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Forex Market: EUR/USD daily trading outlook

Yesterday’s trade saw EUR/USD within the range of 1.0565-1.0690. The pair closed at 1.0623, down 0.17% on a daily basis. It has been the sixth drop in the past thirteen trading days. The daily low has been the lowest level since April 14th, when a low of 1.0529 was reached.

At 7:30 GMT today EUR/USD was down 0.07% for the day to trade at 1.0617. The pair touched a daily low at 1.0615 during early Asian trade, undershooting the daily S2 level. The pair has found support within the area 1.0615-1.0620 on several occasions during the past hours of trade, while forming a tight range.

Today EUR/USD trading may be influenced by the macroeconomic report listed below.

Fundamentals

Euro area

Private sector lending

Lending to individuals and business entities in the Euro areas private sector probably expanded for a sixth consecutive month in October, rising at an annualized rate of 1.2%, according to market expectations. If so, this would be the fastest annual rate of increase in more than three years. In September the total value of private sector loans increased 1.1% year-on-year. In case lending expanded at a faster pace than anticipated, this would have a moderate bullish effect on the euro, as it implies higher economic activity in the future in terms of consumer spending and business investments. The European Central Bank (ECB) is expected to release the official data at 9:00 GMT.

Two-tiered charges for banks on the discussion table, ECB officials say

The common currency lost ground sharply on Wednesday, as it became clear European Central Bank policy makers discussed whether to introduce a two-tier penalty charge on commercial banks holding their funds with the central bank, along with a number of other measures.

“They are still trying to figure out what will be in the package. A lot of people have different views,” an ECB official with knowledge on the matter, who spoke on condition of anonymity, said, cited by Reuters. “There are some who say you should surprise markets. But you cannot surprise indefinitely. Sooner or later, you are bound to disappoint.”

ECB President Mario Draghi has not once indicated that an extension of the Banks easing program was possible, as well as a further increase of the charge for commercial banks holding funds with the ECB (the negative deposit rate). In order to reduce the potential impact by such a measure on credit institutions in the euro region, a split-level rate was on the discussion table, according to officials. Such as measure would include a higher charge on a given bank in dependence on the amount of funds it has parked with the ECB.

“It could be combined with a ceiling, so that from a certain point onwards liquidity can only be parked overnight at a stronger rate,” according to another opinion. “Whether and how to shape a deposit rate cut in December is in discussion.”

Thanksgiving Day

Today is the Thanksgiving Day national holiday in the United States, which commemorates harvest. Banks in the country are to remain closed.

Bond Yield Spread

The yield on German 2-year government bonds went as high as -0.369% on November 25th, or the highest level since November 19th (-0.353%), after which it closed at -0.415% to lose 3.5 basis point (0.035 percentage point) in comparison with November 24th. It has been the ninth drop in the past thirteen trading days.

The yield on US 2-year government bonds climbed as high as 0.946% on November 25th, after which it closed at 0.934% to add 0.004 percentage point compared to November 24th. It has been the eighth 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 1.349% on November 25th from 1.310% on November 24th. The November 25th yield spread has been the largest one in more than seven months.

Meanwhile, the yield on German 10-year government bonds soared as high as 0.525% on November 25th, after which it slid to 0.477% at the close to lose 3.6 basis points (0.036 percentage point) compared to November 24th. It has been the eleventh drop in the past thirteen trading days.

The yield on US 10-year government bonds climbed as high as 2.248% on November 25th, after which it slipped to 2.234% at the close to lose 0.005 percentage point compared to November 24th. It has been the third consecutive trading day of increase.

The spread between 10-year US and 10-year German bond yields expanded to 1.757% on November 25th from 1.726% on November 24th. The November 25th yield difference has been the largest one since November 20th, when the spread was 1.785%.

Daily and Weekly Pivot Levels

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

R1 – 1.0634
R2 – 1.0646
R3 (range resistance) – 1.0657
R4 (range breakout) – 1.0692

S1 – 1.0612
S2 – 1.0600
S3 (range support) – 1.0589
S4 (range breakout) – 1.0554

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

Central Pivot Point – 1.0681
R1 – 1.0746
R2 – 1.0847
R3 – 1.0912

S1 – 1.0580
S2 – 1.0515
S3 – 1.0414

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