Forex Market: EUR/USD daily trading outlook

Yesterday’s trade saw EUR/USD within the range of 1.0619-1.0674. The pair closed at 1.0643, going up 0.07% on a daily basis. It has been the first gain in the past three trading days.

At 7:23 GMT today EUR/USD was gaining 0.22% for the day to trade at 1.0666. The pair touched a daily high at 1.0682 at 7:32 GMT, overcoming the upper range breakout level (R4). Short-term resistance may be encountered at 1.0700, while in case of a breach to the upside, the high from November 20th (1.0745) may halt the move up. Support may be received in the area around November 23rd low of 1.0591.

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

Fundamentals

Euro area

Italian Retail sales

At 10:00 GMT the National Institute of Statistics (Istat) is to report on retail sales regarding September. In August annualized retail sales surged 1.3%, which marked the fourth consecutive period of increase. In monthly terms, retail sales with a seasonal adjustment rose 0.3% in August, marking a second straight month of increase. This indicator reflects the change in the total value of inflation-adjusted sales by retailers in the country and provides key information regarding the consumer spending trend, while the latter is a key driving force behind economic growth. An increase in the monthly retail sales index usually has a limited bullish effect on the euro and vice versa.

United States

Personal Income, Personal Spending

Personal spending in the United States probably rose for a sixth straight month in October, up 0.3%, according to market expectations, while personal income was probably up for a seventh consecutive month in October, increasing at a monthly rate of 0.4%. Consumer spending, which accounts for over two thirds of the nations GDP, rose 0.1% in September, or at the slowest rate since January.

At the same time, personal income increased 0.1% during the same month, while disposable personal income (DPI) rose USD 19.2 billion (or 0.1%). Private wages and salaries dropped USD 7.0 billion in September, compared with an increase by USD 32.2 billion in the prior month. Government wages and salaries were USD 3.3 billion higher in September, compared with an increase by USD 3.8 billion in August.

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 13:30 GMT.

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 20th, probably decreased to 270 000, according to market expectations, from 271 000 in the previous week. If so, this would be the lowest number of claims since the business week ended on October 23rd, when a figure of 260 000 was reported.

The 4-week moving average, an indicator lacking seasonal effects, was 270 750, marking an increase of 3 000 compared to the preceding weeks unrevised average.

The business week, which ended on November 13th has been the 37th 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 2 164 000 during the business week ended on November 13th from 2 175 000 in the preceding week. The latter represented a decrease by 2 000 compared to the revised up number of claims reported in the week ended on October 30th. 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.

Durable Goods Orders

Durable goods orders in the United States probably went up 1.5% in October, according to the median forecast by experts, following two consecutive months of declines. In September orders were 1.2% lower from a month ago, after a downwardly revised 3.0% decline in August.

In September, excluding transportation, new orders went down at a monthly rate of 0.4%. At the same time, without taking into account defense, new orders slumped 2.0% in September from a month ago. Transportation equipment, down in two consecutive months, dropped the most, by 2.9% to reach USD 75.5 billion.

Shipments of manufactured durable goods rose 0.2% to USD 242.5 billion in September, after a 0.5% drop in August. Unfilled orders for manufactured durable goods dropped by USD 6.6 billion (0.6%) to reach USD 1,187.4 billion in September, following a 0.5% slump in August. Inventories of manufactured durable goods went down 0.3% to USD 399.4 billion, while non-defense new orders for capital goods plunged by USD 5.9 billion (7.6%) to reach USD 72.2 billion in September, according to data by the US Census Bureau.

Durable goods orders, which exclude transportation, probably rose 0.3% in October from a month ago, according to expectations, following a 0.4% decrease in September. Large ticket orders, such as automobiles for civil use or aircraft, are not present in the calculation, as their value may be in a wide range. This way the index provides a more reliable information in regard to orders for durable goods.

In case the general index increased at a faster-than-projected pace, this would have a strong bullish effect on the US dollar. The US Census Bureau is scheduled to release the official report at 13:30 GMT.

