Forex Market: EUR/USD daily trading forecast

Yesterday’s trade saw EUR/USD within the range of 1.1295-1.1394. The pair closed at 1.1334, losing 0.41% on a daily basis.

At 8:14 GMT today EUR/USD was down 0.10% for the day to trade at 1.1319. The pair touched a daily low at 1.1314 at 8:15 GMT.

Fundamentals

Euro area

Harmonized consumer inflation – final estimate

The final annualized consumer inflation in the Euro zone, evaluated in accordance with Eurostat’s harmonized methodology, probably confirmed the preliminary rate at -0.6% in January, which was reported on January 30th. If confirmed, this would be the lowest annual inflation since July 2009, when a final rate of -0.6% was reported. In December the final HICP reading pointed to annual inflation rate of -0.2%, which matched the preliminary estimate. According to the preliminary data, in January the negative inflation rate was influenced by a fall in energy prices (-8.9%, compared with -6.3% in December). Prices are also expected to drop for food, alcohol and tobacco (-0.1%, compared with a flat performance in December) and non-energy industrial goods (-0.1%, compared with a flat reading in December).

The index shows the change in price levels of a basket of goods and services from consumer’s perspective and also reflects purchasing trends. The main components of the HICP are food, alcohol and tobacco (accounting for 19% of the total weight), energy (11%), non-energy industrial goods (29%) and services (41%).

The HICP is used to evaluate and compare inflation rates between Member States, according to Art. 121 of the Amsterdam’s Agreement and directives by the European Central Bank (ECB), in order the latter to achieve price stability and implement monetary policy. The HICP aggregates are calculated as a weighted average of each member state’s HICP components.

In case the HICP fell more than anticipated, thus, further distancing from the 2% inflation objective set by the ECB, this would mount selling pressure on the euro, because of the greater possibility of expanding the set of monetary policy measures in order to stimulate economic activity.

The final annualized Core HICP for January probably matched the preliminary core inflation estimate, which was reported at 0.6% on January 30th. In December, November and October the final annualized core inflation in the Euro area was registered at 0.7%. This index excludes volatile categories such as food, energy, alcohol and tobacco. Eurostat is scheduled to release the final inflation data at 10:00 GMT.

United States

Services PMI by Markit – preliminary estimate

Activity in the US sector of services probably remained little changed in February, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 54.0. In January the final seasonally adjusted PMI stood at 54.2, up from a preliminary value of 54.0. 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 Index

Confidence among consumers in the United States probably lowered in February, with the corresponding index coming in at a reading of 99.6 from 102.9 in January. The latter has been the highest index value since August 2007, when the gauge was reported at 105.0.

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.

The index has 1985 as a base year, when the base value was 100. This year was chosen, as it was neither a peak nor a bottom. The Consumer Confidence Index (CCI) is calculated on the basis of a household survey, which reflects consumers opinion on current conditions and future expectations regarding the US economy. Opinions on current conditions account for 40% of the index, while expectations of future conditions account for the remaining 60%. The surveys objective is to define consumer attitudes and buying intentions, while the data are filtered by age, income and region.

A sample of 5 000 households in the United States serves as a basis for the survey. Each month respondents give their opinion based on the answers to five questions: Current business conditions; Business conditions for the next six months; Current employment conditions; Employment conditions for the next six months; Total family income for the next six months. Respondents may answer each question as “positive”, “negative” or “neutral”.

Each of the five questions is given a “relative value”, or the positive responses are divided by the sum of the positive and negative responses. The relative value is then compared against each relative value from the base year (1985). The comparison of the relative values leads to the “index value” for all five questions. These index values are then averaged in order to form the value of the CCI.

In case the index dropped more than anticipated, this might lead to a sell-off of the US dollar, as lower confidence suggests a lesser willingness to spend and, respectively, a stagnating economic growth. The Conference Board research group is to publish the official index reading at 15:00 GMT.

Fed Chair Yellens testimony

At 15:00 GMT Federal Reserve Chair Janet Yellen is expected to take a statement on monetary policy in front of the US Congress. Moderate-to-high volatility of the US dollar crosses is usually present during such speeches.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.1341. In case EUR/USD manages to breach the first resistance level at 1.1387, it will probably continue up to test 1.1440. In case the second key resistance is broken, the pair will probably attempt to advance to 1.1486.

If EUR/USD manages to breach the first key support at 1.1288, it will probably continue to slide and test 1.1242. With this second key support broken, the movement to the downside will probably continue to 1.1189.

The mid-Pivot levels for today are as follows: M1 – 1.1216, M2 – 1.1265, M3 – 1.1315, M4 – 1.1364, M5 – 1.1414, M6 – 1.1463.

In weekly terms, the central pivot point is at 1.1371. The three key resistance levels are as follows: R1 – 1.1463, R2 – 1.1546, R3 – 1.1638. The three key support levels are: S1 – 1.1288, S2 – 1.1196, S3 – 1.1113.