Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7955-0.8009. The pair closed at 0.7963, losing 0.13% on a daily basis.

At 6:32 GMT today EUR/GBP was down 0.17% for the day to trade at 0.7950. The pair touched a daily low at 0.7948 at 6:32 GMT.

Fundamental view

Euro zone

Euro zones final HICP

The annualized final consumer price index in the Euro zone, evaluated in accordance with Eurostat’s harmonized methodology, probably confirmed the preliminary HICP of 0.3% in August, according to the median estimate by experts. If confirmed, this would be the lowest level of the HICP since October 2009. The Services category is expected to have the highest annual rate in August, or 1.2%, compared with 1.3% in July, and non-energy industrial goods (0.3%, compared with 0.0% in July), according to data by Eurostat.

The index shows the change in price levels of a basket of goods and services from consumer’s perspective and also reflects purchasing trends. The main components of the HICP are food, alcohol and tobacco (accounting for 19% of the total weight), energy (11%), non-energy industrial goods (29%) and services (41%).

The HICP is used to evaluate and compare inflation rates between Member States, according to Art. 121 of the Amsterdam’s Agreement and directives by the European Central Bank (ECB), in order the latter to achieve price stability and the implementation of monetary policy. The HICP aggregates are calculated as the weighted average of each member state’s HICP components. The weight of each state is presented by its share of household final monetary consumption expenditure in the total of the country’s group.

In case the HICP slowed down more than anticipated, thus, distancing from the 2% inflation objective set by the ECB, this would mount selling pressure on the euro, because of the greater possibility of introducing additional monetary policy measures in order to stimulate economy.

The annualized final Core HICP for August probably matched the preliminary Core HICP, reported at 0.9% on August 29th. In July annualized core inflation was reported at 0.8%. This index excludes volatile categories such as food, energy, alcohol and tobacco. Eurostat is scheduled to release the official inflation data at 9:00 GMT.

Italian Balance of Trade

Italy probably produced a surplus of 2.470 billion EUR in June and another surplus of 1.330 billion EUR in July on its trade balance, according to market expectations. Nations trade surplus shrank to 3.67 billion EUR in May this year, compared with a surplus figure of 3.89 billion EUR in May 2013, as total imports rose 0.9% to reach 30.95 billion EUR. At the same time, total exports expanded at an annualized pace of 0.2% to 34.63 billion EUR in May.

In case of contracting trade surplus, this might have a bearish effect on the single currency. The National Institute of Statistics (ISTAT) is to release the official trade data at 8:00 GMT.

Euro zone Construction Output

At 9:00 GMT Eurostat is to report on construction activity in the Euro zone for July. Seasonally adjusted construction output in the region decreased 0.7% in June compared to a month ago. In annual terms, output expanded 0.3% in June. This indicator reflects how resilient construction sector development is and also provides clues over investment activity. Higher rates of increase in output usually support the common currency.

United Kingdom

Bank of England Minutes

At 8:30 GMT Bank of England is to publish the minutes from its most recent meeting on policy. Released two weeks after the meeting itself, the minutes provide a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Monetary Policy Committee (MPC). On September 9th 7 members of the Committee probably voted in favor of keeping the benchmark interest rate unchanged, while 2 members probably supported a rate hike. In addition, all 9 members of the Committee probably voted to keep monetary stimulus unchanged. In case the central bank demonstrates a hawkish view in regard to inflation pressure in the UK, this heightens the probability of an interest rate hike, which has a positive effect on the pound. A dovish view, on the other hand, has the opposite effect.

UK jobless claims, ILO unemployment

The number of people, who applied for unemployment assistance, in the United Kingdom probably decreased by 30 000 in August, following another drop by 33 600 during the prior month. The claimant count rate probably fell to 2.9% last month from 3.0% in July. It represents the number of jobless claims as a percentage from the entire work force in the country.

The rate of unemployment in the UK, estimated in accordance with ILO (International Labour Organization) standards, probably dropped to 6.3% during the three months through July compared to the same period a year ago, from 6.4% in the three months through June, as the latter has been the lowest rate since the fall of 2008.

During the period April to June this year, there were 30.60 million people in work, or an increase by 167 000 compared to the period January to March, and also an increase by 820 000 compared to April-June 2013.

There were 2.08 million unemployed people during the three months through June, or 132 000 fewer than the number, reported in January-March and also 437 000 fewer compared to April-June a year ago.

There were 8.86 million economically inactive people (people out of work, but not looking for or available for employment) aged from 16 to 64, according to data by the Office for National Statistics (ONS).

The rate of unemployment refers to the percentage of economically active people, who are currently unemployed. According to the ILO approach, people who are considered as unemployed are either: 1) Out of work, but are actively searching for employment, or 2) Out of work and are waiting to be hired again during the next two weeks.

The ILO Unemployment Rate is based on a monthly survey, known as the Labour Force Survey in the United Kingdom, with approximately 40 000 individuals being interviewed every month. This indicator reflects overall economic state in the country, as there is a strong correlation between consumer spending levels and labor market conditions. High rates of unemployment are accompanied by lesser spending, which causes an adverse effect on corporate profits and also slows down overall growth. In case, however, the rate of unemployment fell more than projected, this would have a bullish effect on the sterling. The official report by the ONS is due out at 8:30 GMT.

Average Earnings including bonuses

Average earnings with the inclusion of bonuses probably increased 0.5% during the three months through July compared to the same period a year ago, following a 0.2% drop in the period January-March. Higher rates of increase would certainly boost demand for the pound.

Technical view

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7976. In case EUR/GBP manages to breach the first resistance level at 0.7996, it will probably continue up to test 0.8030. In case the second key resistance is broken, the pair will probably attempt to advance to 0.8050.

If EUR/GBP manages to breach the first key support at 0.7942, it will probably continue to slide and test 0.7922. With this second key support broken, the movement to the downside will probably continue to 0.7888.

The mid-Pivot levels for today are as follows: M1 – 0.7905, M2 – 0.7932, M3 – 0.7959, M4 – 0.7986, M5 – 0.8013, M6 – 0.8040.

In weekly terms, the central pivot point is at 0.7991. The three key resistance levels are as follows: R1 – 0.8045, R2 – 0.8121, R3 – 0.8175. The three key support levels are: S1 – 0.7915, S2 – 0.7861, S3 – 0.7785.