Forex Market: EUR/USD daily trading forecast

Yesterday’s trade saw EUR/USD within the range of 1.1785-1.1871. The pair closed at 1.1834, losing 0.30% on a daily basis.

At 7:37 GMT today EUR/USD was up 0.14% for the day to trade at 1.1849. The pair touched a daily high at 1.1860 at 3:05 GMT.

Fundamentals

Euro zone

Italian industrial output

Annualized industrial production in Italy probably contracted for a fifth consecutive month, at a pace of 2.7% in November, according to the median forecast by experts, following another 3.0% drop in October. The latter has been the most considerable annual decline since August 2013, when output shrank 4.6%. Italian seasonally adjusted index of industrial production probably rose 0.1% in November compared to a month ago, neutralizing the 0.1% dip in October. The index reflects the change in overall inflation-adjusted value of output in sectors such as manufacturing, mining and utilities. In case output shrank more than anticipated, this would have a limited bearish effect on the common currency. The National Institute of Statistics (Istat) is to release the official industrial data at 9:00 GMT.

Legal test

An adviser to the EU Court of Justice is to determine whether the European Central Bank’s Outright Monetary Transactions (OMT) program overstepped the law in a non-binding opinion, Bloomberg reported.

“If the opinion is favorable and the conditions attached are not too restrictive, it would open the way to QE by the ECB right now,” said Pierre-Henri Conac, a professor of financial-markets law at the University of Luxembourg, cited by the same media.

The OMT program could pass the test if it were limited and placed under specific conditions, such as banning debt cuts and unlimited purchases of bonds of selected member states, according to the German court. In 2014 the latter said that the OMT may be in violation of European Union rules, as it amounts to economic policy that stands outside the ECB’s mandate. The OMT plan could also be considered as monetary financing of governments, in the court’s view.

As the European Central Bank is preparing to discuss a large-scale easing program at the upcoming policy meeting on January 22nd, Governing Council member Ewald Nowotny said that policy makers should not wait too long to cope with the risk of deflation.

“it is important that one takes deflation risks seriously and addresses them,” Nowotny, also the governor of the Austrian central bank, said during a panel discussion on Monday in Vienna. “We shouldn’t wait too long with a reaction.”

Policy makers expressed diverging opinions about whether quantitative easing is in fact a pressing matter. Bundesbank President Jens Weidmann supports arguments against new monetary stimulus, while other experts, including the ECB Chief Economist Peter Praet support QE plans.

United States

Job openings

The number of job openings in the United States probably rose to 4.848 million in November from 4.834 million in the prior month. If so, this would be the highest level since August, when 4.853 million job openings were reported. This indicator refers to all positions that are open, but not filled on the last business day of the month. Job openings are part of the Job Openings and Labor Turnover Survey (JOLTS), which gathers data from about 16 400 non-farm establishments including retailers and manufacturers, as well as federal, state, and local government entities in the 50 states and the District of Columbia. The survey assesses the unmet demand for labor in the labor market. Higher-than-projected number of openings is usually dollar positive. The Bureau of Labor Statistics is to release the official data at 15:00 GMT.

Monthly Budget Statement

The United States probably recorded a government budget surplus of USD 22.0 billion in December, according to market expectations, after a deficit of USD 56.8 billion during the previous month. The latter was a 58% decrease compared to November 2013. In November total receipts were at the amount of USD 191.4 billion, or a 4.8% increase compared to the same month a year earlier, while total outlays were recorded at USD 248.3 billion during the period, down 21.8%. The budget results were influenced by differences in the calendar, while some payments went out in October rather than November 2014, according to the report by the US Treasury.

A larger-than-projected surplus would have a certain bullish effect on the greenback. The Financial Management Service is to publish the official figure at 19:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.1830. In case EUR/USD manages to breach the first resistance level at 1.1875, it will probably continue up to test 1.1916. In case the second key resistance is broken, the pair will probably attempt to advance to 1.1961.

If EUR/USD manages to breach the first key support at 1.1789, it will probably continue to slide and test 1.1744. With this second key support broken, the movement to the downside will probably continue to 1.1703.

The mid-Pivot levels for today are as follows: M1 – 1.1724, M2 – 1.1767, M3 – 1.1810, M4 – 1.1853, M5 – 1.1896, M6 – 1.1939.

In weekly terms, the central pivot point is at 1.1868. The three key resistance levels are as follows: R1 – 1.1982, R2 – 1.2123, R3 – 1.2237. The three key support levels are: S1 – 1.1727, S2 – 1.1613, S3 – 1.1472.