Forex Market: EUR/USD daily trading outlook

Yesterday’s trade saw EUR/USD within the range of 1.0619-1.0519. The pair closed at 1.0568, falling 0.36% on a daily basis, extending five days of losses.

At 7:21 GMT today EUR/USD was down 0.09% for the day to trade at 1.0557. The pair held in a daily range of 1.0532 – 1.0594.

Fundamentals

Eurozone

Consumer prices in Spain fell by an annualized 0.7% in March, the National Institute of Statistics (INE) reported, matching a preliminary report released on March 30th. This was the ninth consecutive month during which annual consumer inflation remained in negative territory. On a monthly basis, the Consumer Price Index rose 0.6%.

The CPI measures the change in price levels in a basket of goods and services from consumer’s perspective and also provides clues over purchasing trends. Positive and better-than-expected readings support the euro.

Spanish final annualized CPI, evaluated in accordance with Eurostat’s harmonized methodology, showed deflation of 0.8% in March, the ninth consecutive month when the harmonized inflation stood in negative territory.

In Italy, annual HICP probably fell 0.1% in March, according to market expectations. If so, this would match the preliminary estimate reported on March 31st. In February the final annualized HICP rose at a pace of 0.1%. The National Institute of Statistics (Istat) is to release the official CPI report at 08:00 GMT.

Meanwhile, the seasonally adjusted index of industrial production in the euro area probably rose 0.4% in February from a month earlier, following a 0.1% contraction in January. Annualized output probably increased at a pace of 0.7%, following a 1.2% expansion in January which ended two straight months of contraction.

The index, reflecting business cycle, measures changes in the overall inflation-adjusted value of output in the industrial sector which includes manufacturing, mining and utilities. In case industrial output expanded more than anticipated, this would support demand for the euro, as this implies a higher probability of inflationary pressure. Eurostat is to publish the official data at 09:00 GMT.

United States

Retail sales in the United States probably jumped 1.0% in March on a monthly basis, according to the median forecast by experts. In February, the metric recorded a 0.6% drop which followed a 0.8% decline in January and another 0.9% decrease a month earlier.

The report on retail sales reflects the dollar value of merchandise sold within the retail trade by taking a sampling of companies operating in the sector of selling physical end products to consumers. The retail sales report encompasses both fixed point-of-sale businesses and non-store retailers, such as mail catalogs and vending machines. The Census Bureau, which is a part of the Department of Commerce, surveys about 5 000 companies of all sizes, from huge retailers such as Wal-Mart to independent small family firms.

US core retail sales, or retail sales ex autos, probably went up 0.6% in March compared to a month ago, following a 0.1% drop in February. This indicator removes large ticket prices and historical seasonality of automobile sales.

The retail sales index is considered as a coincident indicator, thus, it reflects the current state of the economy. It is also deemed a pre-inflationary indicator, which investors can use in order to reassess the probability of an interest rate hike or cut by the Federal Reserve Bank. In addition, this indicator provides key information regarding consumer spending trends. Consumer expenditures, on the other hand, account for almost two-thirds of the US Gross Domestic Product. Therefore, a larger-than-expected rate of increase in sales would certainly boost the US dollar. The official report is due out at 12:30 GMT.

United States’ annualized producer price inflation probably contracted 0.8% in March from a year earlier, according to the median estimate by experts. This comes after a 0.6% decline in February and would be the lowest reading since October 2009. Month-on-month, the PPI probably rose 0.2%, which would end four straight months of contractions.

This index reflects the change in prices of over 8 000 products, sold by manufacturers during the respective period. The Producer Price Index (PPI) differs from the Consumer Price Index (CPI), which measures the change in prices from consumer’s perspective, due to subsidies, taxes and distribution costs of different types of manufacturers in the country. The simple logic behind this indicator is that if producers are forced to pay more for goods and services, they are more likely to pass these higher costs to the end consumer. Therefore, the PPI is considered as a leading indicator of consumer inflation. Lower-than-expected producer prices would usually have a bearish effect on the greenback.

The nation’s annualized core producer price inflation, which excludes prices of volatile categories such as food and energy, probably dropped to 0.9% in March. This indicator is quite sensitive to changes in aggregate demand, thus, it can be used as a leading indicator for the economy. However, because of its restrained scope, it is not suitable for future inflation forecasts. The Bureau of Labor Statistics is expected to report the official PPI performance at 12:30 GMT.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.0569. In case it penetrates the first resistance level at 1.0618, it will encounter next resistance at 1.0669. If breached, upside movement may attempt to advance to 1.0718.

If the cross drops below its S1 level at 1.0518, it will next see support at 1.0469. If the second key support zone is breached, downward movement may extend to 1.0418.

In weekly terms, the central pivot point is at 1.0736. The three key resistance levels are as follows: R1 – 1.0905, R2 – 1.1206, R3 – 1.1375. The three key support levels are: S1 – 1.0435, S2 – 1.0266, S3 – 0.9965.