Yesterday’s trade saw EUR/USD within the range of 1.1098-1.1297. The daily low has also been the lowest level since September 9th 2003, when a low of 1.1055 was recorded. The pair closed at 1.1239, gaining 0.87% on a daily basis.
At 7:52 GMT today EUR/USD was up 0.10% for the day to trade at 1.1248. The pair touched a daily high at 1.1259 at 1:45 GMT.
Fundamentals
United States
Orders for durable goods
Durable goods orders in the United States probably increased 0.5% in December compared to a month ago, according to the median forecast by experts. In November new orders for manufactured durable goods dropped at a revised down pace of 0.9% (0.7% drop previously), which marked a third monthly decline in the last four months, driven by a 1.0% decrease in transportation equipment.
Shipments of manufactured durable goods in November, down three of the last four months, decreased 0.4% to USD 245.3 billion, which followed a 0.1% dip in October. Inventories of manufactured durable goods in November, up nineteen of the last twenty months, rose 0.4% to USD 408.2 billion, which has been the highest level since the series was first published on a NAICS basis and followed another 0.4% increase in October. Non-defense new orders for capital goods rose 0.5% to reach USD 82.8 billion in November, according to data by the US Census Bureau.
Durable goods orders, as an indicator, gauge the strength of US manufacturing sector and represent a major portion of the nations factory orders. This is a closely watched report on manufacturing activity, because durable goods are the first type of goods to be affected by an economic downturn or upturn.
Durable goods are designed to last three or more years and encompass aircraft, automobiles and buses, cranes, machine parts, appliances etc. More than 85 industries are represented in the sample, which covers the entire United States. The logic behind this indicator is that consumers need to be very optimistic in order to buy an automobile in comparison with, for example, first necessities such as food or clothing. Therefore, durable goods are among the first goods, which a consumer may abstain from purchasing, in case overall economic activity begins to contract. The same is valid for company purchases. During a recession, an airliner is less likely to purchase new planes and as factory output contracts, it is less likely to purchase new machines.
Durable goods orders, which exclude transportation, probably rose 0.6% in December, following a revised down 0.7% drop in November (0.4% drop previously). Large ticket orders, such as automobiles for civil use or aircraft, are not present in the calculation, as their value may be in a wide range. This way the index provides a more reliable information in regard to orders for durable goods.
In case orders increased at a faster pace than projected, this would certainly have a bullish effect on the greenback. The US Census Bureau is scheduled to release the official data at 13:30 GMT.
Services PMI data by Markit – preliminary estimate
Activity in the US sector of services probably improved in January, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 53.8. In November the final seasonally adjusted PMI stood at 53.3, or the lowest since February 2014, and down from a preliminary value of 53.6. The PMI is based on data collected from a representative panel of more than 400 private sector companies, which encompasses industries such as transport and communication, financial intermediaries, business and personal services, computing & IT and hotels and restaurants. Values above the key level of 50.0 indicate optimism (expanding activity). Higher-than-expected PMI readings would support the US dollar. The preliminary data by Markit Economics is due out at 14:45 GMT.
Consumer confidence indicator by the CB
Confidence among consumers in the United States probably improved in January, with the corresponding index coming in at a reading of 95.0 from 92.6 in November. If so, this would be the highest index value since October 2007, when the gauge was reported at 95.2.
This indicator measures the level of individuals confidence in the US economic development. It is considered as a leading indicator, as it gives an early insight into consumer spending, which accounts for most of the nations GDP. Confidence is measured on a scale of -100 to +100. A reading of -100 implies a lack of confidence, while a reading of 100 is indicative of extremely high confidence. Zero values imply neutrality. In case the index improved more than anticipated, this might provide support to the US dollar, as higher confidence suggests greater willingness to spend and, respectively, accelerated economic growth. The Conference Board research group is to publish the official index reading at 15:00 GMT.
New home sales
Sales of new single-family homes probably increased to the seasonally adjusted annual rate of 450 000 during December compared to a month ago, according to market expectations. The index of new home sales fell 1.6% to the annual rate of 438 000 in November, which has been the lowest level since July 2014. The median sales price of new houses sold in November was USD 280 900, while the average sales price was USD 321 800. The seasonally adjusted estimate of new houses for sale at the end of November was 213 000, which represents a supply of 5.8 months at the current sales rate, according to the report by the US Census Bureau.
There are several points to watch out for when interpreting the New Home Sales numbers. First of all, the statistics does not record any houses that are not going to be sold immediately. As an example, the case when a house is commissioned to be built on an existing plot of land, that the purchaser owns.
Second, the statistics are taken at the point where a customer has signed a sales contract or has put a deposit down. At this point the house can be at any stage of construction.
Third, the sales figures are not adjusted to take into account the sales contracts, which are eventually canceled by the builder or the customer. However, the same house is not included in any subsequent count when it is eventually sold to another customer.
This report has a significant influence on the Forex market, because increasing new home sales can lead to a rise in consumption, for example. The new home sales index is also an excellent indicator of any economic downturns or upturns due to the sensitivity of consumers income. When, for instance, new home sales drop over several months, this usually is a precursor to an economic depression.
Therefore, in case the index rose more than anticipated, this would usually support the greenback. The Census Bureau is to report the official figure at 15:00 GMT.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.1211. In case EUR/USD manages to breach the first resistance level at 1.1325, it will probably continue up to test 1.1410. In case the second key resistance is broken, the pair will probably attempt to advance to 1.1524.
If EUR/USD manages to breach the first key support at 1.1126, it will probably continue to slide and test 1.1012. With this second key support broken, the movement to the downside will probably continue to 1.0927.
The mid-Pivot levels for today are as follows: M1 – 1.0970, M2 – 1.1069, M3 – 1.1169, M4 – 1.1268, M5 – 1.1368, M6 – 1.1467.
In weekly terms, the central pivot point is at 1.1332. The three key resistance levels are as follows: R1 – 1.1551, R2 – 1.1894, R3 – 1.2113. The three key support levels are: S1 – 1.0989, S2 – 1.0770, S3 – 1.0427.
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