Yesterday’s trade saw EUR/USD within the range of 1.0818-1.0903. The pair closed at 1.0843, shedding 0.16% on a daily basis. It has been the fifth drop in the past seven trading days and also a third consecutive one. The daily low has been the lowest level since January 8th, when a low of 1.0801 was reached.
At 7:20 GMT today EUR/USD was losing 0.34% for the day to trade at 1.0825. The pair touched a daily low at 1.0812 during mid-Asian trading session, overshooting the range support level (S3). Support may be received at the current daily low, then – at the low from January 8th (1.0801) and finally – in the area around the low from January 7th (1.0769). Resistance may be encountered at the hourly 21-period EMA (1.0840), then – at the hourly 100-period EMA (1.0858) and finally – at the hourly 200-period EMA (1.0863).
On Wednesday EUR/USD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
Euro area
Industrial output
The seasonally adjusted index of industrial production in the Euro area probably fell 0.3% in November compared to a month ago, according to market expectations, following a 0.6% expansion in October. The latter has been the sharpest monthly rate of increase in output since July, when it surged at a revised up rate of 0.8%.
Annualized output probably increased at a pace of 1.3% in November, according to the median forecast by experts. If so, this would be the 12th consecutive month, when annual output grew. In October industrial production expanded 1.9% year-on-year, or the most since July. Octobers index performance was boosted by production of durable consumer goods (an increase by 4.2%), production of capital goods (an increase by 3.5%), intermediate goods (up 1.5%) and non-durable consumer goods (up 0.7%). Additionally, production of energy was up 0.2% year-on-year during the same period.
In October, the highest annual increases in industrial output were reported for Ireland (+14.6%), Lithuania (+6.5%), the Czech Republic and Croatia (both +6.4%), while the most considerable decreases were registered in the Netherlands (-2.6%), Estonia (-2.1%) and Greece (-1.9%).
The index, reflecting the business cycle, measures the change in overall inflation-adjusted value of output in sectors such as manufacturing, mining and utilities. In case annualized industrial output expanded at a larger rate than anticipated, this would have a moderate bullish effect on the euro, as it implies a greater probability of inflationary pressure occurring. Eurostat is to publish the official data at 10:00 GMT.
United States
Fed speakers
At 13:00 GMT the Federal Reserve Bank of Boston President, Eric Rosengren, is expected to take a statement, followed by a speech by the Fed President for Chicago, Charles Evans, scheduled at 17:30 GMT.
Monthly Budget Statement
The United States probably recorded a government budget deficit of USD 2.7 billion in December, according to market expectations, after a budget gap of USD 65.0 billion during the previous month. The latter represented a 14% increase compared to the figure posted in November a year ago, but yet, it has been the smallest deficit since August 2015.
In November total receipts were at USD 205 billion (a 7.3% year-on-year increase), while total outlays amounted to USD 270 billion (an 8.9% year-on-year surge), according to the report by the US Treasury.
The current fiscal year-to-date budget gap amounted to USD 201 billion, or a 13% increase compared to the same period a year earlier.
A larger-than-projected budget deficit in December would have a moderate bearish effect on the greenback. The Financial Management Service is to publish the official figure at 19:00 GMT.
”Beige Book” report
Also at 19:00 GMT, the Federal Reserve is to release its ”Beige Book” report, which is published eight times during the year. Each of the banks in the 12 Federal Reserve Districts gathers data in regard to current economic situation in the country on the basis of interviews with key business contacts, economists, market experts, and other sources. In case the Beige Book presents an optimistic economic outlook, this will usually support the US dollar, while a pessimistic view will have a bearish effect on the currency.
Bond Yield Spread
The yield on German 2-year government bonds went as high as -0.365% on January 12th, or the highest level since January 5th (-0.342%), after which it closed at -0.382% to add 0.002 percentage point in comparison with January 11th. It has been the 8th gain in the past 20 trading days and also a second consecutive one.
The yield on US 2-year government bonds climbed as high as 0.968% on January 12th, or the highest level since January 8th (1.016%), after which it closed at 0.936% to lose 0.004 percentage point compared to January 11th. It has been the 12th drop in the past 20 trading days.
The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, narrowed to 1.318% on January 12th from 1.324% on January 11th. The January 12th yield spread has been the lowest one since December 21st, when the difference was 1.311%.
Meanwhile, the yield on German 10-year government bonds soared as high as 0.583% on January 12th, or the highest level since January 5th (0.596%), after which it slid to 0.535% at the close to lose 0.008 percentage point compared to January 11th. It has been the 10th drop in the past 20 trading days.
The yield on US 10-year government bonds climbed as high as 2.200% on January 12th, after which it slipped to 2.119% at the close to lose 5.6 basis points (0.056 percentage point) compared to January 11th. It has been the 13th drop in the past 20 trading days.
The spread between 10-year US and 10-year German bond yields shrank to 1.584% on January 12th from 1.632% on January 11th. The January 12th yield difference has been the lowest one since December 4th, when the spread was 1.583%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.0851
R2 – 1.0860
R3 (range resistance) – 1.0867
R4 (range breakout) – 1.0890
S1 – 1.0835
S2 – 1.0826
S3 (range support) – 1.0819
S4 (range breakout) – 1.0796
By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:
Central Pivot Point – 1.0863
R1 – 1.1018
R2 – 1.1103
R3 – 1.1258
S1 – 1.0778
S2 – 1.0623
S3 – 1.0538
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