Forex Market: EUR/CZK daily trading forecast

Yesterday’s trade saw EUR/CZK within the range of 27.6419-27.7440. The pair closed at 27.6677, losing 0.27% on a daily basis.

At 6:35 GMT today EUR/CZK was up 0.05% for the day to trade at 27.6802. The pair touched a daily high at 27.6816 at 6:15 GMT.

Fundamental view

Euro zone

At 11:45 GMT the European Central Bank (ECB) is to announce its decision in regard to borrowing costs. The median estimate by experts suggests that the central bank will probably maintain its benchmark interest rate at the record low level of 0.15% at the policy meeting today. The ECB cut borrowing costs by 0.10% at its June 5th policy meeting. Short-term interest rates are of utmost importance for the valuation of national currencies. In case the central bank is dovish about inflationary pressure in Euro zones economy and thus, either puts interest rates on hold, or reduces them, this will usually have a bearish effect on the common currency.

ECBs Governing Council aims to keep prices in the region stable, while stability is defined as a year-on-year increase in the Harmonized Index of Consumer Prices (HICP) for the Euro zone of below 2%.

The interest rate decision is to be followed by the press conference with ECB President Mario Draghi, at which he takes a statement on monetary policy. During this event volatility of euro crosses is usually high. In case Draghi offers a more hawkish tone, the euro will usually receive support, while a more dovish tone will have a bearish effect on the currency. The press conference is scheduled at 12:30 GMT.

In his speech at the Economic Symposium in Jackson Hole Mario Draghi expressed concerns over high unemployment rate in the single currency area. ”The only conclusion we can safely draw, in my view, is that we need action on both sides of the economy: aggregate demand policies have to be accompanied by national structural policies. On the demand side, monetary policy can and should play a central role, which currently means an accommodative monetary policy for an extended period of time. I am confident that the package of measures we announced in June will indeed provide the intended boost to demand, and we stand ready to adjust our policy stance further. We will launch our first Targeted Long-Term Refinancing Operation in September, which has so far garnered significant interest from banks”, Draghi said in Wyoming.

Czech Republic

At 7:00 GMT the Czech Statistical Office is expected to report on the retail sales index for July. In June annualized sales rose at a pace of 6.4%, which has been the fastest since March. In monthly terms, retail sales climbed 2.5% in June, or the fastest rate of increase since November 2013, when the index surged at a record high monthly pace of 3.60%. This indicator reflects the change in the total value of inflation-adjusted sales by retailers in the country and provides key information regarding consumer spending trend in a shorter term, while the latter is a key driving force behind economic growth. Therefore, a higher than expected rate of increase in sales usually has a positive effect on the local currency.

Technical view

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 27.6845. In case EUR/CZK manages to breach the first resistance level at 27.7272, it will probably continue up to test 27.7866. In case the second key resistance is broken, the pair will probably attempt to advance to 27.8293.

If EUR/CZK manages to breach the first key support at 27.6251, it will probably continue to slide and test 27.5824. With this second key support broken, the movement to the downside will probably continue to 27.5230.

The mid-Pivot levels for today are as follows: M1 – 27.5527, M2 – 27.6038, M3 – 27.6548, M4 – 27.7059, M5 – 27.7569, M6 – 27.8080.

In weekly terms, the central pivot point is at 27.7552. The three key resistance levels are as follows: R1 – 27.8783, R2 – 28.0212, R3 – 28.1443. The three key support levels are: S1 – 27.6123, S2 – 27.4892, S3 – 27.3463.