Forex Market: EUR/USD daily trading forecast

Friday’s trade saw EUR/USD within the range of 1.0713-1.0818. The pair closed at 1.0779, falling 0.35% on a daily basis. It has been the first drop in the past three trading days. In weekly terms, EUR/USD gained 0.35% last week, which has been the first weekly advance in the past five weeks.

At 7:30 GMT today EUR/USD was down 0.22% for the day to trade at 1.0751. The pair touched a daily low at 1.0688 during early Asian trade. It was a lower-low test of the low from November 12th and also the lowest level since November 10th, when a daily low of 1.0673 was reached.

Today EUR/USD trading may be influenced by a number of macroeconomic reports as listed below.

Fundamentals

Euro area

Consumer inflation – final estimate

The final annualized consumer inflation in the Euro zone, evaluated in accordance with Eurostat’s harmonized methodology, probably confirmed the preliminary rate at 0.0% in October, which was reported on October 30th. In September annual inflation rate was reported at a final -0.1%, or the lowest level since March 2015. According to the provisional data, in October prices of alcohol & tobacco are expected to surge the most (+1.5% year-on-year, following a 1.4% gain in September), followed by cost of services (+1.3%, following a 1.2% gain in September) and cost of non-energy industrial goods (+0.4%, following a 0.3% increase in September). On the other hand, cost of energy is expected to drop 8.7% in October compared to the same month a year ago, following an 8.9% slump in September.

In case the HICP accelerated more than anticipated, thus, further approaching the 2% inflation objective set by the ECB, this would support demand for the euro, because it implies that monetary policy measures have begun to work in favor of economic activity.

The final annualized Core HICP for October probably matched the preliminary estimate of a 1.0% surge, which was reported on October 30th. In September the final Core HICP increased at an annual rate of 0.9%, matching the preliminary rate. This index excludes volatile categories such as food, energy, alcohol and tobacco. Eurostat is scheduled to release the final inflation data at 10:00 GMT.

United States

NY Empire State Manufacturing Index

The New York Empire State Manufacturing Index probably increased for a fourth consecutive month in November to reach a reading of -5.00, according to the median forecast by experts, from -11.36 in the prior month. If so, however, this would be the fourth straight month, when the gauge inhabited negative territory.

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.

Readings below 0.00 are indicative of worsening business conditions in the region. Higher-than-anticipated index values will usually have a moderate bullish effect on the US dollar. The Federal Reserve Bank of New York is expected to release the official reading at 13:30 GMT.

Correlation with other Majors

Taking into account the week ended on November 15th 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 AUD/USD (0.8943, or very strong)
EUR/USD to GBP/USD (0.7108, or strong)
EUR/USD to USD/CAD (0.5398, or strong)
EUR/USD to NZD/USD (0.2453, or weak)
EUR/USD to USD/CHF (-0.6598, or strong)
EUR/USD to USD/JPY (-0.7984, or strong)

1. During the examined period EUR/USD moved strongly in one and the same direction with GBP/USD and USD/CAD, while moving strongly in the opposite direction compared to USD/CHF and USD/JPY.

2. EUR/USD moved almost equally in one and the same direction with AUD/USD during the past week.

3. The correlation between EUR/USD and NZD/USD was insignificant during the period in question.

Bond Yield Spread

The yield on German 2-year government bonds went as high as -0.347% on November 13th, after which it slid to -0.359% at the close to lose 1.1 basis points (0.011 percentage point) in comparison with November 12th. It has been the fourth drop in the past five trading days.

The yield on US 2-year government bonds climbed as high as 0.883% on November 13th, after which it closed at 0.851% to lose 2.4 basis points (0.024 percentage point) compared to November 12th. It has been the second trading day of decline 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, narrowed to 1.210% on November 13th from 1.223% on November 12th. The November 13th yield spread has been the lowest one since November 9th, when the difference was 1.203%.

Meanwhile, the yield on German 10-year government bonds soared as high as 0.613% on November 13th, after which it slid to 0.562% at the close to lose 4.5 basis points (0.045 percentage point) compared to November 12th. It has been the fifth consecutive trading day of decline.

The yield on US 10-year government bonds climbed as high as 2.320% on November 13th, after which it slipped to 2.275% at the close to lose 4 basis points (0.04 percentage point) compared to November 12th. It has been the fourth consecutive trading day of decrease.

The spread between 10-year US and 10-year German bond yields widened to 1.713% on November 13th from 1.708% on November 12th. The November 13th yield difference has been the highest one since November 10th, when the spread was 1.719%.

Daily and Weekly Pivot Levels

By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:

R1 – 1.0789
R2 – 1.0798
R3 (range resistance) – 1.0808
R4 (range breakout) – 1.0837

S1 – 1.0769
S2 – 1.0760
S3 (range support) – 1.0750
S4 (range breakout) – 1.0721

By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:

Central Pivot Point – 1.0761
R1 – 1.0849
R2 – 1.0919
R3 – 1.1007

S1 – 1.0691
S2 – 1.0603
S3 – 1.0533