Yesterday’s trade saw EUR/USD within the range of 1.2511-1.2600. The pair closed at 1.2554, gaining 0.14% on a daily basis.
At 7:36 GMT today EUR/USD was down 0.21% for the day to trade at 1.2527. The pair touched a daily low at 1.2524 at 7:35 GMT.
Fundamentals
Euro zone
Manufacturing data – preliminary release
Frances manufacturing PMI probably remained in the zone of contraction for a seventh consecutive month in November, with the preliminary index estimate being at 48.8, acording to the median forecast by experts. The final PMI stood at 48.5 in October, as reported on November 3rd, up from a preliminary reading of 47.3. Values below the key level of 50.0 indicate that the majority of respondents in the survey expressed pessimism in regard to activity in the sector. Markit Economics is expected to release the official data at 8:00 GMT.
French preliminary services PMI probably slightly improved to 48.5 in November from a final reading of 48.3 in the prior month. If so, this would be the third consecutive month, during which the index inhabited the zone below 50.0. Markit will publish the preliminary data at 8:00 GMT.
German manufacturing PMI probably remained above 50.0 for a second consecutive month in November, with the preliminary index value improving to 51.5, from a final reading of 51.4 in October, as reported on November 3rd. If so, this would be the highest index reading since July, when the final PMI was reported at 52.4. The preliminary value is due out at 8:30 GMT.
Activity in German services sector was probably little changed in November, with the preliminary PMI climbing to 54.5 from a final reading of 54.4 in October. If so, this would be the eighteenth consecutive month, when the PMI stood in the zone of expansion. The preliminary data is to be released at 8:30 GMT.
Manufacturing activity in the whole Euro region probably improved in November, with the preliminary Purchasing Managers Index rising to 50.8 from a final value of 50.6 during the preceding month. If so, this would be the highest reading since July, when the final index was reported at 51.8, and also a seventeenth 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 data is expected at 9:00 GMT.
The preliminary services PMI in the Euro zone was probably little changed in November, reaching a level of 52.4. In October the final reading of the index was reported to have been at 52.3. If market expectations were met, this would be a sixteenth 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 around 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 data at 9:00 GMT.
A larger-than-expected improvement in any of the PMI readings would certainly provide support to the common currency.
Consumer Confidence
Confidence among consumers in the Euro area probably improved in November. The preliminary value of the consumer confidence index probably rose to -10.7, or the highest since August, from a final reading of -11.1 in October, as reported on October 30th. The final index for September came in at -11.4. The indicator measures consumer confidence on a scale of -100 to +100. A reading of -100 suggests a lack of confidence, zero means neutrality and a reading of +100 indicates extreme levels of confidence. The index reflects the level of optimism, which consumers have about economic development in the region. The Business and Consumer Survey is conducted by phone and includes 23 000 households in the Euro zone. The questions asked stress on current economic and financial situation, savings intention and also on expected developments regarding consumer price indexes, general economic situation and major purchases of durable goods. This indicator is one of the five major components, that comprise the Economic Sentiment Indicator (ESI).
Higher confidence usually implies greater willingness to spend, including large-ticket purchases, while consumer spending is a key factor behind economic growth. Therefore, in case the gauge of confidence increased more than anticipated, this would cause a bullish impact on the euro. The European Commission is expected to release the preliminary data at 15:00 GMT.
United States
Consumer inflation
The annualized consumer inflation in the United States probably decelerated to 1.6% in October, according to market expectations, from 1.7%, registered in September and August. In monthly terms, the Consumer Price Index (CPI) probably dipped 0.1% in October, following a 0.1% gain in the prior month. In September increases in shelter and food prices outweighed declines in energy costs. The food index rose 0.3%, as five of the six major grocery store food group indexes increased. The energy index, at the same time, lost 0.7%, as the indexes for gasoline, electricity and fuel oil all decreased, according to the report by the Bureau of Labor Statistics.
The CPI is based on a basket of goods and services bought and used by consumers on a daily basis. In the United States the Bureau of Labor Statistics (BLS) surveys the prices of 80 000 consumer items in order to calculate the index. The latter reflects prices of commonly purchased items by primarily urban households, which represent about 87% of the US population. The Bureau processes price data from 23 000 retail and service businesses.
The CPI includes sales taxes, but excludes income taxes, costs of investments such as stocks and bonds and sales prices of homes.
The annualized Core CPI, which excludes prices of food and energy, probably remained unchanged at 1.7% in October. It is usually reported as a seasonally adjusted figure, because consumer patterns are widely fluctuating in dependance on the time of the year. The Core CPI is a key measure, because this is the gauge, which the Federal Reserve Bank takes into account in order to adjust its monetary policy. The Fed uses the core CPI, because prices of food, oil and gas are highly volatile and central bank’s tools are slow-acting. In case, for example, prices of oil surge considerably, this could lead to a high rate of inflation, but the central bank will not take action until this increase affects prices of other goods and services.
