Friday’s trade saw EUR/USD within the range of 1.0852-1.0987. The pair closed at 1.0917, rising 0.48% on a daily basis. It has been the fourth gain in the past ten trading days. The daily high was a lower-high test of the high from December 29th. In weekly terms, EUR/USD lost 0.14% last week, following a 0.66% surge in the week ended on January 10th. The pair has appreciated 0.23% so far during the current month, following a 2.80% advance in December. The latter has been the sharpest monthly increase since April 2015, when the pair added 4.59% to its value.
At 7:30 GMT today EUR/USD was losing 0.27% for the day to trade at 1.0886. The pair touched a daily low at 1.0875 at 7:14 GMT, overshooting the range support level (S3).
On Monday EUR/USD trading may be influenced by the macroeconomic report listed below.
Fundamentals
Euro area
Italy – balance of trade
The surplus on Italys trade balance probably narrowed to EUR 3.240 billion in November, according to market expectations, from a surplus figure of EUR 4.812 billion in October. The latter represented a 22.59% decrease compared to October 2014 surplus (EUR 5.4 billion).
Total exports shrank at an annualized rate of 1.4% to reach EUR 36.874 billion in October, as shipments of energy products and intermediate goods dropped by 18.2% and by 2.6% respectively. At the same time, exports of consumer goods ticked up 0.1%, while those of capital goods rose 0.1% as well.
Total imports were virtually unchanged at EUR 32 billion in October. Imports of capital goods rose the most, or 9.3% year-on-year, those of consumer goods went up 3.8% and purchases of intermediate goods were 1.1% higher. On the other hand, imports of energy products shrank at an annualized rate of 24.4% during the month.
The trade balance, as an indicator, measures the difference in value between the country’s exported and imported goods during the reported period. It reflects the net export of goods, or one of the components to form the Gross Domestic Product. Generally, exports reflect how strong economic growth is, while imports indicate the strength of domestic demand. In case Italian trade surplus narrowed more than anticipated in November, this might have a limited bearish effect on the single currency. The National Institute of Statistics (Istat) is to release the official trade data at 9:00 GMT.
Correlation with other Majors
Taking into account the week ended on January 14th 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 (0.9310, or very strong)
EUR/USD to USD/CHF (-0.0360, or very weak)
EUR/USD to NZD/USD (-0.6818, or strong)
EUR/USD to USD/JPY (-0.8519, or very strong)
EUR/USD to GBP/USD (-0.8968, or very strong)
EUR/USD to AUD/USD (-0.9919, or very strong)
1. During the examined period EUR/USD moved strongly in the opposite direction compared to NZD/USD.
2. EUR/USD moved almost equally in one and the same direction with USD/CAD during the past week, while moving almost equally in the opposite direction compared to USD/JPY, GBP/USD and AUD/USD. This relationship has been the most pronounced between EUR/USD and AUD/USD (almost perfect correlation).
3. EUR/USD moved almost independently compared to USD/CHF during the period in question.
Bond Yield Spread
The yield on German 2-year government bonds went as high as -0.376% on January 15th, after which it closed at -0.392% to lose 0.009 percentage point in comparison with January 14th. It has been the 15th drop in the past 23 trading days and also a third consecutive one.
The yield on US 2-year government bonds climbed as high as 0.903% on January 15th, after which it closed at 0.850% to lose 4.9 basis points (0.049 percentage point) compared to January 14th. It has been the 15th drop in the past 23 trading days and also a fourth consecutive one.
The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, narrowed to 1.242% on January 15th from 1.282% on January 14th. The January 15th yield spread has been the lowest one since December 11th, when the difference was 1.222%.
Meanwhile, the yield on German 10-year government bonds soared as high as 0.509% on January 15th, after which it slid to 0.473% at the close to lose 3.4 basis points (0.034 percentage point) compared to January 14th. It has been the 12th drop in the past 23 trading days and also a fourth consecutive one.
The yield on US 10-year government bonds climbed as high as 2.101% on January 15th, after which it slipped to 2.037% at the close to lose 5.4 basis points (0.054 percentage point) compared to January 14th. It has been the 14th drop in the past 23 trading days.
The spread between 10-year US and 10-year German bond yields narrowed to 1.564% on January 15th from 1.584% on January 14th. The January 15th yield difference has been the lowest one since October 26th, when the spread was 1.558%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.0929
R2 – 1.0942
R3 (range resistance) – 1.0955
R4 (range breakout) – 1.0991
S1 – 1.0905
S2 – 1.0892
S3 (range support) – 1.0880
S4 (range breakout) – 1.0843
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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