Forex Market: EUR/USD daily trading forecast

Friday’s trade saw EUR/USD within the range of 1.1265-1.1391. The pair closed at 1.1358, up 0.70% on a daily basis, while extending gains from Thursday. The daily high has been the highest level since September 18th, when the cross registered a high of 1.1460. In weekly terms, EUR/USD went up 1.31%, marking a second straight week of gains. The weekly advance has been the sharpest one since the week ended on September 13th, when the pair appreciated 1.73%.

At 6:44 GMT today EUR/USD was gaining 0.10% for the day to trade at 1.1371. The pair tested the daily R2 level, as it touched a daily high at 1.1378 during early Asian trade.

No relevant macroeconomic reports, which would influence EUR/USD trading, are scheduled for release today.

Columbus Day in the United States

Today is the Columbus Day federal holiday, which remembers Christopher Columbus’ arrival to the Americas on October 12th 1492. Columbus day is a public holiday in many parts of the United states, but is not observed or is not a holiday in some states. Government offices are generally closed, but businesses may remain open. Schools are not required to close and may decide to remain open or closed. The Columbus Day is a legal observance in Florida.

Correlation with other Majors

Taking into account the week ended on October 11th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:

EUR/USD to AUD/USD (0.9207, or very strong)
EUR/USD to NZD/USD (0.8211, or very strong)
EUR/USD to GBP/USD (0.6022, or strong)
EUR/USD to USD/JPY (-0.2136, or weak)
EUR/USD to USD/CHF (-0.9700, or very strong)
EUR/USD to USD/CAD (-0.9871, or very strong)

1. During the examined period EUR/USD moved almost equally in one and the same direction with AUD/USD and NZD/USD.

2. EUR/USD moved almost equally in the opposite direction compared to USD/CHF and USD/CAD last week.

3. EUR/USD moved strongly in one and the same direction with GBP/USD.

4. The correlation between EUR/USD and USD/JPY was insignificant during the period in question.

Bond Yield Spread

The yield on German 2-year government bonds went as high as -0.240% on October 9th, or matching the high from the prior day, after which it slid to -0.248% at the close to add 0.001 percentage point compared to October 8th. It has been the fourth gain in the past five trading days.

The yield on US 2-year government bonds climbed as high as 0.657% on October 9th, or matching the high from the previous day, after which it fell to 0.641% at the close to add 0.004 percentage point compared to October 8th, while marking a third consecutive trading day of increase.

The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, widened to 0.889% on October 9th from 0.886% on October 8th. The October 9th yield spread has been the largest one since October 1st, when the difference was 0.914%.

Meanwhile, the yield on German 10-year government bonds soared as high as 0.629% on October 9th, or the highest level since October 7th (0.632%), after which it slid to 0.621% at the close to gain 3.2 basis points (0.032 percentage point) compared to October 8th. It has been the first gain in the past three trading days.

The yield on US 10-year government bonds climbed as high as 2.138% on October 9th, or the highest level since September 28th (2.169%), after which it slipped to 2.090% at the close to lose 1.2 basis point (0.012 percentage point) compared to October 8th. It has been the first drop in the past three trading days.

The spread between 10-year US and 10-year German bond yields narrowed to 1.469% on October 9th from 1.513% on October 8th. The October 9th yield difference has been the lowest one since October 6th, when the spread was 1.434%.

Daily and Weekly Pivot Levels

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

R1 – 1.1370
R2 – 1.1381
R3 (range resistance) – 1.1393
R4 (range breakout) – 1.1427

S1 – 1.1346
S2 – 1.1335
S3 (range support) – 1.1323
S4 (range breakout) – 1.1289

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

Central Pivot Point – 1.1306
R1 – 1.1443
R2 – 1.1527
R3 – 1.1664

S1 – 1.1222
S2 – 1.1085
S3 – 1.1001