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Forex Market: EUR/USD daily trading outlook

Yesterday’s trade saw EUR/USD within the range of 1.0598-1.0634. The pair closed at 1.0606, down 0.19% on a daily basis, while extending the loss from Wednesday.

At 7:20 GMT today EUR/USD was gaining 0.14% for the day to trade at 1.0626. The pair touched a daily high at 1.0638 at 6:50 GMT, while holding below the weekly central pivot level for a second consecutive trading day. The daily high was an attempt for a test of the high from November 25th.

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


Euro area

Italian Consumer and Business Confidence

Confidence among consumers in Italy probably was slightly lower in November from a month ago, with the respective index coming in at a reading of 116.5, according to market expectations. In October confidence improved sharply, as the gauge went up as high as 116.9 from an upwardly revised level of 113.0 in September (112.7 previously). Octobers level of confidence has been the highest since February 2002, as respondents in the survey felt more optimistic about personal, current and future economic conditions.

The index of consumer confidence is based on a survey, conducted by phone and encompassing about 2 000 households in the country. Respondents give their opinion regarding past and future economic situation in Italy, past and future personal financial situation, unemployment, intention to make major purchases such as durable goods, and saving prospects. Readings of 100.0 indicate neutrality (no change in sentiment). Values above 100.0 signify improving confidence, while values below 100.0 are indicative of low expectations. Lower-than-expected index readings might have a limited bearish impact on the common currency. The official reading is due out at 9:00 GMT.

Meanwhile, confidence among manufacturing companies in Italy probably remained unchanged in November, with the corresponding index remaining at a level of 105.9. It has been the highest level of confidence since February 2008, as respondents felt more optimistic in regard to order books and production expectations, while their assessment of inventories remained unchanged.

The Manufacturing Confidence Survey features 4 000 Italian companies. Respondents give their opinion regarding the current trend of order books, production and inventories, short-term forecasts on order books, production, prices and the general economic situation.

The index of business confidence is seasonally adjusted and has a base year of 2005. Readings of 100.0 signify neutrality in business sentiment. Values exceeding 100.0 imply improving confidence, while values below 100.0 are related with low expectations. In general, higher-than-anticipated values may have a limited bullish effect on the common currency and vice versa. The official reading by the Istat is due out at 9:00 GMT.

Euro zone Economic Sentiment Indicator

The final value of the consumer confidence index probably came below the preliminary reading in November, falling down to -7.9. If so, it would be the lowest level since January 2015, when a final value of -8.5 was reported. The final index for October came in at -7.7, confirming the preliminary reading. The indicator measures consumer confidence on a scale of -100 to +100. A reading of -100 suggests a lack of confidence, zero means neutrality and a reading of +100 indicates extreme levels of confidence. The index reflects the level of optimism, which consumers have about economic development in the region. The Business and Consumer Survey is conducted by phone and includes 23 000 households in the Euro area. The questions asked stress on current economic and financial situation, savings intention and also on expected developments regarding consumer price indexes, general economic situation and major purchases of durable goods. This indicator is one of the five major components, that comprise the Economic Sentiment Indicator (ESI).

The ESI probably remained steady at 105.9 in November, according to expectations. The latter has been the highest index level since April 2011, when a value of 106.1 was reported. The Economic Sentiment Indicator (ESI) is a composite indicator, consisting of five sectoral confidence indicators with different weights: Industrial confidence indicator, Services confidence indicator, Consumer confidence indicator, Construction confidence indicator and Retail trade confidence indicator. The ESI is calculated as an index with a mean value of 100.0 and standard deviation of 10 over a fixed standardized sample period.

Lower consumer confidence usually implies a lesser willingness to spend, including large-ticket purchases, while consumer spending is a key factor behind economic growth. Therefore, in case either the ESI, or the consumer confidence indicator dropped more than anticipated, this would cause a moderate bearish impact on the euro. The European Commission is expected to release the official ESI reading at 10:00 GMT.

Financial Stability Review of the EZ

At 11:00 GMT the European Central Bank is to release its Financial Stability Review, which offers a thorough overview of risks in regard to the Euro regions financial system. This report has been published two times each year since 2004.

Bond Yield Spread

The yield on German 2-year government bonds went as high as -0.404% on November 26th, after which it closed at -0.414% to lose 0.005 percentage point in comparison with November 25th. It has been the tenth drop in the past fourteen trading days and also a second consecutive one.

The yield on US 2-year government bonds climbed as high as 0.938% on November 26th, after which it closed at 0.934% to remain unchanged compared to November 25th. It followed eight consecutive trading days 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 1.348% on November 26th from 1.343% on November 25th. The November 26th 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 0.485% on November 26th, after which it slid to 0.470% at the close to lose 0.006 percentage point compared to November 25th. It has been the twelfth drop in the past fourteen trading days and also a third consecutive one.

The yield on US 10-year government bonds climbed as high as 2.225% on November 26th, after which it slipped to 2.224% at the close to lose 0.001 percentage point compared to November 25th. It has been the fourth consecutive trading day of decrease.

The spread between 10-year US and 10-year German bond yields narrowed to 1.754% on November 26th from 1.758% on November 25th. The November 26th yield difference has been the lowest one since November 24th, when the spread was 1.726%.

Daily and Weekly Pivot Levels

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

R1 – 1.0609
R2 – 1.0613
R3 (range resistance) – 1.0617
R4 (range breakout) – 1.0627

S1 – 1.0602
S2 – 1.0597
S3 (range support) – 1.0594
S4 (range breakout) – 1.0586

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 is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

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