Yesterday’s trade saw EUR/USD within the range of 1.0538-1.0983. The pair closed at 1.0918, surging 2.85% on a daily basis, or at the most notable rate in more than five years. The daily high has been the highest level since November 3rd, when a high of 1.1032 was registered.
At 7:21 GMT today EUR/USD was losing 0.46% for the day to trade at 1.0892. The pair touched a daily low at 1.0888 at 7:21 GMT.
Yesterday the common currency sharply appreciated against most of its major peers, after the European Central Bank left its key refinancing rate unchanged at a record low 0.05%, but reduced the deposit facility rate to -0.30% from -0.20% previously and extended the period of its asset purchases.
Today EUR/USD trading may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
United States
Non-farm Payrolls, Unemployment rate, Average Earnings per Hour
Employers in all sectors of economy in the United States, excluding the farming industry, probably added 200 000 new jobs in November, according to the median forecast by experts, after a job gain of 271 000 in October. The latter has been the highest job growth since May 2015, when 280 000 new job positions were added.
Employment in professional and business services rose by 78 000 in October, or well above an average growth of 52 000 a month during the past 12 months. Employment in the health care sector increased by 45 000 during the month, while retail trade added 44 000 positions. Employment in food services and drinking places rose by 42 000 in October, while the sector of construction added 31 000 jobs. On the other hand, employment in manufacturing, wholesale trade, transportation and warehousing, information, financial activities and the governmental sector was little changed in October, according to the report by the Bureau of Labor Statistics (BLS).
The non-farm payrolls report presents the total number of US employees in any business, excluding the following four groups: farm employees, general government employees, employees of non-profit organizations, private household employees. The reading, released most often, varies between 10 000 and as much as 250 000 – 300 000 at times when economy is performing well. Despite the volatility and the possibility of large revisions, the non-farm payrolls indicator presents the most timely and comprehensive reflection of the current economic state. Total non-farm payrolls account for 80% of the workers, who produce the entire Gross Domestic Product of the United States. In case of a larger-than-expected gain in jobs in November, demand for the US dollar would be strongly supported.
Average Hourly Earnings probably increased 0.2% in November compared to the prior month, according to market expectations, following a 0.4% surge in October. The latter has been the sharpest monthly increase in hourly earnings since January 2015.
The rate of unemployment in the country probably remained at 5.0% for a second consecutive month in November, according to expectations. It has been the lowest level since April 2008, when a rate of 5.0% was reported.
The total number of people unemployed was almost unchanged at 7.9 million in October. The unemployment rate for adult men (4.7%), adult women (4.5%), teenagers (15.9%), whites (4.4%), blacks (9.2%), Asians (3.5%), and Hispanics (6.3%) showed little or no change during the month. The number of long-term unemployed (those looking for employment for 27 weeks or more) was almost unchanged at 2.1 million during October and comprised 26.8% of the unemployed, according to the BLS.
In case the unemployment rate met expectations or even fell further, this would have a bullish effect on the US dollar, because of the positive implications for consumer spending. The Bureau of Labor Statistics will release the official employment data at 13:30 GMT.
Balance of Trade
The deficit on US balance of trade probably widened to USD 41.0 billion in October, according to market expectations. In September the trade gap was reported at USD 40.8 billion, which has been the smallest since February 2015, when a deficit of USD 35.40 billion was registered.
Total exports expanded at a monthly rate of 1.6% in September to reach USD 187.9 billion, supported by artwork, antique, stamps, jewelry and capital goods.
Exports of goods rose USD 2.9 billion to reach USD 127.3 billion in September. Exports of services went up USD 0.1 billion to USD 60.6 billion during the same month, supported by higher sales of travel and other business services, including research and development services; professional and management services; technical and trade-related services.
Total imports, at the same time, shrank at a monthly rate of 1.8% to reach USD 228.7 billion in September. Imports of goods fell USD 4.4 billion to USD 187.6 billion during the month. Imports of industrial supplies and materials were USD 1.6 billion lower to reach their lowest level since August 2009, driven by a drop in imports of crude oil (-USD 1.3 billion) and imports of capital goods (-USD 1.0 billion).
US exports to Canada rose 0.4%, those to the EU went up 7.7% and those to China were 2.8% higher in September. On the other hand, exports to Japan decreased 13.8% month-over-month to their lowest level since April 2010, while sales to Mexico were down 0.1%.
In case a larger-than-projected deficit figure is reported, this would cause a strong bearish impact on the US dollar, because of the negative implications for growth. The Bureau of Economic Analysis will release the official trade data at 13:30 GMT.
ECB re-assesses monetary easing
According to extracts from the Introductory statement to the November 3rd press conference, offered by the ECB President Mario Draghi: “…we decided to extend the asset purchase programme (APP). The monthly purchases of €60 billion under the APP are now intended to run until the end of March 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term.”
“…we decided to reinvest the principal payments on the securities purchased under the APP as they mature, for as long as necessary. This will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.”
“…we decided to include, in the public sector purchase programme, euro-denominated marketable debt instruments issued by regional and local governments located in the euro area in the list of assets that are eligible for regular purchases by the respective national central banks.”
“…we decided to continue conducting the main refinancing operations and three-month longer-term refinancing operations as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the last reserve maintenance period of 2017.”
Bond Yield Spread
The yield on German 2-year government bonds went as high as -0.288% on December 3rd, or the highest level since November 9th (-0.276%), after which it closed at -0.303% to add 14.0 basis points (0.140 percentage point) in comparison with December 2nd. It has been the first gain in the past four trading days.
The yield on US 2-year government bonds climbed as high as 0.994% on December 3rd, or the highest level in more than seven months, after which it closed at 0.951% to add 1.2 basis points (0.012 percentage point) compared to December 2nd. It has been the 12th gain in the past 14 trading days.
The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, narrowed to 1.254% on December 3rd from 1.382% on December 2nd. The December 3rd yield spread has been the lowest one since November 18th, when the difference was 1.243%.
Meanwhile, the yield on German 10-year government bonds soared as high as 0.693% on December 3rd, or the highest level since November 9th (0.725%), after which it slid to 0.682% at the close to add 21.4 basis points (0.214 percentage point) compared to December 2nd. It has been the first gain in the past three trading days.
The yield on US 10-year government bonds climbed as high as 2.347% on December 3rd, or the highest level since November 12th (2.354%), after which it slipped to 2.303% at the close to add 12.5 basis points (0.125 percentage point) compared to December 2nd. It has been the second consecutive gain, following seven straight trading days of decline.
The spread between 10-year US and 10-year German bond yields narrowed to 1.621% on December 3rd from 1.710% on December 2nd. The December 3rd yield difference has been the lowest one since November 2nd, when the spread was 1.613%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.0959
R2 – 1.1000
R3 (range resistance) – 1.1040
R4 (range breakout) – 1.1163
S1 – 1.0877
S2 – 1.0836
S3 (range support) – 1.0796
S4 (range breakout) – 1.0673
By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:
Central Pivot Point – 1.0617
R1 – 1.0668
R2 – 1.0744
R3 – 1.0795
S1 – 1.0541
S2 – 1.0490
S3 – 1.0414
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