Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7952-0.8022. The pair closed at 0.8019, gaining 0.74% on a daily basis.

At 7:12 GMT today EUR/GBP was down 0.04% for the day to trade at 0.8014. The pair touched a daily low at 0.8012 at 7:05 GMT.

Fundamentals

Euro zone

Euro zone Current account

The surplus on Euro zones current account probably shrank to 9.4 billion EUR in September from 15.1 billion EUR in August. Regions seasonally adjusted current account had a surplus of 18.9 billion EUR in August.

The current account reflects the difference between savings and investments in the Euro area. It is the sum of the balance of trade, net current transfers (cash transfers) and net income from abroad (earnings from investments made abroad plus money sent by individuals working abroad to their families back home, minus payments made to foreign investors).

A current account surplus indicates that the net foreign assets of the region have increased by the respective amount, while a deficit suggests the opposite. A nation with a surplus on its current account is considered as a net lender to the rest of the world, while a current account deficit puts it in the position of a net borrower. A net lender is consuming less than it is producing, which means it is saving and those savings are being invested abroad, or foreign assets are created. A net borrower is consuming more than it is producing, which means that other countries are lending it their savings, or foreign liabilities are created. A contracting surplus or an expanding deficit on the areas current account usually has a bearish effect on the euro.

The European Central Bank is expected to release the official data at 9:00 GMT.

Euro zone Construction output

At 10:00 GMT Eurostat is to report on construction activity in the Euro zone for September. Seasonally adjusted construction output in the region increased 1.5% in August compared to a month ago. In annual terms, output shrank 0.3% in August. This indicator reflects how resilient construction sector development is and also provides clues over investment activity. Higher rates of increase in output usually provide a limited support to the common currency.

United Kingdom

Bank of England minutes

At 9:30 GMT Bank of England (BoE) 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 November 6th 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 usually has a positive effect on the pound. A dovish view, on the other hand, has the opposite effect.

Bank of England inflation and growth forecasts

The central bank revised down its economic growth forecasts by 0.2% for 2015 and 2016 to 2.9% and 2.6%. The bank kept its growth projection for the current year, according to which UK economy will probably expand 3.5%.

According to extracts from BoE report on inflation released in November: ”There is a significant probability that inflation could temporarily fall below 1% in the near term. Inflation then rises back to the target by the end of the forecast period as external pressures fade and growth in unit labour costs gradually picks up. There are significant risks either side of this inflation projection. Domestic risks to inflation centre on unit labour costs. Wages need to grow more strongly than productivity to return inflation to the 2% target, absent external price pressures.”

”The Committee sets monetary policy to meet the 2% target in the medium term and in a way that helps to sustain growth and employment. The Committee gave guidance in its February Report on how it would seek to achieve the inflation target over the policy horizon. At its November meeting, the Committee noted that the central message of that guidance remained relevant: given the likely persistence of the headwinds weighing on the economy, when Bank Rate did begin to rise, it was expected to do so only gradually and to remain below average historical levels for some time to come. The actual path for monetary policy would remain dependent on economic conditions. In other words, the Committee’s guidance on the likely pace and extent of interest rate rises was an expectation, not a promise.”

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7998. In case EUR/GBP manages to breach the first resistance level at 0.8043, it will probably continue up to test 0.8068. In case the second key resistance is broken, the pair will probably attempt to advance to 0.8113.

If EUR/GBP manages to breach the first key support at 0.7973, it will probably continue to slide and test 0.7928. With this second key support broken, the movement to the downside will probably continue to 0.7903.

The mid-Pivot levels for today are as follows: M1 – 0.7916, M2 – 0.7951, M3 – 0.7986, M4 – 0.8021, M5 – 0.8056, M6 – 0.8091.

In weekly terms, the central pivot point is at 0.7931. The three key resistance levels are as follows: R1 – 0.8064, R2 – 0.8135, R3 – 0.8268. The three key support levels are: S1 – 0.7860, S2 – 0.7727, S3 – 0.7656.