Forex Market: EUR/USD trading forecast for Monday

Friday’s trade saw EUR/USD within the range of 1.0460-1.0639. The daily low has also been the lowest level since January 9th 2003, when a low of 1.0453 was recorded. The pair closed at 1.0495, falling 1.32% on a daily basis. The cross plummeted 3.22% for the whole week, which marked a fourth consecutive weekly loss. On Monday (March 16th) EUR/USD may be influenced by a number of fundamentals, as listed below.

Fundamentals

Euro area

ECB Mario Draghi Speech

At 18:45 GMT the European Central Bank President Mario Draghi is expected to take a statement. Moderate-to-high volatility of the euro crosses is usually present during his speeches.

United States

NY Empire State Manufacturing Index

The New York Empire State Manufacturing Index probably dropped to a reading of 7.25 in February, according to the median forecast by experts, from 7.78 in the prior month. If so, this would be the lowest index reading since November 2014, when the gauge slipped into negative territory, falling to -1.23.

The index is based on the monthly Empire State Manufacturing Survey, which is conducted by the Federal Reserve Bank of New York. About 200 top manufacturing executives respond to a questionnaire, sent out during the first day of the month. They provide their estimates in regard to the performance of several business indicators from the prior month, while also forecasting performance during the upcoming six months.

The ”general business conditions” component of the index is based on a distinct question, posed on the Empire State Manufacturing Survey, which means it is not a weighted average of the other indicators. These indicators, which are only applicable to the manufacturing facilities of survey respondents in the region of New York, include new orders, shipments, unfilled orders, delivery time, inventories, prices paid, prices received, number of employees including contract workers, average employee work week, technology spending and capital expenditures.

The general business conditions component and the sub-indexes for the 11 indicators are calculated by subtracting the percentage of respondents, rating an indicator as ”lower” (a drop), from the percentage of respondents, rating the same indicator as ”higher” (an increase). In case 33% of survey respondents stated that business conditions had improved during the current month, 50% stated that conditions had not changed, and 17% of the respondents stated that conditions had deteriorated, the index would have a reading of 16. Readings above 0.00 are indicative of improving business conditions in the region. However, lower-than-anticipated index values will usually have a negative effect on the US dollar. The Federal Reserve Bank of New York is expected to release the official reading at 12:30 GMT.

Industrial Output, Capacity Utilization

Industrial output in the United States probably expanded 0.3% in February compared to January, following a 0.2% increase in January compared to December. In January manufacturing output went up 0.2%, as the production of durable goods rose 0.4% and the production of non-durable goods remained unchanged. The index for mining activity plunged 1.0%, as the decline was driven by a substantial drop in the gauge for oil and gas well drilling and related support activities. The output of utilities, on the other hand, went up 2.3% during the period.

The index of industrial production reflects the change in overall inflation-adjusted value of output in the three major sectors mentioned above. The index is sensitive to consumer demand and interest rates. As such, industrial production is an important tool for future GDP and economic performance forecasts. Those figures are also used to measure inflation by central banks as very high levels of industrial production may lead to uncontrolled levels of consumption and rapid inflation. It is a coincident indicator, which means that changes in its levels generally echo similar shifts in overall economic activity. A larger-than-projected increase in the index would usually boost demand for the US dollar.

The Board of Governors of the Federal Reserve is to release the production data at 13:15 GMT.

In addition, Capacity Utilization Rate in the country probably increased to 79.5% in February from 79.4% in January. The latter has been the lowest utilization rate since October 2014, when a rate of 79.3% was reported. This indicator represents the optimal rate for a stable production process, or the highest possible level of production in an enterprise, in case it operates within a realistic work schedule and has sufficient raw materials and inventories at its disposal. High rates of capacity utilization usually lead to inflationary pressure. In general, higher-than-anticipated rates tend to be dollar positive.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.0531. In case EUR/USD manages to breach the first resistance level at 1.0603, it will probably continue up to test 1.0710. In case the second key resistance is broken, the pair will probably attempt to advance to 1.0782.

If EUR/USD manages to breach the first key support at 1.0424, it will probably continue to slide and test 1.0352. With this second key support broken, the movement to the downside will probably continue to 1.0245.

The mid-Pivot levels for Monday are as follows: M1 – 1.0299, M2 – 1.0388, M3 – 1.0478, M4 – 1.0567, M5 – 1.0657, M6 – 1.0746.

In weekly terms, the central pivot point is at 1.0621. The three key resistance levels are as follows: R1 – 1.0782, R2 – 1.1069, R3 – 1.1230. The three key support levels are: S1 – 1.0334, S2 – 1.0173, S3 – 0.9886.