Forex Market: EUR/USD daily trading outlook

Yesterday’s trade saw EUR/USD within the range of 1.1294 – 1.1190 to close 0.45% higher at 1.1276.

At 07:11 GMT today EUR/USD was up 0.33% for the day to trade at 1.1322. The pair held in a daily range of 1.1260 – 1.1285 and is up 0.5% for the week so far, following two consecutive weekly advances.

Fundamentals

Eurozone

German annualized consumer inflation matched expectations at 0.7% in May, according to a final reading by Destatis, as energy costs fell at a slower pace and prices of services and food accelerated. In April, the final rate of inflation was reported at a better-than-expected 0.5%. Month-on-month, consumer prices edged up 0.1% last month, as projected.

The Consumer Price Index (CPI) presents a general picture of the price change in the country, while encompassing all household types, all regions and all goods and services demanded (food, clothing, automobiles, rental, repair and hairdressing services etc). The index is based on a basket of goods and services, which is regularly renewed, so that goods and services purchased more often by consumers are included in the present survey.

The nations annualized CPI, evaluated in accordance with the harmonized methodology, also came in in line with forecasts at 0.7%, the highest since October 2014. In monthly terms, the HICP was at 0.1%, offsetting a 0.1% contraction in April. The harmonized methodology is used for the sake of consumer inflation comparison in an international context (member states in the Euro area). Lower-than-expected CPI readings that are further distanced from the 2-percent inflation objective, set by the European Central Bank, tend to mount selling pressure on the common currency.

Sentiment

The gauge of economic sentiment in Germany probably continued to deteriorate in June, according to the median forecast by experts, dropping to 37.1 from 41.9 in May. If so, this would be the lowest index reading since December 2014, when it was reported at 34.9.

The ZEW (Zentrum für Europäische Wirtschaftsforschung) economic expectations index is published on a monthly basis. The study encompasses up to 350 financial and economic analysts. The indicator reflects the difference between the share of analysts that are optimistic, and those that are pessimistic about the expected economic development in Germany over the next six months. A positive value indicates that the proportion of optimists is larger than that of pessimists. A ZEW reading of -100 suggests that all analysts are pessimistic about the current developments and expect economic conditions to deteriorate. A ZEW reading of 100 implies that all analysts are optimistic about the current situation and expect conditions to improve. A ZEW reading of 0 indicates neutrality.

The index of current assessment probably edged down to 63.0 from 65.7 in May, according to expectations, having reached 70.2 in April.

The ZEW Economic Sentiment index for the whole Eurozone probably eased in June as well, from 61.2 in May and a peak of 64.8 in April.

In case the gauge of economic sentiment exceeded expectations, this would certainly have a positive impact on the common currency. The official data is scheduled to be released at 09:00 GMT.

United States

The number of housing starts in the United States probably dropped 3.1% to 1.100 million in May after rising 20.2% to the seasonally-adjusted annual rate of 1.135 million in April, the highest rate since November 2007. Single-family housing starts jumped 16.7% to 733 000 while starts of buildings with five units or more soared 31.9% to 389 000.

Housing Starts represent a gauge to measure residential units, on which construction has already begun, every month. A start in construction is defined as the foundation laying of a building and it encompasses residential housing primarily.

The number of building permits in the country probably decreased 3.5% to 1.100 million last month from 1.140 million in April. Single-family authorizations rose 3.7% while authorizations of units in buildings with five units or more increased by 20%.

Building permits are permits, issued in order to allow excavation. An increase in the number of building permits and housing starts usually occurs a few months after mortgage rates in the country have been reduced. Permits are not required in all regions of the United States. Building permits, as an indicator, provide information regarding demand in the US housing market. In case a higher-than-anticipated figure is reported, this will certainly support the US dollar. The official housing data is due out at 12:30 GMT.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.1253. In case it penetrates the first resistance level at 1.1317, it will encounter next resistance at 1.1357. If breached, upside movement may attempt to advance to 1.1421.

If the cross drops below its S1 level at 1.1213, it will next see support at 1.1149. If the second key support zone is breached, downward movement may extend to 1.1109.

In weekly terms, the central pivot point is at 1.1245. The three key resistance levels are as follows: R1 – 1.1409, R2 – 1.1550, R3 – 1.1714. The three key support levels are: S1 – 1.1104, S2 – 1.0940, S3 – 1.0799.