Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7369-0.7456. The daily low has also been the lowest level in more than six years. The pair closed at 0.7412, losing 0.35% on a daily basis.

At 7:41 GMT today EUR/GBP was up 0.06% for the day to trade at 0.7416. The pair touched a daily high at 0.7420 at 7:34 GMT.

Fundamentals

Euro area

Spanish consumer inflation – final estimate

Spain’s final annualized consumer inflation probably decelerated to -1.4% in January, according to the median forecast by experts, while confirming the preliminary rate, reported on January 30th. If so, this would be the seventh consecutive month, during which annual consumer inflation stood in negative territory. It would also be the lowest inflation rate ever recorded. In December the final annualized Consumer Price Index (CPI) fell 1.0%.

According to provisional estimates, the drop in consumer prices in January was mainly due to lower costs of diesel and gasoline.

Key categories, included in Spans 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 annual CPI plunged more than projected, this would have a bearish effect on the euro. The National Statistics Institute (INE) will release its official report at 8:00 GMT.

Spanish final annualized CPI, evaluated in accordance with Eurostat’s harmonized methodology, probably matched the preliminary CPI performance of a 1.5% drop in January, which was reported on January 30th. If so, this would be the sixth consecutive month, when the harmonized inflation stood in negative territory. In December the final HICP was reported to have fallen 1.1% in line with the preliminary estimate.

Italian GDP – preliminary estimate

The preliminary estimate of Italys annual Gross Domestic Product probably pointed to a 0.4% contraction in the fourth quarter of the year, according to the median forecast by experts. In Q3 economy shrank at an annualized pace of 0.5%, according to final data, released on December 1st 2014.

On a quarterly basis, Italian economy probably contracted 0.1% in Q4, following another negative growth rate of 0.1% during the third quarter. In Q3 nations GDP was influenced by a drop in investment activity and government spending. Gross fixed capital formation dropped by a seasonally adjusted rate of 1.0%, while government spending was 0.3% lower. The nations exports were up 0.2%, while imports dropped 0.3%. At the same time, consumer spending was a mere 0.1% higher.

In case a slower-than-projected rate of growth was reported, this would have a negative effect on the single currency. The National Institute of Statistics (Istat) will release the preliminary GDP data at 9:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7412. In case EUR/GBP manages to breach the first resistance level at 0.7456, it will probably continue up to test 0.7499. In case the second key resistance is broken, the pair will probably attempt to advance to 0.7543.

If EUR/GBP manages to breach the first key support at 0.7369, it will probably continue to slide and test 0.7325. With this second key support broken, the movement to the downside will probably continue to 0.7282.

The mid-Pivot levels for Monday are as follows: M1 – 0.7304, M2 – 0.7347, M3 – 0.7391, M4 – 0.7434, M5 – 0.7478, M6 – 0.7521.

In weekly terms, the central pivot point is at 0.7477. The three key resistance levels are as follows: R1 – 0.7541, R2 – 0.7659, R3 – 0.7723. The three key support levels are: S1 – 0.7359, S2 – 0.7295, S3 – 0.7177.