Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7910-0.7954. The pair closed at 0.7924, losing 0.24% on a daily basis.

At 7:14 GMT today EUR/GBP was down 0.32% for the day to trade at 0.7898. The pair broke the first key daily support and touched a daily low at 0.7896.

Fundamentals

Euro zone

German IFO Business Climate Index

Business climate in Germany probably improved in December, with the respective gauge rising to 105.4 from 104.7 in November. If so, this would be the highest index reading since August, when the indicator came in at 106.3.

The IFO Business Climate Index reflects entrepreneurs’ sentiment in regard to current business situation and their expectations for the next six months. The index is based on a survey, conducted by phone and encompasses 7 000 companies, that operate in sectors such as manufacturing, construction, wholesaling and retailing industry. The Business Climate Balance represents the difference between the percentage share of respondents that are optimistic and the share of respondents that are pessimistic. The balance can fluctuate between -100, which suggests all responding companies assess their situation as poor and expect business conditions to deteriorate, and +100, which suggests all responding companies assess their situation as good and expect an improvement in business conditions. In order to calculate the IFO Business Climate Index, the Balance is normalized to the average of a base year, which currently is 2005.

The IFO Business Climate Index is comprised by two equally-weighted sub-indexes – a gauge of expectations and a gauge of current assessment. The IFO expectations index probably rose to 100.5 in December from 99.7 in November. If so, this would be the highest level since August, when it was reported at 101.7. The IFO current assessment index probably advanced to 110.4 in the current month from 110.0 in November. If so, this would be the highest index value since September. In case any of the gauges registered a larger-than-projected increase, this might have a bullish effect on the common currency.

The CESifo Group is to release the official numbers at 9:00 GMT.

Euro zone construction output

At 10:00 GMT Eurostat is to report on construction activity in the Euro zone for October. Seasonally adjusted construction output in the region decreased 1.8% in September compared to a month ago, following a 1.5% gain in August. In annual terms, output contracted at a pace of 1.7% in September, or the most since October 2013, when activity shrank 2.4%. This indicator reflects how resilient construction sector development is and also provides clues over investment activity. Higher rates of increase in output usually provide a limited support to the common currency, while higher rates of decline usually have the opposite effect.

United Kingdom

BoE Lending Conditions Report

At 9:30 GMT the Bank of England (BoE) will publish its report on lending conditions in the United Kingdom during the three months to September. It is based on a survey of banking and non-banking institutions, which provide information regarding secured and not secured loans to households, small and medium enterprises and corporations outside financial sector. Respondents in the survey are asked about their opinion on conditions during both past three and the upcoming three months.

Retail Sales

Annualized retail sales in the United Kingdom probably rose at a rate of 4.5% in November, according to the median forecast by experts, after in October sales climbed another 4.3%. If so, this would be the fastest annual rate of increase since April, when the index of sales gained 6.5%. In monthly terms, retail sales probably rose 0.3% during November, following another 0.8% increase in the prior month. Annualized retail sales, without taking into account fuel sales, probably rose 4.4% in November, following a 4.6% surge in October. The latter has been the most considerable annual gain in core sales since April, when a rate of 7.4% was registered.

This is a short-term indicator, which provides key information about consumption on a national scale. Higher retail sales suggest stronger consumer demand, confidence and economic growth, respectively. Therefore, in case the index of retail sales increased at a faster-than-projected pace, this would be pound positive. The Office for National Statistics is expected to publish the official report at 9:30 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7929. In case EUR/GBP manages to breach the first resistance level at 0.7949, it will probably continue up to test 0.7973. In case the second key resistance is broken, the pair will probably attempt to advance to 0.7993.

If EUR/GBP manages to breach the first key support at 0.7905, it will probably continue to slide and test 0.7885. With this second key support broken, the movement to the downside will probably continue to 0.7861.

The mid-Pivot levels for today are as follows: M1 – 0.7873, M2 – 0.7895, M3 – 0.7917, M4 – 0.7939, M5 – 0.7961, M6 – 0.7983.

In weekly terms, the central pivot point is at 0.7906. The three key resistance levels are as follows: R1 – 0.7978, R2 – 0.8028, R3 – 0.8100. The three key support levels are: S1 – 0.7856, S2 – 0.7784, S3 – 0.7734.