New manufacturing orders in Germany rose to 3% (vs. 1.7% expected) in March, while EU retail sales jumped 2.7% in the same month, outpacing market expectations. In YoY terms, sales climbed 12% compared to the projected 9.6% and the previous reading of -1.5%.
Stateside, the day’s macro releases also cheered investors. The number of initial jobless claims for the week ended April 30 dropped to 498,000, (vs. 540,000 projected). The report sent out another signal that growth in the US labor market is accelerating. Massive Covid-19 vaccinations alongside government incentives are buttressing the economy and creating new jobs.
Today’s macro agenda (GMT 3)
- 10:00 Switzerland: SNB FX reserves (April)
- 11:30 UK: construction sector PMI (April)
- 13:00 ECB President Christine Lagarde speech
- 15:30 US: non-farm payrolls and employment rate (April); Canada: unemployment rate and employment change (April)
- 17:00 Canada: Ivey PMI (April)
- 20:00 Baker Hughes weekly oil rig count
- 22:00 US: consumer credit change (March)
Current outlook
At the time of writing, the euro was trading at 1.2064. After breaking out of the trendline (5), the price action picked up to the 67-degree angle (3), where sellers met buyers with active selling. The key pair hit an intraday high of 1.2072. The short-term picture suggests a moderately bullish scenario. The pair may accelerate its advance towards the 1.2095 (2)-1.2104 band.
Today market participants will be focused on the US labor market report (NFPs). Yesterday’s initial jobless claims unveiled a decline, reflecting faster growth in other labor market indicators. Today's NFP report could show a 1.1 mln rise in April job creation. The median consensus is calling for a 978k increase.
The unemployment rate should continue to decline to 5.8% amid accelerated hiring and reduced pandemic concerns.
FX players are advised to keep a close eye on UST yields right after the NFP report comes out. If the 10Y bond yield decreases, EURUSD will move up to 1.2100. Conversely, if the yield increases, the dollar will go up, while the euro will sink. Euro and pound crosses are trading in the green, so sentiment for them looks bullish. Overall, the bulls look set for a retracement to recent highs.
Bottom line: on Thursday, the euro drew support from macro releases out of Germany and the Eurozone. EURUSD met resistance at 1.2070. Asian trading has been relatively low-key. Market participants await the publication of the US April jobs report. Buyers are set to move up towards the 1.2100 level. The yield on 10-year Treasury bonds is 1.568%, with key support level located at 1.53%. In case of further decline, we expect to see the single currency pair reach 1.21.