Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7851-0.7934. The pair closed at 0.7929, gaining 0.95% on a daily basis.

At 6:31 GMT today EUR/GBP was down 0.15% for the day to trade at 0.7916. The pair touched a daily low at 0.7910 at 5:55 GMT.

Fundamental view

Euro zone

French consumer inflation

The annualized index of consumer prices (CPI) in France probably remained unchanged at 0.4% in September, according to the median forecast by experts. If so, this would be the second month in a row, when the CPI stood at the lowest level since 2010. In August prices of tobacco rose at an annualized rate of 3.5%, transport and communication costs were up 2.1%, cost of other services climbed 2.2%, while prices of clothing and footwear rose 1.6%. Consumers paid less for fresh food (-8.9%), petroleum products (-3.3%), medical products (-2.9%) and food excluding fresh products (-0.4%), according to data by the INSEE.

Key categories, included in Frances Consumer Price Index, are manufactured products excluding clothing and pharmaceuticals (accounting for 20.6% of the total weight) and food (16.4%). Other categories, which comprise the index, are healthcare (10.1%), energy (8.7%), rentals and real estate services (7.4%), transport and communication services (5%), clothing and footwear (4.7%) and pharmaceuticals (4.6%).

The index measures the change in price levels of the above mentioned basket of goods and services from consumer’s perspective and also provides clues over purchasing tendencies. In case the CPI decelerated, this would have a bearish effect on the euro. The National Institute for Statistics and Economic Studies (INSEE) will release the official report at 6:45 GMT.

France’s annualized CPI, evaluated in accordance with Eurostat’s harmonized methodology, probably fell to 0.4% during September from 0.5% in August and 0.6% in July. In monthly terms, the harmonized CPI probably fell 0.2% last month, following a 0.5% increase in August.

Spanish consumer inflation – final

Spain’s final annualized index of consumer prices (CPI) probably improved to -0.2% in September, confirming the preliminary CPI reading, reported on September 29th. In August the annualized CPI was at -0.5%. If confirmed, this would be the third consecutive month of negative inflation rate. According to provisional estimates, cost of food and non-alcoholic beverages were flat on a yearly basis in September, while electricity prices rose.

Key categories, included in Spans CPI, are food and non-alcoholic beverages (accounting for 20% of the total weight) and transport (15%). Other categories are real estate (12%), hotels, coffee and restaurants (11.5%), clothing and footwear (9%) and entertainment and culture (7.5%). Health, communication, education and other goods and services comprise the remaining 25% of the index.

The CPI measures the change in price levels of the abovementioned basket of goods and services from consumer’s perspective and also provides clues over purchasing trends. In case the CPI dropped more than projected, this would have a bearish effect on the common currency. The National Statistics Institute (INE) will release its official report at 7:00 GMT.

Spanish final annualized CPI, evaluated in accordance with Eurostat’s harmonized methodology, probably also matched the preliminary CPI estimate of -0.3% in September, which was released on September 29th. Augusts HICP reading stood at -0.5%.

Italian consumer inflation – final

Italys final annualized index of consumer prices (CPI) probably remained steady at -0.1% in August, matching the preliminary CPI, reported on September 30th. If so, this would be the second month in 55 years, when Italian consumer inflation was in negative territory. According to provisional estimates, the drop in consumer prices was mostly driven by lower prices of non-regulated energy products (a 2.8% annual drop in September), followed by a 0.9% decrease in the cost of unprocessed food.

Key categories, included in Italys Consumer Price Index, are food and non-alcoholic beverages (accounting for 16% of total weight), transport (15%), restaurants and hotels (11%) and housing, water, electricity and other fuels (10%). Other categories are clothing and footwear (9%), furnishing and household equipment (8%), recreation and culture (8%) and health (also 8%). Communication, education, alcoholic beverages, tobacco and other goods and services comprise the remaining 15% of the index.

Nations final annualized CPI, evaluated in accordance with the harmonized methodology, probably matched the preliminary HICP estimate of -0.2% in September, which was released on September 30th. The National Institute of Statistics (ISTAT) is to publish the official CPI report at 8:00 GMT.

Germany and Euro zone Economic Sentiment by the ZEW Institute

The gauge of economic sentiment in Germany probably continued to fall, reaching 1.0 in October, according to the median forecast by experts. In September the index came in at 6.9. The indicator has been falling since December 2013, when it stood at 62.0. Geopolitical situation probably continued to have an adverse influence on economic expectations.

