Yesterday’s trade saw EUR/USD within the range of 1.0617-1.0692. The pair closed at 1.0671, up 0.26% on a daily basis. It has been the first gain in the past four trading days. The daily low was a lower-low test of the low from April 16th and also the lowest level since April 15th, when a low of 1.0570 was registered.
At 7:17 GMT today EUR/USD was gaining 0.29% for the day to trade at 1.0690. The pair touched a daily high at 1.0716 at 1:45 GMT, overshooting the upper range breakout level (R4). The pair has been holding below the weekly central pivot level for a fourth consecutive trading day.
Today EUR/USD trading may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
Euro area
Current Account
The surplus on Euro zones seasonally adjusted current account probably expanded to EUR 18.3 billion in September, according to the median forecast by experts, from EUR 17.7 billion in August. The latter has been the lowest surplus since September 2013, when a figure of EUR 13.7 billion was registered.
The regions current account (without a seasonal adjustment) had a surplus of EUR 13.7 billion in August, which has been the lowest one since May 2015, when a figure of EUR 3.4 billion was reported.
In case the current account surplus expanded more than anticipated in September, this would have a limited bullish effect on the common currency. The European Central Bank is to release the official report at 9:00 GMT.
ECB Monetary Policy Accounts
At 12:30 GMT the European Central Bank is expected to release the accounts from its latest policy meeting, held on October 22nd. This document offers a fair and balanced reflection of policy deliberations, with its objective being to provide the rationale behind monetary policy decisions and let the public receive a better understanding of the ECB Governing Council’s assessment of macroeconomic conditions.
The key refinancing rate was left intact at the record low level of 0.05% in line with market expectations. The rates on the marginal lending facility and the deposit facility were kept unchanged at 0.30% and -0.20%, respectively. The bank indicated that it may review its easing program at the December meeting, due to risks to Eurozone growth, posed by emerging market stress and financial market volatility.
According to the Introductory Statement to the Press Conference offered by ECB President Mario Draghi in October: ”While euro area domestic demand remains resilient, concerns over growth prospects in emerging markets and possible repercussions for the economy from developments in financial and commodity markets continue to signal downside risks to the outlook for growth and inflation.”
”…the degree of monetary policy accommodation will need to be re-examined at our December monetary policy meeting, when the new Eurosystem staff macroeconomic projections will be available. The Governing Council is willing and able to act by using all the instruments available within its mandate if warranted in order to maintain an appropriate degree of monetary accommodation.”
”…in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively. Given continued high structural unemployment and low potential output growth in the euro area, the ongoing cyclical recovery should be supported by effective structural policies. In particular, actions to improve the business environment, including the provision of an adequate public infrastructure, are vital to increase productive investment, boost job creation and raise productivity.”
In case the accounts were to present a hawkish economic outlook, the common currency would receive support, while a dovish outlook would usually lead to a sell-off.
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 November 13th, probably decreased to 271 000, according to market expectations, from 276 000 in the previous week.
The 4-week moving average, an indicator lacking seasonal effects, was 267 750, marking an increase of 5 000 compared to the preceding weeks unrevised average.
The business week, which ended on November 6th has been the 36th consecutive week, when jobless claims stood below the 300 000 threshold, which implied a healthy labor market.
Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims met expectations or decreased further, this would have a moderate bullish effect on the US dollar.
The number of continuing jobless claims probably dropped to the seasonally adjusted 2 170 000 during the business week ended on November 6th, according to market expectations, from 2 174 000 in the preceding week. The latter represented an increase by 5 000 compared to the revised up number of claims reported in the week ended on October 23rd. 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 13:30 GMT.
Philadelphia Fed Manufacturing Survey
The Philadelphia Fed Manufacturing Index probably improved for a second straight month in October, to reach a level of -1.0, according to the median forecast by experts, from -4.5 index points during September. If so, however, October would be the third consecutive month, when the gauge inhabited negative territory. 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 usually 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 15:00 GMT.
Bond Yield Spread
The yield on German 2-year government bonds went as high as -0.360% on November 18th, after which it closed at -0.367% to add 0.005 percentage point in comparison with November 17th. It has been the third gain in the past eight trading days.
The yield on US 2-year government bonds climbed as high as 0.908% on November 18th, or the highest level since November 9th (0.910%), after which it closed at 0.884% to add 2.1 basis points (0.021 percentage point) compared to November 17th. It has been the third consecutive trading day of gains.
The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, widened for a second straight day on November 18th to reach 1.251% from 1.235% on November 17th. The November 18th yield spread has been the largest one in more than six months.
Meanwhile, the yield on German 10-year government bonds soared as high as 0.532% on November 18th, after which it slid to 0.505% at the close to lose 2 basis points (0.02 percentage point) compared to November 17th. It has been the eighth consecutive trading day of decline.
The yield on US 10-year government bonds climbed as high as 2.299% on November 18th, after which it slipped to 2.275% at the close to remain unchanged compared to November 17th.
The spread between 10-year US and 10-year German bond yields widened for a fourth straight day on November 18th to reach 1.770% from 1.750% on November 17th. The November 18th yield difference has been the highest one in more than six months.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.0678
R2 – 1.0685
R3 (range resistance) – 1.0693
R4 (range breakout) – 1.0712
S1 – 1.0664
S2 – 1.0657
S3 (range support) – 1.0649
S4 (range breakout) – 1.0630
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
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