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EURUSD: euro consolidating ahead of the NPF report and Spanish parliament vote


On Thursday the 31st of May, trading on the EURUSD pair closed slightly up. Despite the fact that the euro dropped to 1.1641, it managed to recover to 1.1700 by the end of the session. This recovery was the result of reduced pressure on the single currency. Giuseppe Conte is set to be sworn in as Italy’s Prime Minister today, along with his cabinet, having gained the approval of the president.

The new Finance Minister will be economics professor Giovanni Tria. Eurosceptic Paolo Savona, who was vetoed as Finance Minister, has been appointed Minister of European affairs.

In the US session, riskier assets declined on the back of new developments in the trade dispute between the US and the rest of the world. US Commerce Secretary Wilbur Ross announced that from the 1st of June, tariffs would come into effect on steel (25%) and aluminium (10%) imports from Canada, Mexico, and the EU. The US has imposed the condition that should anyone impose their own counter measures in response to the tariffs, continued negotiations will become impossible.

US data:

  • Initial jobless claims (25 May): 221,000 (forecast: 228,000, previous: 234,000).
  • Personal income (Apr): 0.3% (forecast: 0.3%, previous: 0.2%).
  • Personal spending (Apr): 0.6% (forecast: 0.4%, previous: 0.5%).
  • Chicago PMI (May): 62.7 (forecast: 58.0, previous: 57.6).
  • Canada – GDP (Q1): 1.3% YoY (forecast: 1.8% YoY, previous: 1.7% YoY).

Day’s news (GMT+3):

  • 10:30 Switzerland: SVME – PMI (May).
  • 10:50 France: Markit manufacturing PMI (May).
  • 10:55 Germany: Markit manufacturing PMI (May).
  • 11:00 Eurozone: Markit manufacturing PMI (May).
  • 11:30 UK: Markit manufacturing PMI (May).
  • 15:30 USA: unemployment rate (May), nonfarm payrolls (May), average hourly earnings (May), average weekly hours (May), labour force participation rate (May).
  • 16:45 USA: Markit manufacturing PMI (May).
  • 17:00 USA: ISM manufacturing PMI (May), construction spending (Apr).
  • 20:00 USA: Baker Hughes US oil rig count.

Fig 1. EURUSD hourly chart. Source: TradingView

During Thursday’s European session, the euro rose to 1.1724. The single currency broke through the trend line and continued its upwards trajectory to the U3 MA line, just as I expected. Since the euro subsequently dropped from the U3 MA line to 1.1641, this confirmed the breakout of the trend line as false. The line now runs through the high of 1.1724.

Today’s key developments will be the Spanish parliament’s vote of confidence in the government as well as the nonfarm payrolls report from the US. These are what traders and investors will be looking at today.

Considering that the US dollar is on the rise against all the majors in today’s Asian session, I’m expecting the euro to decline today. The rise of the EURGBP cross has been providing support to the euro for 14 hours and only started declining in the Asian session, now providing support to sellers.

I don’t make predictions on payrolls day. The only thing I can do is to set a target level for sellers; 1.1620. As the crosses are reluctant to decline, downwards movement should prove difficult today. Also, on the way down, sellers will be met with resistance at the 45th degree and the LB line at 1.1653.

If the NFP report is weak, and the vote of confidence in Spain goes in the government’s favour, the euro should surge to around 1.1840. Of course, if you have a profitable open position, I think it best to get out of the market ahead of the payrolls report. It’s not a nice feeling when you have a profitable position ahead of some event, only to lose it once the news has come out. There are too many factors adding to the uncertainty of the situation.

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