Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7820-0.7874. The pair closed at 0.7847, gaining 0.31% on a daily basis.

At 7:11 GMT today EUR/GBP was down 0.07% for the day to trade at 0.7840. The pair touched a daily low at 0.7828.

Fundamentals

Euro zone

German unemployment

The number of the unemployed people in Germany probably dropped by 6 000 in December, according to the median forecast by experts, following a decrease by 14 000 during November and by 23 000 in October. The latter has been the most significant monthly decline since April, when unemployed were 25 000 less. A decrease implies that consumer spending may be more active, while the latter is tightly related to economic growth. An increase suggests the opposite.

At the same time, the seasonally adjusted rate of unemployment in the country probably remained unchanged at 6.6% in December, according to expectations. If confirmed, this would be the third consecutive month, during which the rate remains at this level. In October the number of unemployed people dropped to 2.06 million from 2.08 million in the preceding month, while employment rose by 33 000 to 39.78 million persons. If compared to the same month in 2013, employment in Germany grew 0.7%, while unemployment decreased 3.7%, according to the report by Destatis. Unemployment among persons aged between 15 and 24 remained unchanged at 7.7% in October.

In case the number of people unemployed decreased more than projected and the unemployment rate dropped, this would certainly support demand for the euro. The Federal Statistics Office will release the official data at 8:55 GMT.

Italian unemployment

The rate of unemployment in Italy probably reached a new record high level in November at 13.3%, according to the median forecast by experts, from 13.2% during the prior month. The number of unemployed people rose 2.7% in October compared to September to reach 3.41 million. At the same time, employment in the country was 0.2% lower to 22.374 million persons, while the number of inactive persons dropped 0.2% to reach 14.08 million during the month. Youth unemployment rate climbed 0.6% to 43.3% in October, according to the National Institute of Statistics.

In case the rate of unemployment increased more than anticipated, this might have a bearish effect on the common currency. Istat is to report the official rate at 9:00 GMT.

Euro area harmonized consumer inflation – preliminary estimate

The annualized preliminary consumer inflation in the Euro zone, evaluated in accordance with Eurostat’s harmonized methodology, probably decelerated to -0.1% in December, according to the median estimate by experts. If so, this would be the lowest inflation level since October 2009, when the final rate was reported at -0.1%. In November the final HICP reading pointed to annual inflation rate of 0.3%, which matched the preliminary estimate, as the drop in energy prices was the main driver behind the slowdown. The largest upward pressures to impact the regions annual inflation were recorded for restaurants & cafés (+0.09%), rents (+0.08%) and tobacco (+0.06%). In the mean time, prices of fuels for transport fell at an annualized rate of 0.22% in November, telecommunication costs and costs of heating oil were each 0.09% lower.

The index shows the change in price levels of a basket of goods and services from consumer’s perspective and also reflects purchasing trends. The main components of the HICP are food, alcohol and tobacco (accounting for 19% of the total weight), energy (11%), non-energy industrial goods (29%) and services (41%).

The Harmonized Index of Consumer Prices (HICP) is used to evaluate and compare inflation rates between Member States, according to Art. 121 of the Amsterdam’s Agreement and directives by the European Central Bank (ECB), in order the latter to achieve price stability and the implementation of monetary policy. The HICP aggregates are calculated as a weighted average of each member state’s HICP components.

In case the HICP slowed down more than anticipated, thus, further distancing from the 2% inflation objective set by the ECB, this would mount selling pressure on the euro, because of the greater possibility of introducing additional monetary policy measures in order to stimulate economic activity.

The annualized preliminary Core HICP for December probably increased at a rate of 0.6%, slowing down from 0.7% in November and October. If so, this would be the lowest annual core inflation on record, with the current lowest level being at 0.7%. This index excludes volatile categories such as food, energy, alcohol and tobacco. Eurostat is scheduled to release the official inflation data at 10:00 GMT.

Euro area unemployment rate

At the same hour, Eurostat will announce the rate of unemployment in the Euro region for November. It probably remained at 11.5% for the sixth consecutive month, while also being the lowest since September 2012. In October the lowest unemployment rates were recorded in Germany (4.9% in harmonized terms) and Austria (5.1%), while the highest unemployment was registered in Greece (25.9%) and Spain (24.0%).

The EU 28 unemployment rate was reported at 10.0% in October, steady in comparison with September and down from 10.7%, registered in October 2013. According to data by Eurostat, 24.413 million people in the EU28, of whom 18.395 million were in the Euro area, were unemployed in October. Compared to September the number of people unemployed increased by 42 000 in the European Union and by 60 000 in the Euro zone. Compared to October 2013 unemployment was lower in the EU28 (a decrease by 1.549 million), while unemployed people in the Euro area were 547 000 less.

Unemployed are considered to be all persons aged between 15 and 74, who have not been hired during the survey period, have been actively seeking employment during the past four weeks and are able to accept any job proposition right away or in two weeks time. A drop in unemployment in the region would support the single currency.

Italian consumer inflation – preliminary estimate

Italys preliminary annualized consumer inflation probably slowed down to -0.1% in December, according to expectations, from 0.2% in November, according to final data released on December 12th. If so, this would be the lowest annual inflation since September, when the Consumer Price Index (CPI) fell 0.2%. In November the largest upward pressures, causing an impact on annual inflation rate, were reported for food and non-alcoholic beverages (up 0.5%), restaurants and hotels (1.0%), clothing and footwear (0.3%), furnishing and household equipment (0.6%) and education (1.8%). The largest downward pressures came from transport costs (a 0.3% drop) and costs of communication, which were 2.6% lower.

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.

The nations preliminary annualized CPI, evaluated in accordance with the harmonized methodology, probably decreased 0.1% in December, according to market expectations, following a 0.3% climb in November. If so, this would be the lowest annual harmonized inflation since September, when a 0.1% deflation was reported. The National Institute of Statistics (Istat) is to release the official CPI report at 10:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7847. In case EUR/GBP manages to breach the first resistance level at 0.7874, it will probably continue up to test 0.7901. In case the second key resistance is broken, the pair will probably attempt to advance to 0.7928.

If EUR/GBP manages to breach the first key support at 0.7820, it will probably continue to slide and test 0.7793. With this second key support broken, the movement to the downside will probably continue to 0.7766.

The mid-Pivot levels for today are as follows: M1 – 0.7780, M2 – 0.7807, M3 – 0.7834, M4 – 0.7861, M5 – 0.7888, M6 – 0.7915.

In weekly terms, the central pivot point is at 0.7810. The three key resistance levels are as follows: R1 – 0.7877, R2 – 0.7924, R3 – 0.7991. The three key support levels are: S1 – 0.7763, S2 – 0.7696, S3 – 0.7649.