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Forex Market: EUR/USD daily trading forecast

Yesterday’s trade saw EUR/USD within the range of 1.1112-1.1209. The pair closed at 1.1120, down 0.62% on a daily basis, while marking a third consecutive trading day of losses. The daily low has been the lowest level since September 4th, when the cross registered a low of 1.1088.

At 6:46 GMT today EUR/USD was losing 0.08% for the day to trade at 1.1120. The pair touched a daily low at 1.1105 during early Asian trade. It is now the new lowest level since September 4th.

Today the cross may be influenced by a number of macroeconomic reports and other events as listed below.

Fundamentals

Euro area

Manufacturing, Services PMIs – preliminary estimate

Manufacturing activity in the whole Euro region probably slowed down a third straight month in September, with the preliminary Purchasing Managers Index coming in at 52.0. If so, this would be the 27th consecutive month of expansion, but also the lowest index reading since April. In August the gauge stood at a final 52.3, down from a preliminary reading of 52.4. The PMI reflects the performance of the manufacturing sector in the area and is based on a survey of 3 000 manufacturing companies. National data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. These member states together account for almost 90% of Euro zones manufacturing activity. The Manufacturing Purchasing Managers Index is comprised by five individual indexes with the following weights: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stock of Items Purchased (10%), as the Delivery Times index is inverted, so that it moves in a comparable direction. The preliminary data is expected at 8:00 GMT.

The preliminary services PMI in the Euro area was probably little changed in September compared to a month ago, with the gauge slipping to a level of 54.2. In August the final reading of the index was reported to have been at 54.4, up from a preliminary estimate of 54.3. If market expectations were met, September would be the 26th consecutive month, during which the index stood above the key level of 50.0. The PMI is based on data collected from a representative panel of around 2 000 private service sector companies. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland. The survey represents private sector conditions in terms of new orders, output, employment, prices etc. Markit will release the preliminary data at 8:00 GMT.

A better-than-expected performance in either of the PMI readings would certainly provide support to the common currency.

ECB President Draghis speech

At 13:00 GMT the European Central Bank President Mario Draghi is expected to take a statement. High volatility of the euro crosses is usually present during such events.

United States

Manufacturing PMI by Markit – preliminary estimate

Manufacturing activity in the United States probably remained unchanged in September, with the corresponding preliminary Purchasing Managers Index remaining at 53.0, according to market expectations. It has been the lowest PMI value since October 2013. In July the final seasonally adjusted PMI stood at 53.8, while being in line with the preliminary reading.

According to Markits statement: “Softer output growth was a key factor contributing to the decline in the headline PMI in August. The latest rise in production volumes was the weakest since the adverse weather-related slowdown recorded in January 2014.”

“Overall new order volumes increased at a solid pace in August, but the rate of expansion eased since the previous month and remained weaker than March’s recent peak. A number of firms suggested that cautious spending patterns among clients had resulted in strong competition for new work.”

“Job creation was sustained across the manufacturing sector in August, with manufacturers noting that new product launches and ongoing expansion plans had encouraged them to boost their payroll numbers. That said, the latest increase in staffing levels was the slowest since July 2014.”

Values above the key level of 50.0 indicate optimism (expanding activity). In case the flash manufacturing PMI showed a better-than-anticipated performance, this would have a moderate bullish effect on the US dollar. The preliminary reading by Markit Economics is due out at 13:45 GMT.

Bond Yield Spread

The yield on German 2-year government bonds went as high as -0.228% on September 22nd, after which it slid to -0.263% at the close to lose 3.1 basis points (0.031 percentage point) on a daily basis. It has been the third consecutive trading day of decline.

The yield on US 2-year government bonds climbed as high as 0.719% on September 22nd, or the highest level since September 17th (0.815%), after which it fell to 0.678% at the close to lose 3.2 basis points (0.032 percentage point) for the day.

The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, shrank to 0.941% on September 22nd from 0.942% during the prior day. The September 22nd yield spread has been the lowest one since September 18th, when the difference was 0.910%.

Meanwhile, the yield on German 10-year government bonds soared as high as 0.690% on September 22nd, after which it slid to 0.600% at the close to lose 8 basis points (0.08 percentage point) compared to September 21st.

The yield on US 10-year government bonds climbed as high as 2.198% on September 22nd, after which it slipped to 2.132% at the close to lose 6.7 basis points (0.067 percentage point) on a daily basis.

The spread between 10-year US and 10-year German bond yields expanded to 1.532% on September 22nd from 1.519% during the prior day. The September 22nd yield difference has been the largest one since September 15th, when the spread was 1.553%.

Daily and Weekly Pivot Levels

eur-usd 30min

By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:

R1 – 1.1129
R2 – 1.1138
R3 (range resistance – green on the 30-minute chart) – 1.1147
R4 (range breakout – red on the 30-minute chart) – 1.1173

S1 – 1.1111
S2 – 1.1102
S3 (range support – green on the 30-minute chart) – 1.1093
S4 (range breakout – red on the 30-minute chart) – 1.1067

By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:

Central Pivot Point – 1.1326
R1 – 1.1439
R2 – 1.1574
R3 – 1.1687

S1 – 1.1191
S2 – 1.1078
S3 – 1.0943

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