Services PMI by Markit – preliminary reading

Activity in the US sector of services probably expanded in November, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 55.0, according to expectations, up from a final 54.8 in October. The latter has been the lowest index reading since June 2015, when the PMI stood at a final 54.8. The PMI is based on data collected from a representative panel of more than 400 private sector companies, which encompasses industries such as transport and communication, financial intermediaries, business and personal services, computing & IT and hotels and restaurants. Values above the key level of 50.0 indicate optimism (expanding activity). In case a larger-than-expected expansion in services sector activity is reported, this would have a moderate bullish effect on the US dollar. The preliminary data by Markit Economics is due out at 14:45 GMT.

Reuters/Michigan Consumer Sentiment Index – final reading

The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States improved in November. The final reading of the corresponding index, which usually comes out two weeks after the preliminary data, probably came in at 93.0, slightly down from a preliminary value of 93.1. If market expectations were met, this would be the highest level since July 2015, when the gauge of sentiment was reported at a final 93.1. In October the gauge of confidence came in at a final reading of 90.0, down from a preliminary value of 92.1. The survey encompasses about 500 respondents throughout the country. The index is comprised by two major components, a gauge of current conditions and a gauge of expectations. The current conditions index is based on the answers to two standard questions, while the index of expectations is based on three standard questions. All five questions have an equal weight in determining the value of the overall index.

According to preliminary data, the sub-index of current economic conditions, which measures US consumers’ views of their personal finances, went up to a reading of 104.8 in November from a final 102.3 in October. The sub-index of consumer expectations improved to a flash reading of 85.6 in November from a final value of 82.1 in October.

Respondents in the survey expect that the 2016 rate of inflation will probably slow down to 2.5% from 2.7%, as expected in the October survey.

In case the final value of the consumer sentiment index confirmed or even came above the preliminary reading, this would have a moderate bullish effect on the dollar. The final reading is due out at 15:00 GMT.

New Home Sales

Sales of new single-family homes probably increased to the seasonally adjusted annual rate of 500 000 in October, according to market expectations, from 468 000 reported in September. The latter has been the lowest level of sales since November 2014, when a figure of 431 000 was reported. Sales in the Northeast plummeted 61.8% in September, those in the South were down 8.7%, while sales in the West decreased 6.7%. New home sales in the Midwest were also lower, down 8.3% in September compared to a month ago.

The median sales price of new houses sold went up as high as USD 296 900 in September, while the average sales price was USD 364 100. At the end of the month, the seasonally adjusted estimate of new houses for sale was 225 000, or the highest since March 2010. It represents a supply of 5.8 months at the current sales rate, according to the report by the US Census Bureau.

In case the index of sales showed a better-than-anticipated performance, this would support demand for the greenback. The Census Bureau is to report the official figure at 15:00 GMT.

Bond Yield Spread

The yield on German 2-year government bonds went as high as -0.373% on November 24th, or the highest level since November 20th (-0.373%), after which it closed at -0.375% to add 1.4 basis point (0.014 percentage point) in comparison with November 23rd. It has been the first increase in the past four trading days.

The yield on US 2-year government bonds climbed as high as 0.946% on November 24th, or matching the high from the prior day and also being the highest level since November 6th (0.958%), after which it closed at 0.938% to add 1.2 basis points (0.012 percentage point) compared to November 23rd. It has been the seventh consecutive trading day of increase.

The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, narrowed to 1.313% on November 24th from 1.315% on November 23rd. The November 24th yield spread has been the lowest one since November 20th, when the difference was 1.307%.

Meanwhile, the yield on German 10-year government bonds soared as high as 0.529% on November 24th, after which it slid to 0.517% at the close to lose 1.7 basis points (0.017 percentage point) compared to November 23rd. It has been the eleventh drop in the past twelve trading days.

The yield on US 10-year government bonds climbed as high as 2.252% on November 24th, after which it slipped to 2.248% at the close to add 0.005 percentage point compared to November 23rd. It has been the fifth gain in the past twelve trading days.

The spread between 10-year US and 10-year German bond yields expanded to 1.731% on November 24th from 1.709% on November 23rd. The November 24th yield difference has been the largest one since November 20th, when the spread was 1.785%.