Yesterday’s trade saw EUR/USD within the range of 1.2414-1.2479. The pair closed at 1.2437, losing 0.27% on a daily basis.
At 7:38 GMT today EUR/USD was up 0.16% for the day to trade at 1.2453. The pair touched a daily high at 1.2464.
Fundamentals
Euro zone
Preliminary Manufacturing and Services data
Frances manufacturing PMI probably remained in the zone of contraction for an eighth consecutive month in December, with the preliminary index estimate being at 48.8, according to the median forecast by experts. The final PMI stood at 48.4 in November, as reported on December 1st, up from a preliminary reading of 47.6. Values below the key level of 50.0 indicate that the majority of respondents in the survey expressed pessimism in regard to activity in the sector. Markit Economics is expected to release the official data at 8:00 GMT.
French preliminary services PMI probably slightly improved to 48.5 in December from a final reading of 47.9 in the prior month. If so, this would be the fourth consecutive month, during which the index inhabited the zone below 50.0. Markit will publish the preliminary data at 8:00 GMT.
German manufacturing Purchasing Managers Index probably emerged above the key level of 50.0 in December, with the preliminary index value improving to 50.5, from a final reading of 49.5 in November, as reported on December 1st. The latter has been the lowest PMI level since June 2013, when the final PMI estimate was recorded at 48.6. The preliminary value is due out at 8:30 GMT.
Activity in German services sector was probably little changed in December, with the preliminary PMI climbing to 52.5 from a final reading of 52.1 in November. If so, this would be the nineteenth consecutive month, when the PMI stood in the zone of expansion. The preliminary data is to be released at 8:30 GMT.
Manufacturing activity in the whole Euro region probably improved in December, with the preliminary Purchasing Managers Index rising to 50.5 from a final value of 50.1 during the preceding month. If so, this would be the highest reading since October, when the final index was reported at 50.6, and also an eighteenth consecutive month of expansion. The PMI reflects the performance of the manufacturing sector in the area and is based on a survey of 3 000 manufacturing companies. National data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. These member states together account for almost 90% of Euro zones manufacturing activity. The Manufacturing Purchasing Managers Index is comprised by five individual indexes with the following weights: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stock of Items Purchased (10%), as the Delivery Times index is inverted, so that it moves in a comparable direction. The preliminary data is expected at 9:00 GMT.
The preliminary services PMI in the Euro zone probably showed improvement in December, reaching a level of 51.5. In November the final reading of the index was reported to have been at 51.1. If market expectations were met, this would be a seventeenth consecutive month, during which the index stood above the key level of 50.0. The PMI is based on data collected from a representative panel of around 2 000 private service sector companies. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland. The survey represents private sector conditions in terms of new orders, output, employment, prices etc. Markit will release the preliminary data at 9:00 GMT.
A larger-than-expected improvement in any of the PMI readings would certainly provide support to the common currency.
Italian Balance of trade
The surplus on Italys trade balance probably expanded to EUR 3.7 billion in October, according to market expectations. The nations trade surplus was at the amount of EUR 2.014 billion in September, increasing from a figure of EUR 0.68 billion in September a year earlier, as exports marked the largest annual gain since January 2013. Total exports increased at an annualized rate of 7.4% to EUR 34.57 billion in September, within which shipments of capital goods recorded the largest increase (11.6% year-on-year), followed by consumption goods (8.4%). Total imports rose at a rate of 3.3% year-on-year to EUR 32.55 billion during the same month, supported by a 6.2% surge in purchases from the European Union.
The trade balance, as an indicator, measures the difference in value between a country’s exported and imported goods during the reported period. It reflects the net export of goods, or one of the components to form the Gross Domestic Product. Generally, exports reflect how strong economic growth is, while imports indicate the strength of domestic demand. In case Italian trade surplus expanded more than anticipated, this might have a certain bullish effect on the single currency. The National Institute of Statistics (Istat) is to release the official trade data at 9:00 GMT.
Euro zone Balance of trade
The surplus on Euro areas trade balance probably contracted to EUR 17.0 billion in October, according to the median forecast by experts, following a surplus figure of EUR 18.5 billion in September, a 71.3% increase compared to the same month a year earlier. Total exports rose at an annualized rate of 8.5% to EUR 171.9 billion, while imports were 4% higher from a year ago to reach EUR 153.4 billion.
