The euro has taken a pause on Tuesday, after taking traders on a roller-coaster ride in the Monday session following the Italian referendum. Currently, EUR/USD is trading at 1.0770. On the release front, German Factory Orders sparkled with a gain of 4.9%, above the forecast of 0.6%. There are no major releases out of the US.
Italians went to the polls on Sunday as the country held a referendum on constitutional change. The referendum turned into a vote on the popularity of Italian Prime Minister Matteo Renzi, who staked his reputation on winning the vote. However, the move backfired, as the “No” camp cruised to victory with 59.1% of the vote, a humiliating defeat for Renzi. The prime minister promptly resigned, plunging Italy into political uncertainty.
Predictably, the euro responded with sharp losses early on Monday, dropping to a low of 1.0499. The euro wasn’t done and rebounded with strong gains, as EUR/USD climbed 1.9 percent in the Monday session, punching above the 1.07 level. The euro received a boost by signs that a caretaker government will take over until elections in 2018.
Any indications of earlier elections are sure to rattle investors and the euro, as Renzi’s Democratic Party is running neck-and-neck with the opposition Five-Star Party, which wants a referendum on Italy’s membership in the Eurozone. Renzi’s crushing defeat has shaken up the Eurozone, which is still reeling from Britain’s recent decision to depart the club.
Europe Lower on Renzi Defeat but No Panic Yet
Political Uncertainty Added to Italian Woes
US employment numbers were a mixed bag on Friday. Nonfarm Payrolls improved to 178 thousand, edging above the forecast of 177 thousand. This marked a 4-month high. However, Average Hourly Earnings, which measures wage growth, surprised with a decline of 0.1%, short of the estimate of 0.2%. This was the first decline in wage growth since March. The unemployment rate dropped to just 4.6%, well below the forecast of 4.9%. The strong labor market has been a key factor in the strong US economy, which saw GDP grow at a clip of 3.2% in the third quarter.
EUR/USD Fundamentals
Tuesday (December 6)
- 7:00 German Factory Orders. Estimate 0.6%. Actual 4.9%
- 9:10 Eurozone Retail PMI. Estimate 48.6
- 10:00 Eurozone Revised GDP. Estimate 0.3%
- All Day – ECOFIN Meetings
- 13:30 US Revised Nonfarm Productivity. Estimate 3.2%
- 13:30 US Trade Balance. Estimate -41.5B
- 13:30 US Revised Unit Labor Costs. Estimate 0.4%
- 15:00 US Factory Orders. Estimate 2.5%
- 15:00 US IBD/TIPP Economic Optimism. Estimate 52.3
*All release times are GMT
* Key events are in bold
EUR/USD for Tuesday, December 6, 2016
EUR/USD December 6 at 10:30 GMT
Open: 1.0756 High: 1.0785 Low: 1.0733 Close: 1.0773
EUR/USD Technical
| S1 | S2 | S1 | R1 | R2 | R3 |
| 1.0506 | 1.0616 | 1.0708 | 1.0821 | 1.0957 | 1.1045 |
- EUR/USD was flat in the Asian session and has posted small gains in European trade
- 1.0708 is providing support
- 1.0821 is the next resistance line
Further levels in both directions:
- Below: 1.0708, 1.0616, 1.0506 and 1.0414
- Above: 1.0821, 1.0957 and 1.1045
- Current range: 1.0708 to 1.0821
OANDA’s Open Positions Ratio
EUR/USD ratio has posted gains in short positions. Currently, short positions have a majority (60%), indicative of trader bias towards EUR/USD reversing directions and moving lower.