Yesterday’s trade saw EUR/USD within the range of 1.0777-1.0922. The pair closed at 1.0858, shedding 0.30% on a daily basis. It has been the 9th drop in the past 14 trading days and also a second consecutive one. In addition, the daily low has been the lowest level since January 7th, when a low of 1.0769 was registered.
At 7:10 GMT today EUR/USD was losing 0.32% for the day to trade at 1.0824. The pair touched a daily low at 1.0822 at 7:09 GMT, undershooting the range support level (S3), and a daily high at 1.0877 during the early hours of the Asian trading session. Support may be expected at the psychological 1.0800 level and then – within the 1.0765-1.0780 area. Resistance, on the other hand, may be encountered at the hourly 21-period EMA (1.0852), then – at the hourly 55-period EMA (1.0873) and finally – in the area around the current daily high/the hourly 200-period EMA (1.0877/1.0882).
On Friday EUR/USD trading may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
Euro area
Manufacturing, Services PMI – preliminary readings
German manufacturing Purchasing Managers Index probably remained little changed in January, with the preliminary index value being at 53.0, according to expectations, slowing down from a final reading of 53.2 in December. If so, January would be the 14th consecutive month, during which the PMI inhabited the area above 50.0 and also the highest level since August 2015. The flash value is due out at 8:30 GMT.
Activity in German services sector probably increased at a slower rate in January from a month ago, with the preliminary PMI slipping to 55.6 from a final reading of 56.0 in December. The latter has been the highest PMI value since July 2014. If so, January would be the 32nd consecutive month, when the PMI stood in the zone of expansion. The preliminary reading is to be released at 8:30 GMT.
Manufacturing activity in the whole Euro region probably rose at a slower rate in January from a month ago, with the preliminary Purchasing Managers Index slipping to 53.0 from a final reading of 53.2 in December. If so, January would be the 31st consecutive month of expansion. The PMI reflects the performance of the manufacturing sector in the area and is based on a survey of 3 000 manufacturing companies. National data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. These member states together account for almost 90% of Euro zones manufacturing activity. The Manufacturing Purchasing Managers Index is comprised by five individual indexes with the following weights: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stock of Items Purchased (10%), as the Delivery Times index is inverted, so that it moves in a comparable direction. The preliminary index value is expected at 9:00 GMT.
The preliminary services PMI in the Euro area probably remained unchanged in January, with the preliminary Purchasing Managers Index remaining at 54.2, matching the final reading in December. If market expectations were met, January would be the 32nd consecutive month, during which the index stood above the key level of 50.0. The PMI is based on data collected from a representative panel of about 2 000 private service sector companies. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland. The survey represents private sector conditions in terms of new orders, output, employment, prices etc. Markit will release the preliminary reading at 9:00 GMT.
A better-than-expected performance in any of the PMI readings would have a moderate bullish effect on the common currency.
United States
Manufacturing PMI by Markit – preliminary reading
Manufacturing activity in the United States probably was little changed in January, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 51.1, according to market expectations. If so, this would be the lowest reading since October 2012, when the PMI was reported at 51.0. In December the final seasonally adjusted PMI stood at 51.2, down from a preliminary 51.3.
According to Markits statement: ”…new order levels expanded only fractionally and at the weakest pace since September 2009. Anecdotal evidence cited softer underlying demand conditions, intense competition for new work and subdued business confidence among clients. Export sales were also close to stagnation in December, with manufacturers noting that the strong dollar continued to act as a drag on demand from abroad.”
”Manufacturing production growth moderated in response to weaker than expected new business intakes during December. The latest expansion of output levels was the least marked since October 2013. At the same time, capacity pressures eased in December, with backlogs of work decreasing at the fastest pace since September 2009. Nonetheless, payroll numbers rose at a solid rate that was slightly faster than seen during the previous month. This marked two-and-a-half years of sustained job creation across the manufacturing sector, and the pace of expansion was close to the average seen over this period.”
”Input prices continued to fall during the latest survey period, with the rate of decline accelerating slightly since November. Manufacturers commented on falling costs for a range of raw materials, particularly steel. However, factory gate charges rose for the third month running. Although only modest, the rate of output charge inflation picked up to its fastest since August.”
Values above the key level of 50.0 indicate optimism (expanding activity). In case the flash manufacturing PMI showed a worse-than-anticipated performance, this would have a moderate bearish effect on the US dollar. The preliminary PMI reading by Markit Economics is due out at 14:45 GMT.
Existing Home Sales
The index of existing home sales in the United States probably advanced 8.5% to a level of 5.18 million in December compared to November, according to the median estimate by experts. In November sales were 10.5% lower from a month ago to reach 4.76 million, or the lowest level since April 2014, when a figure of 4.66 million was reported. The introduction of new regulations on paperwork for home purchases was the reason behind the sharp drop in November. Sales of new single-family houses slumped 12.1% during the month, while sales of condos were up 1.7%. The median sales price climbed 0.4% in November.
In case the index rose at a steeper monthly rate than anticipated, this would have a limited-to-moderate bullish effect on the US dollar. The National Association of Realtors (NAR) is to release the official figure at 15:00 GMT.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.0871
R2 – 1.0885
R3 (range resistance) – 1.0898
R4 (range breakout) – 1.0938
S1 – 1.0845
S2 – 1.0831
S3 (range support) – 1.0818
S4 (range breakout) – 1.0778
By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:
Central Pivot Point – 1.0902
R1 – 1.1002
R2 – 1.1086
R3 – 1.1186
S1 – 1.0818
S2 – 1.0718
S3 – 1.0634
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