Friday’s trade saw EUR/USD within the range of 1.0787-1.0879. The pair closed at 1.0797, falling 0.71% on a daily basis. It has been the 10th drop in the past 15 trading days and also a third consecutive one. In weekly terms, EUR/USD plunged 1.10% last week, or the most since the week ended on December 20th, when it lost 1.11%. It has been a second consecutive week of decline. The pair has fallen 0.45% so far during the current month.
At 7:31 GMT today EUR/USD was up 0.17% for the day to trade at 1.0815. The pair touched a daily high at 1.0819 at 5:45 GMT, undershooting the range resistance level (R3), and a daily low at 1.0790 during the early phase of the Asian trading session. Support may be expected within the 1.0775-1.0790 area, where the pair received support in the past couple of trading days. Resistance, on the other hand, may be encountered at the hourly 55-period EMA (1.0836), then – at the hourly 100-period EMA (1.0854) and finally – at the high from January 22nd (1.0879).
On Monday EUR/USD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
Euro area
Germany – IFO Business Climate
Business climate in Germany probably remained little changed in January, with the respective gauge coming in at 108.5, according to market expectations, down from 108.7 in December. If expectations were met, this would be the lowest reading since October 2015, when the gauge was reported at 108.2.
The IFO Business Climate Index reflects entrepreneurs’ sentiment in regard to current business situation and their expectations for the next six months. The index is based on a survey, conducted by phone and encompasses 7 000 companies, which operate in sectors such as manufacturing, construction, wholesaling and retailing industry. The Business Climate Balance represents the difference between the percentage share of respondents that are optimistic and the share of respondents that are pessimistic. The balance can fluctuate between -100, which suggests all responding companies assess their situation as poor and expect business conditions to deteriorate, and +100, which suggests all responding companies assess their situation as good and expect an improvement in business conditions. In order to calculate the IFO Business Climate Index, the Balance is normalized to the average of a base year, which currently is 2005.
The IFO Business Climate Index is comprised by two equally-weighted sub-indexes – a gauge of expectations and a gauge of current assessment. The IFO expectations index probably slipped to 104.1 in January, according to expectations, from 104.7 in December. The IFO current assessment index probably remained unchanged at 112.8 in January, or the lowest level since October 2015.
In case the Business Climate Index fell more than anticipated in January, this would have a moderate bearish effect on the single currency. The CESifo Group is expected to release the official numbers at 9:00 GMT.
Italy – Retail Sales
At 10:00 GMT the National Institute of Statistics (Istat) is to report on retail sales regarding November. In October annualized retail sales surged 1.8%, which marked the sixth consecutive period of increase. It has also been the sharpest annual gain since April 2014, when retail sales grew 2.7%. In monthly terms, retail sales with a seasonal adjustment fell 0.3% in October, marking a second straight month of decrease. 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 element behind economic growth. A fall in the monthly retail sales index usually has a limited bearish effect on the euro and vice versa.
Correlation with other Majors
Taking into account the week ended on January 22nd 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 USD/CAD (0.9097, or very strong)
EUR/USD to NZD/USD (-0.5874, or strong)
EUR/USD to AUD/USD (-0.7399, or strong)
EUR/USD to GBP/USD (-0.7622, or strong)
EUR/USD to USD/JPY (-0.8695, or very strong)
EUR/USD to USD/CHF (-0.9972, or very strong)
1. During the examined period EUR/USD moved strongly in the opposite direction compared to NZD/USD, AUD/USD and GBP/USD.
2. EUR/USD moved almost equally in the opposite direction compared to USD/JPY and USD/CHF during the past week. The correlation between EUR/USD and USD/CHF was almost perfect.
3. EUR/USD moved almost equally in one and the same direction with USD/CAD during the period in question.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.0814
R2 – 1.0816
R3 (range resistance) – 1.0820
R4 (range breakout) – 1.0827
S1 – 1.0808
S2 – 1.0805
S3 (range support) – 1.0802
S4 (range breakout) – 1.0795
By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:
Central Pivot Point – 1.0851
R1 – 1.0924
R2 – 1.1052
R3 – 1.1125
S1 – 1.0723
S2 – 1.0650
S3 – 1.0522
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