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Forex Market: EUR/CHF daily trading forecast

Yesterday’s trade saw EUR/CHF within the range of 1.0197-1.0467. The pair closed at 1.0457, surging 2.32% on a daily basis.

At 7:40 GMT today EUR/CHF was up 0.21% for the day to trade at 1.0474. The pair broke the first two key weekly resistance levels and touched a daily high at 1.0480 at 7:42 GMT. The latter has been the highest level since January 15th.


Euro area

Spanish Gross Domestic Product – preliminary estimate

The preliminary estimate of Spains annual Gross Domestic Product probably pointed to 1.9% growth in the fourth quarter of the year, according to the median forecast by experts. In Q3 economy expanded at an annualized pace of 1.6%, according to final data, released on November 27th.

On a quarterly basis, Spanish economy probably expanded 0.6% in Q4, following a 0.5% growth during the third quarter. In Q3 the nations GDP was supported by domestic demand. Household consumption rose at a quarterly rate of 0.8% in Q3 (+0.9% in Q2), while government expenditure rose 0.1%, recovering from a 0.1% drop in the previous quarter. Spanish exports expanded at a quarterly rate of 3.5%, following a 1.3% increase in Q2. Imports were 4.7% higher in Q3 compared to the prior quarter, after in Q2 they rose 2.6%.

In case a faster-than-projected rate of growth was reported, this would have a positive effect on the single currency. The National Statistics Institute (INE) is to release the preliminary GDP data at 8:00 GMT.

Spanish consumer inflation – preliminary estimate

Spain’s annualized consumer inflation probably continued to decelerate in January, reaching a level of -1.2%, the preliminary estimate is expected to reveal today. If so, this would be the seventh consecutive month of negative inflation. In December the annual rate of inflation was reported at -1.0%, according to final data, released on January 15th. It has been the lowest annual inflation since September 2009. In December the largest downward pressure came from sectors such as transportation (-5.5%) due to lower prices of fuel and lubricants. Prices of food and non-alcoholic beverages fell 0.3%, while housing costs dropped 0.2%, as customers paid less for diesel for heating, according to the report by the INE.

Key categories, included in Spans Consumer Price Index (CPI), are food and non-alcoholic beverages (accounting for 20% of the total weight) and transport (15%). Other categories are real estate (12%), hotels, coffee and restaurants (11.5%), clothing and footwear (9%) and entertainment and culture (7.5%). Health, communication, education and other goods and services comprise the remaining 25% of the index.

The CPI 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 trends. In case the annualized CPI dropped more than projected, this would have a bearish effect on the euro. The National Statistics Institute (INE) will release the preliminary inflation data at 8:00 GMT.

Spanish preliminary annualized CPI, evaluated in accordance with Eurostat’s harmonized methodology, probably dropped 1.5% in January, following a 1.1% decrease in December, as reported on January 15th. If so, this would be the most significant annual drop in more than four years.

Italian unemployment

The rate of unemployment in Italy probably reached a new record high level in December at 13.5%, according to the median forecast by experts, from 13.4% during the prior month. The number of unemployed people dropped 0.2% in November compared to October to reach 3.457 million. At the same time, employment in the country was 0.1% lower to 55.5% to reach 22.31 million persons. Youth unemployment rate climbed 0.6% to a new all-time high of 43.9% in November, 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 region harmonized consumer inflation – preliminary estimate

The preliminary annualized consumer inflation in the Euro zone, evaluated in accordance with Eurostat’s harmonized methodology, probably decelerated to -0.5% in January, according to the median estimate by experts. If so, this would be the lowest inflation level since July 2009, when the final rate was reported at -0.6%. In December the final HICP reading pointed to annual inflation rate of -0.2%, which matched the preliminary estimate, as the drop in energy prices was the main driver behind the slowdown. The largest downward pressures to impact the regions annual inflation were recorded for fuels for transport (-0.53%), heating oil (-0.17%) and telecommunications (-0.08%). At the same time, the largest upward pressure came from restaurants & cafés and rents (0.11% increase each) and prices of tobacco (+0.07%), according to the report by Eurostat.

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, as this suggests a need for stimulus in order to spur economic activity.

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

Euro region rate of unemployment

At the same hour, Eurostat will announce the rate of unemployment in the Euro region for December. It probably remained at 11.5% for the seventh consecutive month, while also being the lowest since September 2012. In November the lowest unemployment rates were recorded in Austria (4.9%) and Germany (5.0%), while the highest rates were in Greece (25.7%) and Spain (23.9%).

The EU 28 unemployment rate was reported at 10.0% in November, down from 10.1% in comparison with October and from 10.7%, registered in November 2013. According to data by Eurostat, 24.423 million people in the EU28, of whom 18.394 million were in the Euro area, were unemployed in November. Compared to October the number of people unemployed decreased by 19 000 in the European Union and rose by 34 000 in the Euro zone. Compared to November 2013 unemployment was lower in the EU28 (a decrease by 1.487 million), while unemployed people in the Euro area were 522 000 fewer.

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.


KOF Leading Indicator

The KOF (Konjunkturforschungsstelle) economic barometer in Switzerland probably fell to a reading of 97.5 in January from 98.7 in December. If so, this would be the lowest reading since March 2014, when the barometer was reported at 1.99. It reflects the level of optimism that company executives have about the performance of the economy and how they assess their organizations’ prospects during the following six months. The KOF economic barometer is based on a multi-sectoral design with three modules. The most important module is GDP, which does not include construction and banking sectors, and accounts for 92% of the nations total GDP. It is also known as Core GDP. The other two modules are construction and banking. In case of predominant optimism (respectively, an increase in the barometer), the Swiss franc would receive a boost. The official KOF reading is due out at 8:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.0374. In case EUR/CHF manages to breach the first resistance level at 1.0550, it will probably continue up to test 1.0644. In case the second key resistance is broken, the pair will probably attempt to advance to 1.0820.

If EUR/CHF manages to breach the first key support at 1.0280, it will probably continue to slide and test 1.0104. With this second key support broken, the movement to the downside will probably continue to 1.0010.

The mid-Pivot levels for today are as follows: M1 – 1.0057, M2 – 1.0192, M3 – 1.0327, M4 – 1.0462, M5 – 1.0597, M6 – 1.0732.

In weekly terms, the central pivot point is at 0.9957. The three key resistance levels are as follows: R1 – 1.0146, R2 – 1.0419, R3 – 1.0608. The three key support levels are: S1 – 0.9684, S2 – 0.9495, S3 – 0.9222.

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