Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7861-0.7920. The pair closed at 0.7889, gaining 0.10% on a daily basis.

At 6:14 GMT today EUR/GBP was up 0.05% for the day to trade at 0.7893. The pair touched a daily high at 0.7896 at 2:15 GMT.

Fundamentals

Euro zone

Italian retail sales

Annualized retail sales in Italy probably decreased at a pace of 0.9% in August, according to the median estimate by experts, following another 1.5% drop in July. If so, this would be the fourth consecutive month of decline in sales. In monthly terms, retail sales probably increased 0.2% in August, following two consecutive declines of 0.1% in June and July. This indicator reflects the change in the total value of inflation-adjusted sales by retailers in the country and provides key information regarding consumer spending trend, while the latter is a key driving force behind economic growth. In case retail sales index dropped at a faster than expected pace, this might have a limited bearish effect on the euro. The National Institute of Statistics (Istat) is expected to release the official report at 8:00 GMT.

Italian consumer confidence

Confidence among consumers in Italy probably worsened in October, with the respective index coming in at a reading of 101.0, according to the median forecast by experts, from 102.0 in September. If so, this would be the lowest level of confidence since February.

The index of consumer confidence is based on a survey, conducted by phone and encompassing about 2 000 households in the country. Respondents give their opinion regarding past and future economic situation in Italy, past and future personal financial situation, unemployment, intention to make major purchases such as durable goods, and saving prospects. Readings of 100.0 indicate neutrality (no change in sentiment). Values above 100.0 signify improving confidence, while values below 100.0 are indicative of low expectations. Lower than projected index readings might have a bearish impact on the common currency. The official reading is due out at 10:00 GMT.

United Kingdom

The preliminary estimate of United Kingdoms GDP probably showed that economy expanded at a rate of 3.0% during the third quarter of the year compared to the same period a year ago. UK economy expanded at an annualized rate of 3.2% in the second quarter of the current year, according to final data, and has also been growing persistently since Q4 2012.

Between Q2 2013 and Q2 2014 production output rose 2.4%, as all production industries contributed positively to this quarter on same quarter a year ago increase, with the exception of electricity, gas, steam and air conditioning, which contracted 6.6%. Household final consumption expenditure increased 2.1%, government expenditure – 1.2% and gross fixed capital formation – 9.1%. The net trade balance has deteriorated slightly in Q2 compared to Q2 2013, according to data by the Office for National Statistics.

On a quarterly basis, the preliminary estimate of UK GDP probably showed a 0.7% growth during Q3, after in Q2 economy expanded at a rate of 0.9%, according to final data, released on September 30th.

The GDP represents the total monetary value of all goods and services produced by one nation over a specific period of time. What is more, it is the widest indicator of economic activity in the country. The report on GDP is of huge importance for traders, operating in the Foreign Exchange Market, because it serves as evidence of growth in a productive economy, or as evidence of contraction in an unproductive one. As a result, currency traders will look for higher rates of growth as a sign that interest rates will follow the same direction. Higher interest rates will usually attract more investors, willing to purchase assets in the UK, while, at the same time, this will increase demand for the pound. Therefore, in case growth rate exceeded market expectations, this would provide support to the local currency. The Office for National Statistics is expected to release the preliminary GDP estimate at 8:30 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7890. In case EUR/GBP manages to breach the first resistance level at 0.7919, it will probably continue up to test 0.7949. In case the second key resistance is broken, the pair will probably attempt to advance to 0.7978.

If EUR/GBP manages to breach the first key support at 0.7860, it will probably continue to slide and test 0.7831. With this second key support broken, the movement to the downside will probably continue to 0.7801.

The mid-Pivot levels for today are as follows: M1 – 0.7816, M2 – 0.7846, M3 – 0.7875, M4 – 0.7905, M5 – 0.7934, M6 – 0.7964.

In weekly terms, the central pivot point is at 0.7943. The three key resistance levels are as follows: R1 – 0.8035, R2 – 0.8140, R3 – 0.8232. The three key support levels are: S1 – 0.7838, S2 – 0.7746, S3 – 0.7641.