EUR/USD Fundamental Analysis July 20, 2012, Forecast

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Analysis and Recommendations:

The EUR/USD is trading at 1.2272 as the euro continues to weakened dipping .0012

EUR remains unchanged vs the USD as it weakens on the crosses.  While EUR is up 0.9% over the past five sessions, factors weighing on the common currency include this morning’s weaker Spanish debt auctions (2 & 5 year), where lower demand drove yields higher relative to prior sales of debt.  The five year auction had an average yield of 6.46% (vs 6.07% at the previous auction); Spain’s 10 year yield is back over 7.0%.  Meanwhile, political developments in Germany are complicating Euro-area wide efforts to promote the European Redemption Fund (ERF), as Chancellor Merkel seeks to maintain recent gains in approval ratings ahead of next year’s elections.

Risk appetite is strong, with commodities, equity futures, and higher-beta FX majors all showing strength ahead of the North American session.  AUD & NZD are outperforming, followed by mild strength for JPY, CAD, and GBP, while EUR is flat.  Factors supporting the shift in risk appetite include constructive headlines regarding the EFSF and a continued decline in volatility (see bottom chart for FX majors’ vol), improving the risk-adjusted return of higher yielding currencies such as AUD, NZD, and even to a certain extent, CAD.  Meanwhile, yesterday’s release of the Fed’s Beige Book detailed anecdotal evidence of a US economy that is expanding at a ‘modest to moderate’ pace, supported by a slow expansion in manufacturing along with ‘tepid’ employment growth. 

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports

Economic Data July 19, 2012 actual v. forecast

Date

 

Currency

 

 

 

Event

Actual

 

Forecast

 

Previous

 

 

Jul. 19

 

AUD

 

 

 

NAB Quarterly Business Confidence 

-2.00

 

 

 

-1.00 

 

 

 

 

GBP

 

 

 

Retail Sales (MoM) 

0.1%

 

0.6% 

 

1.5% 

   

 

 

GBP

 

 

 

Retail Sales (YoY) 

1.6%

 

2.4% 

 

2.1% 

   

 

 

USD

 

 

 

Initial Jobless Claims 

386K

 

365K 

 

352K 

   

 

 

CAD

 

 

 

Wholesale Sales (MoM) 

0.9%

 

0.2% 

 

1.2% 

   

 

 

USD

 

 

 

Continuing Jobless Claims 

3314K

 

3299K 

 

3313K

   

 

Upcoming Economic Events that affect the CHF, EUR, GBP and USD

Date

Time

Currency

 Event

Previous

Jul 20

6:00

EUR

German PPI m/m

-0.3%

8:30

GBP

Public Sector Net Borrowing

15.6B

Government Bond Auctions

Date  Time  Country 

Jul 23- n/a  UK

Jul 23  09:30  Germany

Jul 24  08:30  Netherlands

Jul 24  08:30  Spain 

Jul 24  15:30  Italy

Jul 24  17:00  US

Jul 25  09:30  Germany

Jul 25  15:30  Italy

Jul 25  17:00  US

Jul 26  00:30  Japan

Jul 26  09:10  Italy

Jul 27  09:10  Italy

Jul 27  17:00  US 

 

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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