Yesterday’s trade saw EUR/USD within the range of 1.1374-1.1489. The pair closed at 1.1474, soaring 0.83% on a daily basis, while extending gains from Tuesday. The daily rate of increase has been the sharpest one since September 17th, when the cross surged 1.31%. The daily high has been the highest level since August 26th, when the cross registered a high of 1.1562.
At 6:25 GMT today EUR/USD was up 0.10% for the day to trade at 1.1486. The pair touched a daily high at 1.1491 at 6:20 GMT. It is now the new highest level since September 17th.
Today the cross may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
United States
Initial, Continuing Jobless Claims
The number of people in the United States, who filed for unemployment assistance for the first time during the business week ended on October 9th, probably increased to 270 000, according to market expectations, from 263 000 in the previous week. The latter has been the lowest number of claims since the business week ended on July 17th, when 255 000 claims were reported.
The 4-week moving average, an indicator lacking seasonal effects, was 267 500, marking a decrease of 3 000 compared to the preceding weeks revised down average.
The business week, which ended on October 2nd has been the 31st consecutive week, when jobless claims stood below the 300 000 threshold.
Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims met expectations or increased further, this would have a moderate bearish effect on the US dollar.
The number of continuing jobless claims probably fell to the seasonally adjusted 2 195 000 during the business week ended on October 2nd, from 2 204 000 in the prior week. The latter represented an increase by 9 000 compared to the revised up number of claims reported in the week ended on September 18th. This indicator reflects the actual number of people unemployed and currently receiving unemployment benefits, who filed for unemployment assistance at least two weeks ago.
The Department of Labor is to release the weekly report at 12:30 GMT.
Consumer inflation
The annualized consumer inflation in the United States probably entered into negative territory for the first time since April in September, slipping to -0.1%, according to market expectations. In August consumer prices rose 0.2% year-on-year. In monthly terms, the Consumer Price Index (CPI) probably fell for a second consecutive month in September, down 0.2%, after six straight monthly increases. In July the CPI went up at a monthly rate of 0.1%.
In August the largest upward pressure came from cost of services less energy (a 2.6% increase, matching the rate posted in July). Within the category, cost of shelter rose 3.1%, following another 3.1% surge in July, costs of medical care were up 2.2%, following a 2.3% increase in July, while cost of transportation services climbed 2.1% year-on-year, or at the same rate as in July. In addition, food prices rose 1.6% year-on-year in August, matching the rate of increase from July. On the other hand, energy prices decreased 15% on annual basis, following a 14.8% slump in July, according to the report by the Bureau of Labor Statistics.
The annualized core consumer inflation, which is stripped of prices of food and energy, probably remained steady at 1.8% for a fourth consecutive month in September, according to the median forecast by experts. It is usually reported as a seasonally adjusted figure, because consumer patterns are widely fluctuating in dependence on the time of the year. The Core CPI is a key measure, because this is the gauge, which the Federal Reserve Bank takes into account in order to adjust its monetary policy. The Fed uses the core CPI, because prices of food, oil and gas are highly volatile, while the central bank’s tools are slow-acting. In case, for example, prices of oil plunge considerably, this could result in a low rate of inflation, but the central bank will not take action until this decrease affects prices of other goods and services.
In case the annual CPI met expectations or went further into negative territory, this would have a strong bearish effect on the US dollar. The Bureau of Labor Statistics is to release the official CPI report at 12:30 GMT.
Philadelphia Fed Manufacturing Survey
The Philadelphia Fed Manufacturing Index probably improved to a reading of -1.0 in September from -6.0 index points during the previous month. The latter has been the lowest index reading since January 2014, when a value of -6.3 was reported. The index is based on a monthly business survey (the Business Outlook Survey), measuring manufacturing activity in the third district of the Federal Reserve, Philadelphia. Participants give their opinion about the direction of business changes in overall economy and different indicators of activity in their companies, such as employment, working hours, new and existing orders, deliveries, inventories, delivery time, price etc. The survey is conducted every month since May 1968. The results are presented as the difference between the percentages of positive and negative projections. A level above zero is indicative of improving conditions, while a level below zero is indicative of worsening conditions. Higher-than-expected index readings would have a moderate bullish effect on the greenback. The Federal Reserve Bank of Philadelphia is expected to release the official results from the survey at 14:00 GMT.
US producer prices and retail sales disappoint in September
Yesterday annual producer prices in the United States were reported to have dropped for an eighth consecutive month in September, down 1.1%, following a 0.8% slump in the prior month. The median forecast by analysts pointed to a lesser annual drop, 0.7%.
In addition, monthly retail sales came below expectations, with the general index increasing 0.1% in September. The index performance in August has been revised down to flat from a 0.2% gain previously. Core retail sales, which exclude automobile sales, dropped more than anticipated last month, by 0.3% instead of 0.1%. It has been the sharpest monthly slump since January. Augusts core retail sales have been revised down to a 0.1% drop from a 0.1% gain previously.
Following the data release, EUR/USD gained ground sharply, climbing as high as 1.1448 as of 13:12 GMT.
Bond Yield Spread
The yield on German 2-year government bonds went as high as -0.241% on October 14th, after which it slid to -0.257% at the close to lose 1 basis point (0.01 percentage point) compared to October 13th. It has been the third gain in the past eight trading days.
The yield on US 2-year government bonds climbed as high as 0.625% on October 14th, after which it fell to 0.557% at the close to lose 6 basis points (0.06 percentage point) compared to October 13th. It has been a third consecutive trading day of decline.
The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, shrank to 0.814% on October 14th from 0.868% on October 13th. The October 14th yield spread has been the lowest one since July 8th, when the difference was 0.806%.
Meanwhile, the yield on German 10-year government bonds soared as high as 0.592% on October 14th, after which it slid to 0.540% at the close to lose 5.1 basis points (0.051 percentage point) compared to October 13th. It has been the fourth drop in the past eight trading days.
The yield on US 10-year government bonds climbed as high as 2.049% on October 14th, after which it slipped to 1.849% at the close to lose 19.3 basis points (0.193 percentage point) compared to October 13th, while marking a fourth consecutive trading day of decline.
The spread between 10-year US and 10-year German bond yields widened to 1.306% on October 14th from 1.451% on October 13th. The October 14th yield difference has been the lowest one in more than four months.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.1485
R2 – 1.1495
R3 (range resistance) – 1.1506
R4 (range breakout) – 1.1537
S1 – 1.1463
S2 – 1.1453
S3 (range support) – 1.1442
S4 (range breakout) – 1.1411
By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:
Central Pivot Point – 1.1306
R1 – 1.1443
R2 – 1.1527
R3 – 1.1664
S1 – 1.1222
S2 – 1.1085
S3 – 1.1001
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