Forex Market: EUR/USD daily trading outlook

Yesterday's trade saw EUR/USD within the range of 1.0867-1.0940. The pair closed at 1.0893, shedding 0.23% on a daily basis. It has been the seventh drop in the past eleven trading days.

At 7:09 GMT today EUR/USD was losing 0.24% for the day to trade at 1.0867. The pair touched a daily low at 1.0863 at 7:08 GMT, undershooting the lower range breakout level (S4) and making a lower-low test of the low from January 18th.

On Tuesday EUR/USD trading may be influenced by the following macroeconomic reports listed below.

Fundamentals

Euro area

ZEW Survey

The gauge of economic sentiment in Germany probably fell to a reading of 9.0 in January, according to the median forecast by experts, from 16.1 in December. The latter has been the highest reading since August 2015, when the gauge was reported at 25.0.

The ZEW (Zentrum für Europäische Wirtschaftsforschung) economic expectations index is reported on a monthly basis. The study encompasses up to 350 financial and economic analysts. The indicator reflects the difference between the share of analysts, that are optimistic and those, that are pessimistic about the expected economic development in Germany over the next six months. A positive value indicates that the proportion of optimists is larger than that of pessimists. A ZEW reading of -100 suggests that all analysts are pessimistic about the current developments and expect economic conditions to deteriorate. A ZEW reading of 100 implies that all analysts are optimistic about the current situation and expect conditions to improve. A ZEW reading of 0 indicates neutrality.

The index of current assessment in Germany probably slowed down to 54.0 in January, according to market expectations, from a reading of 55.0 registered in December. If expectations were met, January's reading would be the lowest since February 2015, when a level of 45.5 was reported.

The ZEW Economic Sentiment index for the whole Euro region probably dropped to a reading of 27.9 in January, according to market expectations, from 33.9 in the preceding month. The latter has been the highest index level since August 2015, when the gauge stood at 47.6.

In case the German gauge of economic sentiment decreased at a sharper pace than expected, this would have a strong bearish effect on the common currency. The official readings are scheduled to be released at 10:00 GMT.

Consumer price inflation – final estimate

The final annualized consumer inflation in the Euro zone, evaluated in accordance with Eurostat's harmonized methodology, probably confirmed the preliminary rate of 0.2% in December, which was reported on January 5th. In November annual inflation rate was reported at a final 0.2%, up from a preliminary rate of 0.1%.

According to the provisional data, in December prices of food, alcohol & tobacco are expected to surge the most (+1.2% year-on-year, following a 1.5% gain in November), followed by cost of services (+1.1%, following a 1.2% gain in November) and cost of non-energy industrial goods (+0.5%, or steady compared to a month ago). On the other hand, cost of energy is expected to drop 5.9% in December compared to the same month a year ago, following a 7.3% slump in November.

In case the HICP exceeded expectations, thus, further approached the 2% inflation objective set by the ECB, this would support demand for the euro, because it would imply that monetary policy measures have begun to work in favor of economic activity.

The final annualized Core HICP for December probably rose 0.9%, accelerating from a preliminary 0.8% surge, which was reported on January 5th. In November the final Core HICP increased at an annual rate of 0.9%, matching the preliminary rate. This index excludes volatile categories such as food, energy, alcohol and tobacco. Eurostat is scheduled to release the final inflation report at 10:00 GMT.

United States

NAHB Housing Market Index

The National Association of Home Builders (NAHB) Housing Market Index probably remained at 61.0 for the second consecutive month in January, according to market expectations. If so, this would be the 19th consecutive month, when the gauge stood in the area above 50.0. In November the index was reported at 62.0. The indicator is based on a monthly survey in regard to current home sales and expected sales in the coming six months. Values above the key level of 50.0 indicate that housing market conditions are good. Therefore, higher-than-projected readings would provide a moderate support to the US dollar. The official report is scheduled for release at 15:00 GMT.