If the CPI tends to approach or comes in line with the inflation objective, set by the Federal Reserve and considered as providing price stability, or 2%, this will usually support demand for the US dollar. However, quite high rates of inflation (well above central bank’s inflation target) can be harmful to economy and as a result, this may lead to the loss of confidence in the local currency.
The Bureau of Labor Statistics is to release the official CPI report at 13:30 GMT.
Manufacturing data by Markit – preliminary release
Manufacturing activity in the United States probably expanded in November, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 56.4, or the highest since September. In October the final seasonally adjusted PMI stood at 55.9. Output and new business growth moderated in October, job creation remained robust, while input cost inflation was the weakest since April, according to Markit Economics. Values above the key level of 50.0 indicate optimism (increasing activity). Higher-than-expected PMI readings would certainly support the US dollar. The preliminary data by Markit is due out at 14:45 GMT.
Leading Economic index by the CB
The Conference Board Leading Economic Index for the United States probably increased 0.6% in October compared to a month ago, acording to the median forecast by experts. In September compared to August the index gained 0.8%. It covers a variety of economic indicators, which signify possible changes in overall economic activity. The index is comprised by the following components: average weekly hours in manufacturing, average weekly initial claims for unemployment insurance, manufacturers’ new orders, consumer goods and materials, ISM Index of New Orders, manufacturers new orders, nondefense capital goods excluding aircraft orders, building permits, new private housing units, Stock prices, 500 common stocks, Leading Credit Index, interest rate spread, 10-year Treasury bonds less federal funds, average consumer expectations for business conditions. Better-than-expected performance of the index is usually dollar positive. The Conference Board research group is to release the official data at 15:00 GMT.
Philadelphia Fed Manufacturing Index
The Philadelphia Fed Manufacturing Index probably fell to a reading of 18.3 in November from 20.7 index points during the previous month. If so, this would be the lowest value since May, when the index was reported at 17.8. This indicator is based on a monthly business survey (the Business Outlook Survey), measuring manufacturing activity in the third district of the Federal Reserve, Philadelphia. Participants give their opinion about the direction of business changes in overall economy and different indicators of activity in their companies, such as employment, working hours, new and existing orders, deliveries, inventories, delivery time, price etc. The survey is conducted every month since May 1968. The results are presented as the difference between the percentages of positive and negative projections. A level above zero is indicative of improving conditions, while a level below zero is indicative of worsening conditions. Lower-than-anticipated index readings would have a bearish effect on the greenback. The Federal Reserve Bank of Philadelphia is expected to release the official results from the survey at 15:00 GMT.
Existing Home Sales
The index of existing home sales in the United States probably remained flat in October compared to September at a level of 5.16 million. In September compared to August existing home sales rose 2.4% to 5.17 million, or the highest level since September 2013. The sample of data encompasses condos, co-ops and single-family houses.
Statistical data on existing home sales is often used along with statistical figures regarding the new home sales and pending home sales, with the major objective being to draw a conclusion how nation’s housing sector is performing, regardless of interest rates. The most active house-purchasing period in the United States is usually between the months of March through June. Therefore, in case statistical data revealed a sudden drop in the number of homes sold rather than an improvement during this period, this would be considered as a signal of weakness in country’s housing market.
The report on existing home sales usually does not cause a real direct impact on US economy. Actually, this effect appears to be minimal, due to the fact that nothing is produced with the mere sale of an existing home. In terms of economic activity, the sale of an existing house may be related only to interior design and purchases of new furniture.
In case the index showed a better-than-projected performance, this would usually have a bullish effect on the US dollar. The National Association of Realtors (NAR) is to release the official figure at 15:00 GMT.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.2555. In case EUR/USD manages to breach the first resistance level at 1.2599, it will probably continue up to test 1.2644. In case the second key resistance is broken, the pair will probably attempt to advance to 1.2688.
If EUR/USD manages to breach the first key support at 1.2510, it will probably continue to slide and test 1.2466. With this second key support broken, the movement to the downside will probably continue to 1.2421.
The mid-Pivot levels for today are as follows: M1 – 1.2444, M2 – 1.2488, M3 – 1.2533, M4 – 1.2577, M5 – 1.2622, M6 – 1.2666.
In weekly terms, the central pivot point is at 1.2489. The three key resistance levels are as follows: R1 – 1.2584, R2 – 1.2645, R3 – 1.2740. The three key support levels are: S1 – 1.2428, S2 – 1.2333, S3 – 1.2272.
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