Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7753-0.7831. The pair closed at 0.7766, losing 0.42% on a daily basis.

At 7:17 GMT today EUR/GBP was up 0.11% for the day to trade at 0.7774. The pair touched a daily high at 0.7782 at 6:45 GMT.

Fundamentals

Euro zone

French consumer inflation

The annualized consumer inflation in France probably continued to slow down in December, reaching 0.2%, according to the median forecast by experts, from a rate of 0.3% during the preceding month. In November annual inflation decelerated, due to lower prices of energy, manufactured products and food. During the month upward pressures came from prices of tobacco (+3.5% year-on-year), other services (+2.1%), actual rentals and services for dwellings (+1.5%) and clothing and footwear (+0.2%). At the same time, cost of petroleum products dropped at an annualized rate of 5%, while that of medical products – by 3%. Additional downward pressures came from prices of other manufactured products (-1.1%) and food (-0.2%).

Key categories, included in Frances Consumer Price Index (CPI), 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 more than anticipated, this would have a bearish effect on the euro. The National Institute for Statistics and Economic Studies will release the official report at 7:45 GMT.

France’s annualized CPI, evaluated in accordance with Eurostat’s harmonized methodology, probably remained unchanged in December, following a 0.4% climb in the prior month. In monthly terms, the harmonized CPI probably also remained flat in December, after falling 0.2% in November.

Italian consumer inflation – final estimate

Italys final annualized consumer inflation was probably at 0.0% in December, matching the preliminary inflation estimate, reported on January 7th. In November the final annualized index of consumer prices rose 0.2%, while in October – 0.1%. According to provisional data, in December the largest annual price drop was reported for non-regulated energy products (7.9%, after a 3.1% fall in November), supported by a decline in fuel prices. Cost of transport decreased 0.9% during the same month, cost of housing, water, electricity and gas went down 0.3%, while prices of food and non-alcoholic beverages were 0.2% lower. At the same time, consumers paid more for restaurants and hotels (+0.9% year-on-year), furnishing and household equipment (+0.6%) and clothing and footwear (+0.2%).

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 final annualized CPI, evaluated in accordance with the harmonized methodology, probably dipped 0.1% in December, according to market expectations. If so, this would match the preliminary HICP estimate, reported on January 7th. In November the final annualized HICP rose at a pace of 0.3%, up from a preliminary 0.2% gain, marking the highest annual rate of inflation since May 2014. The National Institute of Statistics (Istat) is to release the official CPI report at 9:00 GMT.

Euro area industrial output

The seasonally adjusted index of industrial production in the Euro zone probably rose 0.2% in November compared to a month ago, following a 0.1% gain in October. Annualized output, on the other hand, probably contracted at a pace of 0.8% in November. If so, this would be the most significant annual drop since August 2013, when output shrank at a pace of 1.1%. In October industrial output expanded at an annual rate of 0.7%, as production of non-durable consumer goods rose 3.7%, that of capital goods went up 1.4% and production of durable consumer goods increased 0.2%.

The index, reflecting business cycle, measures the change in overall inflation-adjusted value of output in sectors such as manufacturing, mining and utilities. In case industrial output expanded more than anticipated, this would support demand for the euro, as this implies higher inflationary pressure. Eurostat is to publish the official data at 10:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7783. In case EUR/GBP manages to breach the first resistance level at 0.7814, it will probably continue up to test 0.7861. In case the second key resistance is broken, the pair will probably attempt to advance to 0.7892.

If EUR/GBP manages to breach the first key support at 0.7736, it will probably continue to slide and test 0.7705. With this second key support broken, the movement to the downside will probably continue to 0.7658.

The mid-Pivot levels for today are as follows: M1 – 0.7682, M2 – 0.7721, M3 – 0.7760, M4 – 0.7799, M5 – 0.7838, M6 – 0.7877.

In weekly terms, the central pivot point is at 0.7812. The three key resistance levels are as follows: R1 – 0.7876, R2 – 0.7942, R3 – 0.8006. The three key support levels are: S1 – 0.7746, S2 – 0.7682, S3 – 0.7616.