EUR/USD Fundamental Analysis July 26, 2012, Forecast

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Analysis and Recommendations:

The EUR/USD having gained 0.5% since yesterday’s close on a combination of renewed focus on potential Fed policy, a resurgence of the discussion on the potential for the ESM banking license (unlikely in our view as it would be a form of ECB debt financing).The pair are trading at 1.2150 as the euro failed to react to the German IFO, which posted a new three year low on business expectations and appears to have priced in significant risk that Greece will fail to meet the Troika’s criteria, thereby increasing the risk of a Greek EMU exit. The downward pressure on EUR is significant and the June 2010 low of 1.1877 is beginning to act as a magnet.

News flow is generally negative, with a miss by Apple, a disappointing German IFO, a larger contraction from the UK economy than expected and confusion ongoing in Europe; however markets are adding risk to portfolio’s partially as traders are refocusing on potential policy action by the Fed (stemmed late yesterday by Jon Hilsenrath’s article in the WSJ), ECB’s Nowtony’s comments and the IMF’s outlook for a soft Chinese landing. For currencies, this has meant a generally weak USD, with EUR outperforming, up 0.7%, on the back of discussion of a banking license for the ESM. AUD is also strong, up 0.6% followed by the other commodity currencies of CAD and NZD.

Market mood was seen distorted as concerns over the global growth continued to play on investors’ mind. Also, EU official’s comments that Greece is unlikely to pay what it owes and further debt restructuring is necessary also dented market sanguinity. Into the twilight session, no major economic data from the U.S are slated for release. With the housing sector in the U.S showing signs of consolidation after lingering in the doldrums since the recession in 2009, the new home sales data in the evening session could illustrate a rise in sales of new homes in June. Also in focus this evening would be the department of Energy (DOE) crude inventory, which is expected to show a draw in inventory levels. The GDP number from the U.S on Friday is most likely to paint an anguish figure with growth slowing to 1.40 percent in contrast to 1.90 percent, a sign of further impeding for the financial markets. Overall, the week is likely to remain incarcerated to the developments in Europe and the U.S economic data.

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 25, 2012 actual v. forecast

Date

 

Currency

 

 

 

Event

Actual

 

Forecast

 

Previous

 

 

Jul. 25

 

JPY

 

 

 

Trade Balance 

-0.30T

 

-0.39T 

 

-0.62T 

  

 

 

AUD

 

 

 

CPI (QoQ) 

0.5%

 

0.6% 

 

0.1% 

 

 

 

 

AUD

 

 

 

Trimmed Mean CPI (QoQ) 

0.5%

 

0.6% 

 

0.3% 

 

 

 

 

EUR

 

 

 

German Ifo Business Climate Index 

103.3

 

104.7 

 

105.2 

  

 

 

EUR

 

 

 

German Current Assessment 

111.6

 

113.0 

 

113.9 

 

 

 

 

EUR

 

 

 

German Business Expectations 

95.6

 

96.7 

 

97.2 

  

 

 

GBP

 

 

 

GDP (QoQ) 

-0.7%

 

-0.2% 

 

-0.3% 

 

 

 

 

GBP

 

 

 

GDP (YoY) 

-0.8%

 

-0.3% 

 

-0.2% 

 

 

 

 

GBP

 

 

 

CBI Industrial Trends Orders 

-6

 

-12 

 

-11 

 

 

 

 

USD

 

 

 

New Home Sales 

 

 

372K 

 

369K 

  

 

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

Date

Time

Currency

 Event

Previous

Jul 26

6:00

EUR

GfK German Consumer Climate

5.8

8:00

EUR

M3 Money Supply y/y

2.9%

12:30

USD

Core Durable Goods Orders m/m

0.7%

12:30

USD

Unemployment Claims

 

14:00

USD

Pending Home Sales m/m

5.9%

Jul 27

27th-31st

GBP

Nationwide HPI m/m

-0.6%

All Day

EUR

German Prelim CPI m/m

-0.1%

7:00

CHF

KOF Economic Barometer

1.16

12:30

USD

Advance GDP q/q

1.9%

13:55

USD

Revised UoM Consumer Sentiment

72.0

 

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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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