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EUR/USD Fundamental Forecast– May 5, 2016

By:
James Hyerczyk
Updated: May 5, 2016, 12:52 UTC

The EUR/USD is trading slightly lower following Tuesday’s sharp sell-off. There was a follow-through break, however, it stalled at 1.1469, triggering an

EUR/USD Fundamental Forecast– May 5, 2016

The EUR/USD is trading slightly lower following Tuesday’s sharp sell-off. There was a follow-through break, however, it stalled at 1.1469, triggering an intraday short-covering rally. The Forex pair is currently trading at 1.1491, down 0.0004 or -0.03%.

After a six day rally drove the EUR/USD from 1.1214 to 1.1616, sellers came in on Tuesday to produce a technical reversal top. This was a clear indication that the selling is greater than the buying at current price levels. It doesn’t represent a change in trend, but it could be an indication that investors are not willing to chase the market at current price levels.

A rally in the U.S. Dollar was actually behind the weakness in the EUR/USD. The dollar strengthened after comments from two Fed officials regarding the possibility of interest rate hikes this year.

On Tuesday, Atlanta Fed President Dennis Lockhart said the United States could see two further interest rate hikes this year.

San Francisco Fed President John Williams said Tuesday that he would support an interest-rate hike in June as he sees continued progress in the economy, inflation and jobs.

The early price action suggests that traders are waiting for fresh economic news. On Wednesday, investors will get the opportunity to react to the latest U.S. economic data including the ADP employment report for April. This report could give traders an indication of what to expect in Friday’s U.S. Non-Farm Payrolls report. Investors expect the report to show the economy added 196,000 private sector jobs in April. The range is 205K to 196K.

There will also be data on factory orders, productivity and the ISM services index. Economists forecast the trade deficit narrowed in March due to a decline in imports and the ISM non-manufacturing index rose in April.

A better-than-expected ADP report could increase the chances of a June rate hike which should help support the U.S. Dollar today. The Euro could strengthen if the number misses to the downside. A rebound rally in the U.S. equity markets should also put pressure on the Euro since it is a funding currency. Consequently, a sharp break in the U.S. equity market will likely drive investors out of stocks and into the Euro.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Today’s economic releases:

Cur. Event Actual Forecast Previous
  USD API Weekly Crude Oil Stock 1.265M 0.500M -1.070M
  USD API Weekly Cushing Crude Oil Stock 0.382M 1.900M
  NZD Employment Change (QoQ) (Q1) 1.2% 0.7% 0.9%
  NZD Unemployment Rate (Q1) 5.7% 5.5% 5.3%
  USD FOMC Member Lockhart Speaks
  JPY Japan – Greenery Day
  EUR German Services PMI (Apr) 54.5 54.6 54.6
  EUR Markit Composite PMI (Apr) 53.0 53.0 53.0
  EUR Services PMI (Apr) 53.1 53.2 53.2
  GBP Construction PMI (Apr) 52.0 54.0 54.2
  EUR Retail Sales (MoM) (Mar) -0.5% -0.1% 0.3%
  EUR German Buba President Weidmann Speaks  
  USD ADP Nonfarm Employment Change (Apr)   196K 200K
  USD Nonfarm Productivity (QoQ) (Q1)   -1.4% -2.2%
  USD Trade Balance (Mar)   -41.50B -47.10B
  USD Unit Labor Costs (QoQ) (Q1)   3.3% 3.3%
  CAD Trade Balance (Mar)   -1.40B -1.91B
  USD Markit Composite PMI (Apr)   51.7
  USD Services PMI (Apr)   52.1 52.1
  USD Factory Orders (MoM) (Mar)   0.6% -1.7%
  USD ISM Non-Manufacturing Employment (Apr)   50.3
  USD ISM Non-Manufacturing PMI (Apr)   54.7 54.5
  USD Crude Oil Inventories   1.695M 1.999M
  USD Cushing Crude Oil Inventories   1.746M
  USD FOMC Member Kashkari Speaks  
  AUD HIA New Home Sales (MoM) (Mar)   -5.3%
  AUD Retail Sales (MoM) (Mar)   0.3% 0.0%
  AUD Trade Balance (Mar)   -2.900B -3.410B
  CNY Caixin Services PMI (Apr)   52.6 52.2

30-Minute EUR/USD

Upcoming Economic Events that you should be monitoring:

Thursday, May 5, 2016

Cur. Event Actual Forecast Previous
  JPY Japan – Children’s Day  
  GBP Halifax House Price Index (MoM)   0.1% 2.6%
  GBP Halifax House Price Index (YoY)   9.6% 10.1%
  EUR ECB Economic Bulletin  
  GBP Services PMI (Apr)   53.5 53.7
  USD Initial Jobless Claims   260K 257K
  CAD Building Permits (MoM) (Mar)   -5.0% 15.5%
  USD FOMC Member Bullard Speaks  
  USD FOMC Member Bullard Speaks  
  USD FOMC Member Kaplan Speaks  
  USD FOMC Member Lockhart Speaks  
  USD FOMC Member Williams Speaks  
  AUD RBA Monetary Policy Statement  

Government Bond Auctions

Date Time       Country           Auction

May 04 11:05 Norway Holds bond auction

May 04 11:30 Germany Eur 4bn Apr 2021 Bobl

May 04 11:30 UK Gbp 2.75bn 1.5% 2021 Gilt

May 04 11:50 France Holds bond auction

May 04 17:20 Sweden Details of bond auction on May 11

May 05 10:30 Spain Holds bond auction

May 05 11:00 Austria Holds bond auction

May 05 11:30 UK Gbp 2.5bn 1.5% 2026 Gilt

May 09 17:20 Italy Announces details of bond auction

May 09 N/A Ireland Details of bond auction on May 12

May 10 11:30 Germany Holds I/L bond auction

May 11 11:03 Sweden Holds bond auction

May 11 11:30 Germany Eur 5bn Jun 2018 Schatz

May 12 11:10 Italy Holds bond auction

May 12 17:20 Sweden Details of I/L auction on May 19

May 12 N/A Ireland Holds bond auction

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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