Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7835-0.7903. The pair closed at 0.7869, losing 0.37% on a daily basis.

At 7:13 GMT today EUR/GBP was up 0.03% for the day to trade at 0.7874. The pair touched a daily high at 0.7882 at 6:20 GMT.

Fundamentals

Euro zone

French balance of trade

The deficit on France’s balance of trade probably expanded to EUR 5.2 billion during October, according to the median forecast by experts. If so, this would be the largest trade gap since July. In September nations deficit figure was reported at EUR 4.71 billion, due to increased aircraft sales. On a monthly basis, exports rose 1.7% to EUR 36.8 billion in September, supported by aircraft deliveries and sales of chemical and refined oil. Imports were up 0.7% to EUR 41.5 billion in September, mostly due to an increase in purchases of pharmaceutical products and spatial and aeronautique industry.

Nation’s trade balance reflects the difference in value between exported and imported goods during the respective period. Export demand has a direct link to demand for the euro and also causes an impact on levels of production. In case French trade balance deficit widened more than projected, this would have a bearish effect on the euro. The Ministry of Finance will publish the official figure at 7:45 GMT.

United Kingdom

Industrial, manufacturing output

Annualized industrial production in the United Kingdom probably expanded 1.8% in October, following a 1.5% gain during the preceding month, which has been the slowest pace of increase since June. In monthly terms, industrial production probably increased 0.2% in October. The index measures the change in the total inflation-adjusted value of production in sectors such as manufacturing, mining and energetics.

United Kingdom’s annualized manufacturing production, a short-term indicator which accounts for almost 80% of nation’s industrial output, probably expanded 3.2% in October. In September manufacturing output rose at an annualized pace of 2.9%, or the least since June. In monthly terms, production probably increased 0.2% during October. As it is a key component of the country’s Gross Domestic Product, in case manufacturing production expanded more than projected, this would have a bullish effect on the sterling. The Office for National Statistics (ONS) will release the official industrial data at 9:30 GMT.

Rate hike and BoE stress tests

Bank of England Governor Mark Carney has said the increase in borrowing costs from the current all-time low of 0.5% is likely to be gradual and limited, while the peak in rates – lower compared to previous cycles. In its stress tests of the eight largest lenders in the United Kingdom, the BoE projects a rate increase to 4% by the end of next year. These tests are expected to be the first in Europe to take into account monetary policy actions. Stress test results are to be released on December 16th.

“You could argue that going to 4 percent is against their own policy,” said Charles Goodhart, a former member of the Bank of England’s Monetary Policy Committee and a professor at the London School of Economics, cited by Bloomberg. “I think it’s actually quite courageous, and better than the ECB did, to include in the scenario a feature which in some sense is against their current policy.”

Meanwhile, analysts at Santander Asset Management project that the first rate hike in over six years will probably be pushed back to November 2015, while the peak in interest rates will probably be at 1.50%-1.75% during the upcoming three years. Analysts point to prospects for slow economic growth in an intermediate term and low rate of inflation as the major factors behind their forecast.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7869. In case EUR/GBP manages to breach the first resistance level at 0.7903, it will probably continue up to test 0.7937. In case the second key resistance is broken, the pair will probably attempt to advance to 0.7971.

If EUR/GBP manages to breach the first key support at 0.7835, it will probably continue to slide and test 0.7801. With this second key support broken, the movement to the downside will probably continue to 0.7767.

The mid-Pivot levels for today are as follows: M1 – 0.7784, M2 – 0.7818, M3 – 0.7852, M4 – 0.7886, M5 – 0.7920, M6 – 0.7954.

In weekly terms, the central pivot point is at 0.7897. The three key resistance levels are as follows: R1 – 0.7962, R2 – 0.8042, R3 – 0.8107. The three key support levels are: S1 – 0.7817, S2 – 0.7752, S3 – 0.7672.