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Euro consolidates at 1.1570 amid US holiday

Most major currencies showed mixed dynamics heading into the weekend. The biggest gains against the US dollar were posted by the Canadian dollar ( 1.41%), followed by the Australian dollar ( 0.53%), sterling ( 0.50%) and the Swiss franc ( 0.37%). On the other side of the FX spectrum, the New Zealand dollar (-0.06%), the euro (-0.19%) and the Japanese yen (-1.02%) logged losses.

The single currency strengthened 0.20% against the US currency to 1.1574 on Friday, October 8. In Asian trading, sellers tried to push the euro to a low of 1.1529 (October 6), but the attempt was unsuccessful. Buyers held that level by retracing to 1.1569. Volumes were thin as traders awaited the release of the NFP report.

Despite the mixed data stateside, the euro rose to 1.1586. The US economy created 194k jobs in September, falling considerably short of the 490k consensus forecast. The July and August readings were upwardly revised. The figure was increased from 235k to 366k in July, and from 1,053,000 to 1,091,000 in August. The overall revision for two months amounted to 169k jobs. 

Employment growth was concentrated in the service sectors: leisure and hospitality added 74,000 jobs; professional and business services – 60k, and retail trade – 56,100. In September, employment fell by 144,000 in local government education and by 17,000 in state government education.

The unemployment rate dropped to 4.8%. Average hourly earnings increased 0.6%, up from 0.4% in August and the consensus forecast of 0.4%. On an annualized basis, the indicator rose 4.6% vs. 4.0% in the previous month. The labor force participation rate changed insignificantly at 61.6% and has remained in a narrow range of 61.4%-61.7% since June 2020.The US currency did not weaken sharply, nor did it gain momentum. In the upshot, the 10-year UST yield widened to 1.617%.

Today’s macro agenda (GMT 3)

  • Canada — Thanksgiving
  • US —Columbus Day

Current outlook

Major currencies are showing predominantly mixed dynamics in Asian trading, while the yen and franc lead the underperformers. The euro and the New Zealand dollar have topped the decliners. The single currency remains under pressure as euro crosses decline.

New Zealand’s Prime Minister Jacinda Ardern said the country's largest city, Auckland, will remain in alert level 3 lockdown. The restrictions will be revised in a week. New Zealand announced a spike in COVID-19 cases on Sunday. Over the past 24 hours, the country recorded 60 new cases, which is a big jump.

The September employment report was the last before the FOMC meeting on November 2-3. It is unlikely that it will prevent the regulator from starting to wind down monthly bond purchases in November. Today is the statutory holiday in the US and Canada, so the fixed income market is offline. Traders will not be able to look to bond yields for guidance when making trading decisions.

Market participants will now shift their attention to the Fed minutes and US inflation data for September.

Technical analysis

After dropping to 1.1529, price action has been in a corrective phase for 60 hours, and in a sideways trend for 17 hours after rising to 1.1586. Given that the US fixed income market is offline today, buyers will have the opportunity to test the 1.1595 level. If this attempt is successful, EURUSD could enter a correction before the Fed Reserve meeting on November 2-3.

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