Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7371-0.7447. The pair closed at 0.7432, gaining 0.57% on a daily basis.

At 7:14 GMT today EUR/GBP was down 0.09% for the day to trade at 0.7425. The pair touched a daily low at 0.7422 at 7:06 GMT.

Fundamentals

Euro area

Construction output

At 10:00 GMT Eurostat is to report on construction activity in the Euro zone for December. Seasonally adjusted construction output in the region increased 0.1% in November compared to a month ago, following a 1.3% gain in October. In annual terms, output expanded at a pace of 2.2% in November, following another 1.4% increase in October. 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, while higher rates of decline usually have the opposite effect.

United Kingdom

Bank of England Minutes

At 9:30 GMT the Bank of England is to publish the minutes from its most recent policy meeting. 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 February 5th all 9 members of the Committee probably voted in favor of keeping the benchmark interest rate unchanged. In addition, all 9 members of the Committee probably voted to keep the stock of purchased assets financed by the issuance of central bank reserves unchanged at GBP 375 billion. In case the central bank demonstrates a hawkish view in regard to inflation pressure and overall economic activity in the UK, this heightens the probability of an interest rate hike, which has a positive effect on the pound. A dovish view, on the other hand, will have the opposite effect.

Inflation rate in the UK is more likely than not to drop below zero, according to the most recent Inflation Report, released by the Bank of England.

”CPI inflation was 0.5% in December 2014, well below the 2% target. The main reason for this was the steep fall in wholesale energy prices during the second half of last year. Inflation is likely to fall further in the near term, and could temporarily turn negative, as falls in energy prices continue to be passed through. Inflation is likely to rebound around the turn of the year as these effects drop out of the annual rate”, as noted in the Inflation Report from February this year.

Claimant Count Change, ILO Unemployment Rate

The number of jobless claims in the United Kingdom probably dropped by 25 000 in January, marking the 28th consecutive month of declines, according to expectations, following another drop by 29 700 in December. At the same time, the claimant count rate, which represents the percentage change of jobless claims compared to the entire work force, probably fell to 2.5% in January from 2.6% during the previous month. If so, this would be the lowest claimant count rate since May 2008.

The rate of unemployment in the UK, estimated in accordance with ILO (International Labour Organization) standards, probably remained steady at 5.8% during the three months to December compared to the same period a year ago. This has been the lowest rate since October 2008. In the period to October 2014 the unemployment rate was registered at 6.0%.

During the period September-November there were 30.80 million people in employment, or an increase by 37 000 compared to the period June-August and also 512 000 more compared to September-November a year earlier. During the same period 1.91 million people were unemployed, or 58 000 fewer than in the period June to August and 418 000 fewer compared to September-November 2013.

In September to November there were 9.09 million people aged between 16 and 64, who were out of work and not seeking or available for employment, according to data by the Office for National Statistics (ONS). This represented an increase by 66 000 compared to June-August 2014 and by 41 000 compared to September-November 2013.

The rate of unemployment refers to the percentage of economically active people, who are currently unemployed. According to the ILO approach, people who are considered as unemployed are either: 1) out of work, but are actively searching for employment, or 2) out of work and are waiting to be hired again during the next two weeks.

The ILO Unemployment Rate is based on a monthly survey, known as the Labour Force Survey in the United Kingdom, with approximately 40 000 individuals being interviewed every month. This indicator reflects overall economic state in the country, as there is a strong correlation between consumer spending levels and labor market conditions. Low rates of unemployment are accompanied by higher spending, which causes a favorable effect on corporate profits and also accelerates overall growth. In case the rate of unemployment fell more than projected, this would certainly have a bullish effect on the sterling. The official report by the ONS is due out at 9:30 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7417. In case EUR/GBP manages to breach the first resistance level at 0.7462, it will probably continue up to test 0.7493. In case the second key resistance is broken, the pair will probably attempt to advance to 0.7538.

If EUR/GBP manages to breach the first key support at 0.7386, it will probably continue to slide and test 0.7341. With this second key support broken, the movement to the downside will probably continue to 0.7310.

The mid-Pivot levels for today are as follows: M1 – 0.7326, M2 – 0.7364, M3 – 0.7402, M4 – 0.7440, M5 – 0.7478, M6 – 0.7516.

In weekly terms, the central pivot point is at 0.7408. The three key resistance levels are as follows: R1 – 0.7446, R2 – 0.7500, R3 – 0.7538. The three key support levels are: S1 – 0.7354, S2 – 0.7316, S3 – 0.7262.