EUR/USD. "Quiet Mode," Non-Farms, and ISM Service Index

It's early December, which means traders have very little time left before the start of the "dead season." The currency market will be active for a few more weeks before entering the Christmas-New Year lethargy. The EUR/USD pair is no exception here. Typically, life here slows down after the December meetings of the Federal Reserve and the European Central Bank (on December 12-13 and 14, respectively). For some time, traders reflect on the outcomes of these meetings, but inevitably, "winter holidays" set in.


The main feature of the upcoming week is the absence of representatives from the Fed. The so-called "blackout period" started yesterday: for 10 days leading up to the Fed meeting, officials of the U.S. central bank generally do not speak publicly or grant interviews. Therefore, EUR/USD traders will be focused on economic reports. Let's take a look at the economic calendar and see what awaits us in the coming days.


The first working day is traditionally quite empty for EUR/USD. During the European session, the Sentix investor confidence indicator will be published. As known, this is a leading indicator as it measures investors' sentiment towards the eurozone economy. Since March 2022, the indicator has been in the negative territory, but in November, it showed positive dynamics, rising from -21.9 to -18.6. In December, a further improvement is expected, reaching -15.0.

Also on Monday, ECB President Christine Lagarde is expected to speak. She will participate in a conference with a format that includes a Q&A session. The head of the ECB may comment on the latest eurozone inflation data, although the theme of the meeting, let's say, does not lend itself to such questions (the conference is organized by the French Academy of Moral and Political Sciences).

During the U.S. session, a report on factory orders in America will be published. The volume of total orders is expected to decrease by 2.7% in October, while core orders are expected to increase by only 0.3%.


On Tuesday, the final estimates of PMI data for November will be published. According to forecasts, they will coincide with the initial data (in this case, the market is likely to ignore this report).

The main event of the day will be the ISM Non-Manufacturing Purchasing Managers' Index (PMI), which will be published during the U.S. session. This indicator has declined over the past two months, but according to most experts, it will grow to 52.5 points in November. However, if the index falls into the "red zone," the dollar will come under significant pressure. Let me remind you that the ISM Manufacturing Index published last week was not in favor of the greenback. In November, it reached 46.7 points, with a forecast of an increase to 48.0 (the manufacturing index has been in contraction territory for the 13th consecutive month).

Also on Tuesday, the level of job vacancies and labor turnover from the U.S. Bureau of Labor Statistics will be published. However, considering the expectation of Non-Farm Payrolls later in the week, this release is likely to be overlooked by the market.


At the start of the Wednesday European session, we will learn about the October volume of industrial orders in Germany. In annual terms, the indicator has been in the negative territory since July, and judging by forecasts, the situation is not expected to improve in October (forecast -5.6%).

However, the main report will be announced during the U.S. session, which is the non-farm employment in the United States from ADP. This report is considered to play the role of a kind of "harbinger" ahead of the release of official data—although quite often these indicators do not correlate. Nevertheless, the ADP report can trigger increased volatility among dollar pairs, especially if it comes out in the green/red zone. According to agency experts, 120,000 non-farm jobs were created in November. If the figure falls below the 100,000 mark, the greenback may come under pressure.

Also on Wednesday in the United States, data on labor cost will be published (final estimate). Recall that this indicator in the third quarter, for the first time since the beginning of 2021, dropped into negative territory. According to forecasts, the final estimate will be revised downwards (from -0.8% to -0.9%).

On the same day, ECB Executive Board member Joachim Nagel (head of the Bundesbank) will speak. Before the release of the latest data on eurozone inflation, he voiced rather hawkish theses, allowing for additional interest rate hikes in the foreseeable future. Whether his position will change in light of recent events is an open question.


On this day, we will learn the final estimate of the GDP growth for the euro area in the third quarter. According to forecasts, the final result should match the second estimate (-0.1%).

During the U.S. session, weekly data on initial jobless claims will be published. Since mid-October, this indicator has fluctuated in the range of 210,000 to 220,000 (except for one week when the count jumped to 233,000). According to forecasts, for the upcoming week, the indicator will come in at 220,000, i.e., at the upper limit of the "established" range.

Also on this day, secondary economic reports will be released (wholesale inventories - final estimate, and consumer credit), but they usually do not have any significant impact on the market.


On the last day of the trading week, key labor market data for the U.S. in November will be published. According to preliminary forecasts, the unemployment rate in November will remain at the October level, i.e., at 3.9%. The number of non-farm payrolls is expected to increase by 185,000 (after a 150,000 increase in October) – meaning the figure will once again fall short of the 200,000 mark. In the private sector of the economy, the number of employed is expected to grow by 155,000 (after a 99,000 increase in October).

And the average hourly wage level is expected to demonstrate a downtrend again – down to 4.0% YoY (in this case, it will be the lowest value of the indicator since August 2021). Obviously, such a result will not favor the dollar, especially amid a decrease in CPI, producer price index, and the core PCE index.


The main intrigue of the upcoming week is whether the EUR/USD pair will return to the 1.09 area or whether sellers will pull it towards the 1.08 price level?

On the bullish side, we have the dovish comments from some of the Fed officials (Waller, Goolsby), conflicting signals from Fed Chair Jerome Powell, and a decline in key inflation indicators. On the bearish side, we have the eurozone inflation data. The "red tint" of the latest release put an end to the discussion about the ECB rate hike in the coming months. The euro lost its fundamental trump card, but, as we know, the EUR/USD pair can move up successfully only due to the dollar's weakness. For instance, on Friday, the bears tried to break through to the 1.08 level but eventually failed.

In my opinion, in the medium-term perspective (until the release of Non-Farm Payrolls), traders will exercise caution (both sellers and buyers), trading on "neutral territory," i.e., in the range of 1.0850 – 1.0930 (lower and middle Bollinger Bands lines on the 4H timeframe, respectively).

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