Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7626-0.7746. The pair closed at 0.7659, losing 1.00% on a daily basis.

At 7:21 GMT today EUR/GBP was unchanged for the day to trade at 0.7659. The pair touched a daily high at 0.7673 at 7:00 GMT.

Fundamentals

Euro zone

Euro area consumer inflation – final estimate

The final annualized consumer inflation in the Euro zone, evaluated in accordance with Eurostat’s harmonized methodology, probably confirmed the preliminary rate at -0.2% in December, which was reported on January 7th. If confirmed, this would be the first drop in the Harmonized Index of Consumer Prices since October 2009 and the most considerable one since September 2009, when inflation was reported at -0.3%. In November the final HICP reading pointed to annual inflation rate of 0.3%, which matched the preliminary estimate. According to the preliminary data, in December the negative inflation rate was influenced by a drop in energy prices (-6.3%, compared to -2.6% in November), while prices remained steady for food, alcohol and tobacco (0.0%, compared to a 0.5% gain in November) and non-energy industrial goods (0.0%, compared to a 0.1% dip in November). The only upward pressure in December came from cost of services, which rose 1.2% year-on-year.

The index shows the change in price levels of a basket of goods and services from consumer’s perspective and also reflects purchasing trends. The main components of the HICP are food, alcohol and tobacco (accounting for 19% of the total weight), energy (11%), non-energy industrial goods (29%) and services (41%).

The HICP is used to evaluate and compare inflation rates between Member States, according to Art. 121 of the Amsterdam’s Agreement and directives by the European Central Bank (ECB), in order the latter to achieve price stability and the implementation of monetary policy. The HICP aggregates are calculated as a weighted average of each member state’s HICP components.

In case the HICP slowed down more than anticipated, thus, further distancing from the 2% inflation objective set by the ECB, this would mount selling pressure on the euro, because of the greater possibility of expanding the set of monetary policy measures in order to stimulate economic activity.

The final annualized Core HICP for December probably matched the preliminary core inflation estimate, which was reported at 0.8% on January 7th. In November the final annualized core inflation in the Euro area was registered at 0.7%. This index excludes volatile categories such as food, energy, alcohol and tobacco. Eurostat is scheduled to release the final inflation data at 10:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7677. In case EUR/GBP manages to breach the first resistance level at 0.7728, it will probably continue up to test 0.7797. In case the second key resistance is broken, the pair will probably attempt to advance to 0.7848.

If EUR/GBP manages to breach the first key support at 0.7608, it will probably continue to slide and test 0.7557. With this second key support broken, the movement to the downside will probably continue to 0.7488.

The mid-Pivot levels for today are as follows: M1 – 0.7523, M2 – 0.7583, M3 – 0.7643, M4 – 0.7703, M5 – 0.7763, M6 – 0.7823.

In weekly terms, the central pivot point is at 0.7812. The three key resistance levels are as follows: R1 – 0.7876, R2 – 0.7942, R3 – 0.8006. The three key support levels are: S1 – 0.7746, S2 – 0.7682, S3 – 0.7616.