels we should keep an eye on; 1.1677 and 1.1645. I reckon that the euro/dollar pair will trade flat up until the payrolls report is released.


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