Forex Market: EUR/USD daily trading forecast

Yesterday’s trade saw EUR/USD within the range of 1.2443-1.2578. The pair closed at 1.2450, losing 0.57% on a daily basis.

At 8:05 GMT today EUR/USD was up 0.32% for the day to trade at 1.2490. The pair touched a daily high at 1.2495 at 7:53 GMT.

Fundamentals

Euro zone

German and Euro zone ZEW gauges of Economic Sentiment

The gauge of economic sentiment in Germany probably improved to 0.5 in November, according to the median forecast by experts. In October the index entered into negative territory for the first time since November 2012, slipping to a reading of -3.6. The indicator has been in decline since December 2013, when it stood at 62.0.

The ZEW (Zentrum für Europäische Wirtschaftsforschung) economic expectations index is published monthly. The study encompasses up to 350 financial and economic analysts. The indicator reflects the difference between the share of analysts, that are optimistic and those, that are pessimistic about the expected economic development in Germany over the next six months. A positive value indicates that the proportion of optimists is larger than that of pessimists. A ZEW reading of -100 suggests that all analysts are pessimistic about the current developments and expect economic conditions to deteriorate. A ZEW reading of 100 implies that all analysts are optimistic about the current situation and expect conditions to improve. A ZEW reading of 0 indicates neutrality.

The index of current assessment in Germany probably dropped to 1.8 in November from 3.2 in the prior month. If so, this would be the lowest index value since June 2010, when the indicator was reported at -7.9.

The ZEW Economic Sentiment index in the Euro zone probably climbed to 4.3 this month from 4.1 during October. The latter has been the lowest index reading since November 2012, when the indicator stood at -2.6.

In case the gauge of sentiment exceeded expectations, this would certainly have a positive impact on the common currency. The official data is scheduled to be released at 10:00 GMT.

ECB Draghi statement

European Central Bank President Mario Draghi underscored that government bond purchases is a tool, which the central bank could use in case economic outlook deteriorate. “Unconventional measures might entail the purchase of a variety of assets, one of which is sovereign bonds,” Draghi said in Brussels on Monday in answer to a question during his testimony to lawmakers at the European Parliament, as reported by Bloomberg.

“2015 needs to be the year when all actors in the euro area, governments and European institutions alike, will deploy a consistent common strategy to bring our economies back on track,” ECB President noted. “Monetary policy has done a lot. It can do more if structural reforms are implemented. It can’t do everything.”

United States

Producer prices

United States’ annualized producer price inflation probably slowed down to 1.3% in October, according to the median estimate by experts, from 1.6% in September. If so, this would be the lowest producer inflation since February, when the corresponding index (PPI) climbed at an annualized pace of 0.9%. This index reflects the change in prices of over 8 000 products, sold by manufacturers during the respective period. The Producer Price Index (PPI) differs from the Consumer Price Index (CPI), which measures the change in prices from consumer’s perspective, due to subsidies, taxes and distribution costs of different types of manufacturers in the country. The simple logic behind this indicator is that if producers are forced to pay more for goods and services, they are more likely to pass these higher costs to the end consumer. Therefore, the PPI is considered as a leading indicator of consumer inflation. Lower-than-expected producer prices would usually have a bearish effect on the greenback.

Nation’s annualized core producer price inflation, which excludes prices of volatile categories such as food and energy, probably decelerated to 1.5% in October from 1.6% in the prior month. If so, this would be the lowest annual rate since March, when core producer inflation was registered at 1.4%. This indicator is quite sensitive to changes in aggregate demand, thus, it can be used as a leading indicator for economy. However, because of its restrained scope, it is not suitable for future inflation forecasts. The Bureau of Labor Statistics is expected to report the official PPI performance at 13:30 GMT.

NAHB Housing Market Index

The National Association of Home Builders (NAHB) Housing Market Index probably rose to a reading of 55.0 in November from 54.0 in October. It is based on a monthly survey in regard to current home sales and expected sales in the coming six months. Values above the key level of 50.0 indicate that housing market conditions are good. Therefore, higher than projected readings would provide support to the US dollar. The official data is scheduled for release at 15:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.2490. In case EUR/USD manages to breach the first resistance level at 1.2538, it will probably continue up to test 1.2625. In case the second key resistance is broken, the pair will probably attempt to advance to 1.2673.

If EUR/USD manages to breach the first key support at 1.2403, it will probably continue to slide and test 1.2355. With this second key support broken, the movement to the downside will probably continue to 1.2268.

The mid-Pivot levels for today are as follows: M1 – 1.2312, M2 – 1.2379, M3 – 1.2447, M4 – 1.2514, M5 – 1.2582, M6 – 1.2649.

In weekly terms, the central pivot point is at 1.2489. The three key resistance levels are as follows: R1 – 1.2584, R2 – 1.2645, R3 – 1.2740. The three key support levels are: S1 – 1.2428, S2 – 1.2333, S3 – 1.2272.