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Forex Market: EUR/USD daily trading forecast

Yesterday’s trade saw EUR/USD within the range of 1.1752-1.1860. The daily low has also been the lowest level since December 8th 2005. The pair closed at 1.1772, losing 0.52% on a daily basis, which marked a second consecutive daily drop.

At 8:02 GMT today EUR/USD was up 0.09% for the day to trade at 1.1784. The pair touched a daily high at 1.1809 at 7:54 GMT.


Euro zone

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.

Parity seen

Richard Clarida, executive vice president at Newport Beach, California-based Pimco, said that the European Central Bank may take action as soon as the policy meeting on January 22nd.

“They’ll probably announce a big program, perhaps 500 billion euros, to buy sovereign bonds in the secondary market,” Clarida said in an interview on Bloomberg Television’s “Surveillance” with Tom Keene, cited by the same media. In the case with the euro, “the next technical is parity. There’s a lot more downside.”

Yesterday the common currency lost ground after Governing Council member Ewald Nowotny said in Vienna that policy makers should not wait too long to cope with the risk of deflation.

United States

Retail Sales

Retail sales in the United States probably decreased 0.1% in December on a monthly basis, according to the median forecast by experts. In November retail sales recorded another 0.7% surge, which has been the fastest monthly pace since March, when sales climbed 1.5%. This result was due to holiday shopping, which bolstered food, auto and clothing sales. Sales of motor vehicles and parts marked the highest increase, or 1.7% in November, followed by sales of building materials (up 1.4%) and clothing (up 1.2%). On the other hand, sales at gasoline stations were 0.8% lower, according to the report by the US Census Bureau.

Annualized retail sales climbed 5.1% in November, following a 4.5% gain in October.

The report on retail sales reflects the dollar value of merchandise sold within the retail trade by taking a sampling of companies, operating in the sector of selling physical end products to consumers. The retail sales report encompasses both fixed point-of-sale businesses and non-store retailers, such as mail catalogs and vending machines. The Census Bureau, which is a part of the Department of Commerce, surveys about 5 000 companies of all sizes, from huge retailers such as Wal-Mart to independent small family firms.

US core retail sales, or retail sales ex autos, probably remained flat in December compared to a month ago, following a 0.5% gain in November. The latter has been the fastest monthly pace since March. This indicator removes large ticket prices and historical seasonality of automobile sales.

The retail sales index is considered as a coincident indicator, thus, it reflects the current state of the economy. It is also considered a pre-inflationary indicator, which investors can use in order to reassess the probability of an interest rate hike or cut by the Federal Reserve Bank. In addition, this indicator provides key information regarding consumer spending trends. Consumer expenditures, on the other hand, account for almost two-thirds of the US Gross Domestic Product. Therefore, a larger-than-expected increase in sales would certainly boost the US dollar. The official report is due out at 13:30 GMT.

Beige Book

At 18:00 GMT the Federal Reserve is to release its “Beige Book” report. It is published eight times during the year. Each of the banks in the 12 Federal Reserve Districts gathers data in regard to current economic situation in the country on the basis of interviews with key business contacts, economists, market experts, and other sources. In case the Beige Book presents an optimistic economic outlook, this will usually support the greenback, while a pessimistic view will have a bearish effect on the currency.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.1795. In case EUR/USD manages to breach the first resistance level at 1.1837, it will probably continue up to test 1.1903. In case the second key resistance is broken, the pair will probably attempt to advance to 1.1945.

If EUR/USD manages to breach the first key support at 1.1729, it will probably continue to slide and test 1.1687. With this second key support broken, the movement to the downside will probably continue to 1.1621.

The mid-Pivot levels for today are as follows: M1 – 1.1654, M2 – 1.1708, M3 – 1.1762, M4 – 1.1816, M5 – 1.1870, M6 – 1.1924.

In weekly terms, the central pivot point is at 1.1868. The three key resistance levels are as follows: R1 – 1.1982, R2 – 1.2123, R3 – 1.2237. The three key support levels are: S1 – 1.1727, S2 – 1.1613, S3 – 1.1472.

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