Forex Market: EUR/USD daily trading outlook

Friday’s trade saw EUR/USD within the range of 1.0941-1.0979. The pair closed at 1.0977, going up a meager 0.04% on a daily basis, while extending the gain from Thursday. The daily high was a lower-high test of the high from December 22nd. In weekly terms, EUR/USD went up 1.00% last week, or the most since the week ended on December 6th, when it appreciated 2.77%. EUR/USD has gone up 3.77% so far during the current month, following three months of losses.

At 7:41 GMT today EUR/USD was down 0.03% for the day to trade at 1.0959. The pair touched a daily low at 1.0942 during early Asian trade, or a higher-low test of Fridays low, while overshooting the lower range breakout level (S4).

No relevant macroeconomic reports and other events, which may influence EUR/USD trading, are scheduled for release on Monday.

Correlation with other Majors

Taking into account the week ended on December 27th 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 NZD/USD (0.8987, or very strong)
EUR/USD to AUD/USD (0.7402, or strong)
EUR/USD to GBP/USD (0.4267, or moderate)
EUR/USD to USD/CAD (-0.5409, or strong)
EUR/USD to USD/JPY (-0.7806, or strong)
EUR/USD to USD/CHF (-0.8986, or very strong)

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

2. EUR/USD moved almost equally in one and the same direction with NZD/USD during the past week, while moving almost equally in the opposite direction compared to USD/CHF.

Bond Yield Spread

The yield on German 2-year government bonds went as high as -0.334% on December 24th, after which it closed at the exact same level to remain unchanged in comparison with December 23rd. Yields were up in 6 out of the past 19 trading days.

The yield on US 2-year government bonds climbed as high as 1.011% on December 24th, or the highest level since December 17th (1.017%), after which it closed at 1.006% to add 1.7 basis points (0.017 percentage point) compared to December 23rd. It has been the 20th gain in the past 29 trading days and also a third consecutive one.

The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, expanded to 1.340% on December 24th from 1.323% on December 23rd. The December 24th yield spread has been the largest one since December 2nd, when the difference was 1.382%.

Meanwhile, the yield on German 10-year government bonds soared as high as 0.635% on December 24th, after which it slid to 0.625% at the close to lose 0.003 percentage point compared to December 23rd. It has been the 9th drop in the past 19 trading days.

The yield on US 10-year government bonds climbed as high as 2.266% on December 24th, after which it slipped to 2.245% at the close to lose 1.4 basis points (0.014 percentage point) compared to December 23rd. It has been the 18th drop in the past 29 trading days.

The spread between 10-year US and 10-year German bond yields narrowed to 1.620% on December 24th from 1.631% on December 23rd. The December 24th yield difference has been the lowest one since December 16th, when the spread was 1.618%.

Daily and Weekly Pivot Levels

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

R1 – 1.0980
R2 – 1.0985
R3 (range resistance) – 1.0988
R4 (range breakout) – 1.0998

S1 – 1.0974
S2 – 1.0970
S3 (range support) – 1.0967
S4 (range breakout) – 1.0956

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

Central Pivot Point – 1.0937
R1 – 1.1028
R2 – 1.1079
R3 – 1.1170

S1 – 1.0886
S2 – 1.0795
S3 – 1.0744