Forex Market: EUR/USD daily trading forecast

Yesterday’s trade saw EUR/USD within the range of 1.1060-1.1187. 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 1.1079, losing 0.87% on a daily basis.

At 8:24 GMT today EUR/USD was down 0.28% for the day to trade at 1.1047. The pair broke the first key daily and the first key weekly support levels and touched a daily low at 1.1026 at 6:40 GMT. It has been the lowest level since September 5th 2003.

Fundamentals

Euro area

Italian GDP – final estimate

The final estimate of Italys annual Gross Domestic Product probably pointed to a 0.3% contraction in the fourth quarter of 2014, according to the median forecast by experts, while confirming the preliminary estimate, released on February 13th. In Q3 economy shrank at an annualized pace of 0.4%, according to final data.

On a quarterly basis, Italian economy probably showed no growth in Q4 2014, following a negative growth rate of 0.1% during the third quarter. If so, this would be the 14th consecutive quarter without any expansion. According to provisional data, exports positively contributed to the GDP, while inventories weighted down on growth. On the production side, sectors of agriculture and industry contracted, while services registered an expansion.

In case a lower-than-projected rate of growth was reported, this would have a negative effect on the single currency. The National Institute of Statistics (Istat) will release the final GDP data at 9:00 GMT.

ECB policy decision

At 12:45 GMT the European Central Bank (ECB) is to announce its decision in regard to borrowing costs. The median estimate by experts suggests that the central bank will probably maintain its benchmark interest rate at the record low level of 0.05% at the policy meeting today. The bank last reduced the refinancing rate by 10 basis points to the current 0.05% at the September 4th meeting. This has been the fourth time last year, when the ECB cut its benchmark.

At its meeting on January 22nd the central bank kept the marginal lending facility intact at 0.30% and the deposit facility at -0.20%. The bank has also announced an asset-purchasing program of 60 billion euros per month. Under this program, the ECB will buy public and private sector assets starting March 2015 until September 2016.

According to extracts from the Introductory statement to the press conference, offered by ECB President, Mario Draghi: ”In March 2015 the Eurosystem will start to purchase euro-denominated investment-grade securities issued by euro area governments and agencies and European institutions in the secondary market. The purchases of securities issued by euro area governments and agencies will be based on the Eurosystem NCBs’ shares in the ECB’s capital key.”

”The Governing Council decided to change the pricing of the six remaining targeted longer-term refinancing operations (TLTROs). Accordingly, the interest rate applicable to future TLTRO operations will be equal to the rate on the Eurosystem’s main refinancing operations prevailing at the time when each TLTRO is conducted, thereby removing the 10 basis point spread over the MRO rate that applied to the first two TLTROs.”

“With regard to the sharing of hypothetical losses, the Governing Council decided that purchases of securities of European institutions (which will be 12% of the additional asset purchases, and which will be purchased by NCBs) will be subject to loss sharing. The rest of the NCBs’ additional asset purchases will not be subject to loss sharing. The ECB will hold 8% of the additional asset purchases. This implies that 20% of the additional asset purchases will be subject to a regime of risk sharing.”

ECB policy makers aim to keep prices in the region stable, while stability is defined as a year-on-year increase in the Harmonized Index of Consumer Prices (HICP) for the Euro zone of below, but close to 2%.

Short-term interest rates are of utmost importance for the valuation of national currencies. In case the European Central Bank is dovish about inflationary pressure and overall economic activity in the Euro area and, thus, either puts interest rates on hold, or reduces them further, this will usually cause a bearish impact on the common currency.

The interest rate decision is to be followed by the press conference with ECB President Mario Draghi, during which volatility of euro crosses is usually high. In case Draghi offers a more hawkish tone, the euro will usually receive support, while a more dovish tone will have a bearish effect on the currency. The press conference is scheduled at 13:30 GMT.

United States

Factory Orders

Factory orders in the United States probably rose 0.2% in January compared to December, following five consecutive months of declines. In December orders fell 3.4%. This indicator represents the total value of new purchase orders, placed at manufacturers for durable and non-durable goods, and can provide insight into inflation and growth in the US manufacturing sector. In case new orders rose more than anticipated, this would have a bullish effect on the greenback. US Census Bureau will release the official data at 15:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.1109. In case EUR/USD manages to breach the first resistance level at 1.1157, it will probably continue up to test 1.1236. In case the second key resistance is broken, the pair will probably attempt to advance to 1.1284.

If EUR/USD manages to breach the first key support at 1.1030, it will probably continue to slide and test 1.0982. With this second key support broken, the movement to the downside will probably continue to 1.0903.

The mid-Pivot levels for today are as follows: M1 – 1.0943, M2 – 1.1006, M3 – 1.1070, M4 – 1.1133, M5 – 1.1197, M6 – 1.1260.

In weekly terms, the central pivot point is at 1.1262. The three key resistance levels are as follows: R1 – 1.1349, R2 – 1.1502, R3 – 1.1589. The three key support levels are: S1 – 1.1109, S2 – 1.1022, S3 – 1.0869.