Forex Market: EUR/USD daily trading forecast

Written by Miroslav Marinov

Miroslav Marinov, a financial news editor at TradingPedia, is engaged with observing and reporting on the tendencies in the Foreign Exchange Market, as currently his focus is set on the major currencies of eight developed nations worldwide.

, | Updated: October 30, 2024

Friday’s trade saw EUR/USD within the range of 1.0706-1.0896. The pair closed at 1.0741, plummeting 1.30% on a daily basis, or at the sharpest rate since October 22nd, when it depreciated 2.05%. The daily low has been the lowest level since April 23rd, when a low of 1.0665 was registered. In weekly terms, EUR/USD fell 2.40% last week, while marking its fourth straight week of losses.

US dollar gained ground sharply against its major peers on Friday, after the Bureau of Labor Statistics said US employers in all sectors of the economy with the exception of the farming industry added 271 000 jobs in October, a figure far beyond what analysts had projected. It has been the most considerable gain in jobs since December 2014, when 329 000 job positions were added. September’s figure has been revised down to 137 000 from a job gain of 142 000 reported previously. At the same time, the rate of unemployment fell 0.1% to reach 5.0% in October, or the lowest level since April 2008. The strong employment numbers may bolster the view that the Federal Reserve Bank will take action and hike borrowing costs at its final meeting for the year on December 15th-16th.

At 7:38 GMT today EUR/USD was up 0.19% for the day to trade at 1.0760. The pair touched a daily high at 1.0772 at 6:15 GMT, undershooting the daily R2 level.

Today EUR/USD trading may be influenced by a number of macroeconomic reports as listed below.

Fundamentals

Euro area

Sentix Investors Confidence Index

Confidence among investors in the Euro zone probably rebounded in November, with the corresponding index coming in at a reading of 13.2, according to market expectations. If so, November would be the 11th consecutive month, during which the gauge occupied positive territory. In October the gauge stood at 11.7, which has been the lowest reading since January 2015. The index is based on results from the SENTIX survey, one of the most prominent surveys, reflecting investors’ opinion in Germany. It encompasses 2 800 respondents, with 510 of them being institutional investors. Respondents present their expectations regarding ten different markets for a period of one and six months. Readings above zero indicate that respondents were predominantly optimistic, while readings below zero show pessimism. Higher-than-expected readings would have a limited bullish effect on the common currency. The official index value is due out at 9:30 GMT.

OECD Economic Outlook

At 10:30 GMT the Organization for Economic Co-operation and Development (OECD) is to release its Economic Outlook report. It is considered as a reliable measure for global macroeconomic tendencies.

United States

Federal Reserves Labor Market Conditions Index

At 15:00 GMT on Monday the Federal Reserve Bank is to report on its Labor Market Conditions Index regarding October. In September the gauge slipped to a zero value from 2.1 in the prior month. This index is derived from 19 labor market indicators, as the unemployment rate and the private payrolls are considered to be of the greatest importance. The gauge also encompasses the labor-force participation rate, as well as indicators concerning wages, hiring and dismissals. A reading above the key 0.0 level suggests labor market activity is improving, while a value below it is a signal for worsening conditions. Therefore, readings above 0.0 are usually dollar positive.

Correlation with other Majors

Taking into account the week ended on November 8th 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 NZD/USD (0.9763, or very strong)
EUR/USD to GBP/USD (0.8651, or very strong)
EUR/USD to AUD/USD (0.8233, or very strong)
EUR/USD to USD/CAD (-0.9332, or very strong)
EUR/USD to USD/CHF (-0.9523, or very strong)
EUR/USD to USD/JPY (-0.9718, or very strong)

1. During the examined period EUR/USD moved almost equally in one and the same direction with NZD/USD, GBP/USD and AUD/USD. This relationship has been the most pronounced between EUR/USD and NZD/USD.

2. EUR/USD moved almost equally in the opposite direction compared to USD/CAD, USD/CHF and USD/JPY during the past week. This relationship has been the most pronounced between EUR/USD and USD/JPY.

Bond Yield Spread

The yield on German 2-year government bonds went as high as -0.281% on November 6th, or the highest level since October 22nd (-0.252%), after which it slid to -0.283% at the close to add 2.5 basis points (0.025 percentage point) in comparison with November 5th. It has been the second trading day of gains in a row.

The yield on US 2-year government bonds climbed as high as 0.958% on November 6th, or the highest level in at least 1 year, after which it closed at 0.890% to add 6 basis points (0.06 percentage point) compared to November 5th, while marking a fifth trading day of gains in a row.

The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, widened to 1.173% on November 6th from 1.138% on November 5th. The November 6th yield spread has been the largest one in at least six months.

Meanwhile, the yield on German 10-year government bonds soared as high as 0.702% on November 6th, or the highest level since September 18th (0.712%), after which it slid to 0.697% at the close to add 8.5 basis points (0.085 percentage point) compared to November 5th, while marking a fifth straight trading day of increase.

The yield on US 10-year government bonds climbed as high as 2.349% on November 6th, or the highest level since July 21st (2.403%), after which it slipped to 2.325% at the close to add 8.9 basis points (0.089 percentage point) compared to November 5th, while marking a fifth consecutive trading day of gains.

The spread between 10-year US and 10-year German bond yields widened to 1.628% on November 6th from 1.624% on November 5th. The November 6th yield difference has been the largest one since November 3rd, when the spread was 1.643%.