The surplus on regions extra-EU28 trade balance amounted to EUR 2.6 billion in September this year compared to a surplus of EUR 0.7 billion in September 2013. The highest increases in EU28 exports were registered with China (a 10% gain within the period January-August compared to January-August 2013), South Korea (8%) and the United States (4%). As for EU28 imports, the highest increases were observed with South Korea (9%), Turkey (6%), China and Switzerland (both 5%).
Euro zones balance of trade produces regular surpluses mainly due to the high export of manufactured goods, such as machinery and vehicles. At the same time, the region is a net importer of energy and raw materials. Member states such as Germany, Italy, France and Netherlands play a key role in total trade.
In case the trade balance surplus contracted more than anticipated in October, this would certainly have a bearish impact on the euro. Eurostat is to publish the official trade data at 10:00 GMT.
German, Euro zone ZEW Economic Sentiment
The gauge of economic sentiment in Germany probably improved to 20.0 in December, according to the median forecast by experts, from 11.5 in November. In October the index entered into negative territory for the first time since November 2012, slipping to a reading of -3.6.
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 rose to a value of 5.0 in December from 3.3 in the prior month and 3.2 in October. The latter has been 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 also gained ground in December, reaching 20.1. If so, this would be the highest level since August, when the indicator was reported at 23.7. In November the index came in at 11.0.
In case the gauge of economic 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.
United StatesHousing Starts and Building Permits
The number of housing starts in the United States probably increased to 1.025 million in November from the seasonally adjusted annual rate of 1.009 million during the prior month. Octobers figure has been influenced by a 15.5% drop in houses with 5 units or more. Single-family housing starts in October were at a rate of 696 000, or 4.2% above the revised figure of 668 000 in September. The October rate for units in buildings with five units or more was 300 000, according to data by the US Census Bureau.
Housing Starts represent a gauge to measure residential units, on which construction has already begun, every month. A start in construction is defined as the foundation laying of a building and it encompasses residential housing primarily.
The number of building permits in the country probably dropped to 1.047 million in November from an unrevised annual level of 1.080 million in October. The latter has been the highest number of permits in six and a half years. Single-family authorizations in October were at a rate of 640 000, or 1.4% above the revised number of 631 000 in September. Authorizations of units in buildings with five units or more were at a rate of 406 000 in October, according to the report by the Census Bureau.
Building permits are permits, issued in order to allow excavation. An increase in the number of building permits and housing starts usually occurs a few months after mortgage rates in the country have been reduced. Permits are not required in all regions of the United States. Building permits, as an indicator, provide information regarding demand in US housing market. In case a higher-than-anticipated number is reported, this will certainly support the greenback. The official housing data is due out at 13:30 GMT.
Manufacturing data by Markit – preliminary release
Manufacturing activity in the United States probably accelerated in December, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 55.2. In November the final seasonally adjusted PMI stood at 54.8, which has been the lowest reading since January, when the indicator was reported at 53.7. Factory activity slowed for the third consecutive month to the lowest figure in ten months, as new orders and output sub-indexes declined.
According to Markits statement: “Volumes of new work received by U.S. manufacturers continued to increase at a solid pace during November, but the latest rise was the weakest since the start of the year. Anecdotal evidence suggested a greater degree of caution among clients and weaker sales to export markets. Although only modest, the latest data indicated that new business from abroad decreased at the fastest pace since June 2013.”
“The latest survey indicated that backlogs of work were broadly unchanged across the U.S. manufacturing sector, which ended a nine-month period of expansion. Despite reduced pressure on operating capacity, manufacturing job creation remained relatively strong in November. Moreover, the rate of employment growth accelerated since the previous month and was the second-fastest since January 2013.”
Values above the key level of 50.0 indicate optimism (expanding activity). Higher-than-expected PMI readings would certainly support the US dollar. The preliminary data by Markit Economics is due out at 14:45 GMT.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.2443. In case EUR/USD manages to breach the first resistance level at 1.2473, it will probably continue up to test 1.2508. In case the second key resistance is broken, the pair will probably attempt to advance to 1.2538.
If EUR/USD manages to breach the first key support at 1.2408, it will probably continue to slide and test 1.2378. With this second key support broken, the movement to the downside will probably continue to 1.2343.
The mid-Pivot levels for today are as follows: M1 – 1.2361, M2 – 1.2393, M3 – 1.2426, M4 – 1.2458, M5 – 1.2491, M6 – 1.2523.
In weekly terms, the central pivot point is at 1.2401. The three key resistance levels are as follows: R1 – 1.2557, R2 – 1.2652, R3 – 1.2808. The three key support levels are: S1 – 1.2306, S2 – 1.2150, S3 – 1.2055.
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