The ZEW (Zentrum für Europäische Wirtschaftsforschung) economic expectations index is published monthly. The study encompasses up to 350 financial and economic analysts. The indicator reflects the difference between the share of analysts, that are optimistic and those, that are pessimistic about the expected economic development in Germany over the next six months. A positive value indicates that the proportion of optimists is larger than that of pessimists. A ZEW reading of -100 suggests that all analysts are pessimistic about the current developments and expect economic conditions to deteriorate. A ZEW reading of 100 implies that all analysts are optimistic about the current situation and expect conditions to improve. A ZEW reading of 0 indicates neutrality.

The index of current assessment in Germany probably dropped to 18.4 in October from 25.4 in the prior month.

The ZEW Economic Sentiment index in the Euro zone probably fell to 2.5 this month from 14.2 during September.

Lower-than-projected readings would certainly cause a negative impact on the single currency. The official data is scheduled to be released at 9:00 GMT.

Euro zone industrial production

The seasonally adjusted index of industrial production in the Euro zone probably dropped 1.8% in August compared to a month ago, following a 1.0% increase in July, as the latter has been the most considerable monthly gain since October 2013. Annualized output probably contracted at a pace of 0.9% in August. The index, reflecting the business cycle, measures the change in overall inflation-adjusted value of output in sectors such as manufacturing, mining and utilities. In case industrial output shrank more than anticipated, this would mount selling pressure on the euro. Eurostat is to publish the official data at 9:00 GMT.

United Kingdom

The cost of living in the United Kingdom was probably reduced, with the CPI being at 1.4% in September from a year ago, according to the median estimate by experts. In August the annualized consumer inflation was reported at 1.5%, down from 1.6% in July. The largest downward contributions to the change in the CPI 12-month rate between July and August this year came from food and non-alcoholic beverages, with prices falling 0.2% between July and August this year. Prices of food and non-alcoholic drinks rose 0.5% between the same two months a year ago. According to data by the Office for National Statistics (ONS), the largest upward contributions to the change in the CPI 12-month rate between July and August 2014 came from clothing and footwear, as prices climbed 2.6% between July and August this year in comparison with a more modest increase of 2.0% between the same two months in 2013.

The CPI is the main measure of inflation in the UK for macroeconomic purposes and forms the basis of the inflation target set by the government. Every month about 120 000 samples are made, examining the change in prices of about 650 products. They represent the “market basket” of goods and services, on which the index is based.

Key categories in the consumer price index are Transport (accounting for 16.2% of the total weight) and Housing, Water, Electricity, Gas and Other fuels with a 14.4% share. Recreation and Culture accounts for 13.4%, Restaurants and Hotels – 11.4% and Food and Non-alcoholic Beverages – 11.2%. The CPI also encompasses Miscellaneous Goods and Services (9.6%), Clothing and Footwear (6.5%), Furniture, Household Equipment and Maintenance (6.1%). Alcoholic Beverages and Tobacco, Health, Communication and Education comprise the remaining 11.2% of the total weight.

The Core consumer price index probably dipped to 1.8% in September compared to the same month a year ago, from 1.9% in August. The core CPI measures the change in prices of goods and services purchased by consumers, without taking into account volatile components such as food, energy products, alcohol and tobacco.

The Office for National Statistics (ONS) will publish the official CPI report at 8:30 GMT. Lower-than-expected annualized CPI, especially if distancing from the inflation objective of 2.0%, usually has a bearish effect on the sterling.

Technical view

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7905. In case EUR/GBP manages to breach the first resistance level at 0.7958, it will probably continue up to test 0.7988. In case the second key resistance is broken, the pair will probably attempt to advance to 0.8041.

If EUR/GBP manages to breach the first key support at 0.7875, it will probably continue to slide and test 0.7822. With this second key support broken, the movement to the downside will probably continue to 0.7792.

The mid-Pivot levels for today are as follows: M1 – 0.7807, M2 – 0.7849, M3 – 0.7890, M4 – 0.7932, M5 – 0.7973, M6 – 0.8015.

In weekly terms, the central pivot point is at 0.7862. The three key resistance levels are as follows: R1 – 0.7898, R2 – 0.7942, R3 – 0.7978. The three key support levels are: S1 – 0.7818, S2 – 0.7782, S3 – 0.7738.