Yesterday’s trade saw EUR/USD within the range of 1.1231-1.1325. The pair closed at 1.1279, up 0.38% on a daily basis, following a 0.32% slump on Wednesday. The daily high has been the highest level since September 21st, when the cross registered a high of 1.1333.
At 6:30 GMT today EUR/USD was up 0.06% for the day to trade at 1.1284. The pair tested the daily R2 level, as it touched a daily high at 1.1292 at 5:51 GMT.
Today the cross may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
Euro area
Italian industrial production
Annualized industrial production in Italy probably expanded 1.6% in August, according to the median forecast by experts, following another 2.7% increase in July. If so, Augusts rate of expansion would be the slowest since April 2015.
Italian seasonally adjusted index of industrial production probably dropped 0.3% in August compared to July, following a 1.1% increase in the prior month. The index reflects the change in overall inflation-adjusted value of output in sectors such as manufacturing, mining and utilities. In case annual output increased at a slower rate than anticipated, this would have a limited bearish effect on the common currency. The National Institute of Statistics (Istat) is to release the official industrial data at 8:00 GMT.
Euro area growth forecast axed
The Account of the monetary policy meeting of the European Central Banks Governing Council, conducted on September 2nd-3rd, revealed policymakers anticipated the Euro region economic recovery to decelerate due to economic slowdown in China, but, however, how severe that impact on economy will be was not certain. Projections now point that the regions Gross Domestic Product will grow 1.4% this year, 1.7% in 2016 and 1.8% in 2017. The Bank also noted that the monthly asset purchases of EUR 60 billion would be fully implemented until the end of September 2016 and, if necessary, for an extended period of time, until the inflation objective of annual CPI growth below but close to 2% over the medium term is achieved.
According to excerpts from the September Accounts: “Real GDP growth in the second quarter of 2015 had been weaker than expected, while recent economic data, including survey evidence available up to August, were seen as broadly consistent with a continued moderate economic recovery in the euro area. However, the recovery was now expected to proceed at a somewhat weaker pace than previously anticipated. While domestic demand in the euro area appeared to be relatively resilient, since the Governing Council meeting in mid-July some further weakness had been evident in the international environment. The slowdown in activity in emerging market economies, in particular, was weighing on global growth and trade, leading to lower growth in foreign demand for euro area exports.”
“In addition, uncertainty arising from developments in economic and financial conditions in emerging market economies, particularly China, had clearly increased. It was emphasised that the interpretation of the latest developments in China was very challenging, and more time and analysis were needed to better understand these developments and their implications for the euro area from a medium-term perspective.”
“…it was considered too early to say whether recent external developments would have a material effect on the euro area, but the downside risks had clearly increased and there was a need to carefully monitor developments and policies outside the euro area.”
FOMC Minutes reveal concerns over global economic conditions
The Minutes from the Federal Open Market Committees September policy meeting showed officials were concerned that recent global macroeconomic conditions may curb economic activity in the United States.
According to excerpts from the Minutes: “In their discussion of monetary policy for the period ahead, members judged that information received since the FOMC met in July indicated that economic activity was expanding at a moderate pace. Although net exports remained soft, economic growth was broadly based. Members noted that recent global and financial market developments might restrain economic activity somewhat as a result of the higher level of the dollar and possible effects of slower economic growth in China and in a number of emerging market and commodity-producing economies.”
“In assessing whether economic conditions had improved sufficiently to initiate a firming in the stance of policy, many members said that the improvement in labor market conditions met or would soon meet one of the Committees criteria for beginning policy normalization. But some indicated that their confidence that inflation would gradually return to the Committees 2 percent objective over the medium term had not increased, in large part because recent global economic and financial developments had imparted some restraint to the economic outlook and placed further downward pressure on inflation in the near term.”
“The Committee agreed to maintain the target range for the federal funds rate at 0 to 1/4 percent and to reaffirm in its postmeeting statement that the Committees decision about how long to maintain the current target range for the federal funds rate would depend on its assessment of actual and expected progress toward its objectives of maximum employment and 2 percent inflation.”
Bond Yield Spread
The yield on German 2-year government bonds went as high as -0.240% on October 8th, after which it slid to -0.249% at the close to lose 0.009 percentage point compared to October 7th. It has been the first drop in the past four trading days.
The yield on US 2-year government bonds climbed as high as 0.657% on October 8th, or the highest level since October 2nd (0.680%), after which it fell to 0.637% at the close to add 0.008 percentage point compared to October 7th, while marking a second consecutive trading day of increase.
The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, widened to 0.886% on October 8th from 0.869% on October 7th. The October 8th yield spread has been the largest one since October 1st, when the difference was 0.914%.
Meanwhile, the yield on German 10-year government bonds soared as high as 0.592% on October 8th, after which it slid to 0.589% at the close to lose 0.003 percentage point compared to October 7th. It has been the second consecutive trading day of decline.
The yield on US 10-year government bonds climbed as high as 2.122% on October 8th, or the highest level since September 28th (2.169%), after which it slipped to 2.102% at the close to add 3.7 basis points (0.037 percentage point) compared to October 7th. It has been a second straight trading day of increase.
The spread between 10-year US and 10-year German bond yields widened to 1.513% on October 8th from 1.473% on October 7th. The October 8th yield difference has been the largest one since September 25th, when the spread was 1.515%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.1288
R2 – 1.1296
R3 (range resistance) – 1.1305
R4 (range breakout) – 1.1331
S1 – 1.1270
S2 – 1.1262
S3 (range support) – 1.1253
S4 (range breakout) – 1.1227
By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:
Central Pivot Point – 1.1221
R1 – 1.1309
R2 – 1.1407
R3 – 1.1495
S1 – 1.1123
S2 – 1.1035
S3 – 1.0937
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