Yesterday’s trade saw EUR/USD within the range of 1.1029-1.1079. The pair closed at 1.1049, shedding 0.07% on a daily basis. It has been the most modest daily rate of decrease since October 21st, when the pair slid 0.05%. The daily high has been the highest level since October 23rd, when the cross registered a high of 1.1142.
At 7:15 GMT today EUR/USD was up 0.02% for the day to trade at 1.1047. The pair touched a daily high at 1.1049 at 7:14 GMT.
Today the pair may be influenced by a number of macroeconomic reports and other events as listed below.
Fundamentals
Euro area
Italian Consumer and Business Confidence Indicators
Confidence among consumers in Italy probably worsened in October, with the respective index coming in at a reading of 112.1, according to market expectations, down from 112.7 in September. The latter has been the highest level since May 2002. Consumers in the country expressed higher confidence over economic and personal conditions, while current and future expectations improved. On the other hand, unemployment prospects were lower, while the inflation outlook was revised down.
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. Lower-than-expected index readings might have a limited bearish impact on the common currency. The official reading is due out at 9:00 GMT.
Meanwhile, confidence among manufacturing companies in Italy probably remained unchanged in October, with the corresponding index remaining at a level of 104.2. It has been the highest level of confidence since May 2011.
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. In general, higher-than-anticipated values may have a limited bullish effect on the common currency and vice versa. The official reading by the Istat is due out at 9:00 GMT.
United States
FOMC policy decision
The Federal Open Market Committee (FOMC) will probably keep its target for the federal funds rate unchanged within the range 0%-0.25% for a 54th consecutive meeting, according to the median forecast by experts.
In September the Committee left borrowing costs intact, as macroeconomic conditions, which would warrant a hike, had not yet been met, but were approaching. The Minutes from the Federal Reserves most recent policy meeting revealed officials expressed concerns recent global and financial market developments might pose constraints to US economic activity.
According to extracts from the minutes of the FOMCs September meeting: ”…members judged that information received since the FOMC met in July indicated that economic activity was expanding at a moderate pace. Although net exports remained soft, economic growth was broadly based. Members noted that recent global and financial market developments might restrain economic activity somewhat as a result of the higher level of the dollar and possible effects of slower economic growth in China and in a number of emerging market and commodity-producing economies.”
”In assessing whether economic conditions had improved sufficiently to initiate a firming in the stance of policy, many members said that the improvement in labor market conditions met or would soon meet one of the Committees criteria for beginning policy normalization. But some indicated that their confidence that inflation would gradually return to the Committees 2 percent objective over the medium term had not increased, in large part because recent global economic and financial developments had imparted some restraint to the economic outlook and placed further downward pressure on inflation in the near term.”
”…all but one member concluded that, although the U.S. economy had strengthened and labor underutilization had diminished, economic conditions did not warrant an increase in the target range for the federal funds rate at this meeting.”
The FOMC will announce its official decision on policy at 18:00 GMT. In case a rate hike is introduced, this will certainly cause a strong bullish impact on the US dollar.
Bond Yield Spread
The yield on German 2-year government bonds went as high as -0.320% on October 27th, after which it slid to -0.329% at the close to lose 0.009 percentage point in comparison with October 26th, while marking a second consecutive trading day of decline.
The yield on US 2-year government bonds climbed as high as 0.641% on October 27th, after which it closed at 0.625% to lose 1.2 basis points (0.012 percentage point) compared to October 26th. It has been the second trading day of decrease in a row.
The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, shrank to 0.954% on October 27th from 0.957% on October 26th. The October 27th yield spread has been the lowest one since October 22nd, when the difference was 0.918%.
Meanwhile, the yield on German 10-year government bonds soared as high as 0.502% on October 27th, after which it slid to 0.446% at the close to lose 5.4 basis points (0.054 percentage point) compared to October 26th, while marking a second consecutive trading day of decline.
The yield on US 10-year government bonds climbed as high as 2.060% on October 27th, after which it slipped to 2.042% at the close to lose 1.6 basis points (0.016 percentage point) compared to October 26th. It has been the second trading day of decrease in a row.
The spread between 10-year US and 10-year German bond yields expanded to 1.596% on October 27th from 1.558% on October 26th. The October 27th yield difference has been the largest one since July 30th, when the spread was 1.602%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.1054
R2 – 1.1059
R3 (range resistance) – 1.1063
R4 (range breakout) – 1.1077
S1 – 1.1044
S2 – 1.1040
S3 (range support) – 1.1035
S4 (range breakout) – 1.1021
By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:
Central Pivot Point – 1.1133
R1 – 1.1274
R2 – 1.1529
R3 – 1.1670
S1 – 1.0878
S2 – 1.0737
S3 – 1.0482
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