Friday’s trade saw EUR/USD within the range of 1.1114-1.1231. The pair closed at 1.1195, losing 0.31% on a daily basis, or marking the first drop in the past three trading days. The daily low has been the lowest level since September 23rd, when the cross registered a low of 1.1103 (a two-and-a-half-week low). In weekly terms, EUR/USD fell 0.97%, while marking a second consecutive week of losses. The weekly drop has been the steepest one since the week ended on August 30th, when the pair depreciated 1.84%.
At 6:57 GMT today EUR/USD was losing 0.20% for the day to trade at 1.1172. The pair tested the range support level (S3), as it touched a daily low at 1.1167 at 6:28 GMT.
Today the cross may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
Euro area
Italian Consumer Confidence and Business Confidence
Confidence among consumers in Italy was probably little changed in September, with the respective index coming in at a reading of 108.7, according to market expectations, down from 109.0 in August. If so, this would be the ninth consecutive month, when the gauge stood above the 100.0 level.
The index of consumer confidence is based on a survey, conducted by phone and encompassing about 2 000 households in the country. Respondents give their opinion regarding past and future economic situation in Italy, past and future personal financial situation, unemployment, intention to make major purchases such as durable goods, and saving prospects. Readings of 100.0 indicate neutrality (no change in sentiment). Values above 100.0 signify improving confidence, while values below 100.0 are indicative of low expectations. A larger-than-expected drop might have a limited bearish impact on the common currency. The official reading is due out at 8:00 GMT.
Meanwhile, confidence among manufacturing companies in Italy probably remained almost unchanged in September, with the corresponding index coming in at 102.7, up from 102.5 in August. The latter has been the lowest level of confidence since February 2015, when a value of 100.5 was reported.
The Manufacturing Confidence survey features 4 000 Italian companies. Respondents give their opinion regarding the current trend of order books, production and inventories, short-term forecasts on order books, production, prices and the general economic situation.
The index of business confidence is seasonally adjusted and has a base year of 2005. Readings of 100.0 signify neutrality in business sentiment. Values exceeding 100.0 imply improving confidence, while values below 100.0 are related with low expectations. Higher-than-anticipated values may have a limited bullish effect on the common currency. The official reading by the Istat is due out at 9:00 GMT.
United States
Personal Income, Personal Spending
Personal spending in the United States probably rose for a fourth straight month in August, up 0.3%, according to market expectations, while personal income was probably up for a fifth consecutive month in August, increasing at a monthly rate of 0.4%. Consumer spending, which accounts for over two thirds of the nations GDP, rose 0.3% in July.
At the same time, personal income increased 0.4% during the same month, while disposable personal income (DPI) rose USD 61.5 billion (or 0.5%). Private wages and salaries increased USD 32.7 billion in July, compared to a surge by USD 11.0 billion in June. Government wages and salaries went up by USD 3.1 billion in July, following a USD 3.3 billion increase in the preceding month.
Higher-than-expected rates of increase imply good employment conditions and, therefore, are dollar positive. The Bureau of Economic Analysis is to publish the official figures at 12:30 GMT.
Pending Home Sales
The index of pending home sales in the United States probably rose 0.2% in August compared to July, according to the median estimate by experts, following another 0.5% increase in the prior month.
In annual terms, the index of pending home sales rose 7.2% in July, or at the slowest pace since December 2014, when a climb rate of 6.1% was reported.
When a sales contract is accepted for a property, it is recorded as a pending home sale. As an indicator the index provides information on the number of future home sales, which are in the pipeline. It gathers data from real estate agents and brokers at the point of a sale and is currently the most accurate indicator regarding the US housing sector. It samples over 20% of the market. In addition, over 80% of pending house sales are converted to actual home sales within 2 or 3 months. Therefore, this index has a predictive value about actual home sales.
In case pending home sales increased more than anticipated in August, this would have a moderate bullish effect on the greenback. The National Association of Realtor’s (NAR) will release the official index value at 14:00 GMT.
Correlation with other Majors
Taking into account the week ended on September 27th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:
EUR/USD to NZD/USD (0.5485, or strong)
EUR/USD to USD/CAD (0.4074, or moderate)
EUR/USD to USD/JPY (0.1051, or weak)
EUR/USD to USD/CHF (0.0603, or very weak)
EUR/USD to GBP/USD (-0.3495, or moderate)
EUR/USD to AUD/USD (-0.4313, or moderate)
1. During the examined period EUR/USD moved strongly in one and the same direction with NZD/USD.
2. EUR/USD moved almost independently compared to USD/CHF during the past week.
3. The correlation between EUR/USD and USD/CAD, EUR/USD and GBP/USD, EUR/USD and AUD/USD was moderate during the period in question.
Bond Yield Spread
The yield on German 2-year government bonds went as high as -0.226% on September 25th, or the highest level since September 21st (-0.220%), after which it slid to -0.236% at the close to add 1.2 basis points (0.012 percentage point) on a daily basis, while marking a third consecutive trading day of gains.
The yield on US 2-year government bonds climbed as high as 0.743% on September 25th, or the highest level since September 17th (0.815%), after which it fell to 0.700% at the close to add 1.2 basis points (0.012 percentage point) for the day.
The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, remained unchanged compared to a day ago at 0.936% on September 25th.
Meanwhile, the yield on German 10-year government bonds soared as high as 0.671% on September 25th, or the highest level since September 22nd (0.687%), after which it slid to 0.651% at the close to appreciate 5.9 basis points (0.059 percentage point) compared to September 24th. It has been the first gain in the past four trading days.
The yield on US 10-year government bonds climbed as high as 2.198% on September 25th, or the highest level since September 22nd (2.198%), after which it slipped to 2.166% at the close to add 3.8 basis points (0.038 percentage point) on a daily basis.
The spread between 10-year US and 10-year German bond yields shrank to 1.495% on September 25th from 1.524% during the prior day. The September 25th yield difference has been the lowest one since September 18th, when the spread was 1.469%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.1206
R2 – 1.1216
R3 (range resistance – green on the 30-minute chart) – 1.1227
R4 (range breakout – red on the 30-minute chart) – 1.1259
S1 – 1.1184
S2 – 1.1174
S3 (range support – green on the 30-minute chart) – 1.1163
S4 (range breakout – red on the 30-minute chart) – 1.1131
By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:
Central Pivot Point – 1.1209
R1 – 1.1315
R2 – 1.1435
R3 – 1.1541
S1 – 1.1089
S2 – 1.0983
S3 – 1.0863
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