EUR/USD Weekly Fundamental Analysis Aug 13-17, 2012, Forecast

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Introduction: Out of the major currency pairs the most popular and easy to trade currency pair is the EUR/USD. It has become so popular with traders these days that even when there is no visible trade to be had it is yet traded as a matter of habit. This is of course something that should be avoided and any investor who trades this currency pair wisely can do so successfully with sizable profits at the end of the day.

The first thing with trading currencies is to realize that the EUR/USD is made up of two separate currencies although considered to be one unit when taken as a pair. The weaknesses and strengths of each currency have to be taken into consideration when trading the unit as it influences the final outcome. Another factor that is often overlooked by traders or investors is that the weakening of one currency along with the strengthening of the other currency in the pair results in the generation of pips. It is according to this that entry and exit from the Forex market has to be done in order to maintain profitability.

  • The interest rate differential between the European Bank(ECB) and the Federal Reserve(FED)
  • Dollar strength drives EUR/USD lower
  • FED intervention to weaken the dollar the sends EUR/USD higher

 

Weekly Analysis and Recommendation:

The EUR/USD is trading at 1.2290 down for the week.

When I was a child my parents read me all the fairy tales, they all seemed to be about European’s now I understand why, it seems that all of Europe lives in this fairy tale world where everything will be ok in the end.

Where a Prince or Knight will come to the rescue, but the kingdom and the fairy princess will be saved.

As I watched the EU continue to crumble, I keep waiting for a knight in shining armor to ride in the straighten things out.

Each time the mean wizard seems to cast a spell and they all become dizzy or forget their goals. We started out a few years ago with the Merkel/Sarkozy union, moved on to the Queen Mother herself, Angela Merkel, then she partnered with Christine Lagarde, then came Hollande and the Draghi and somewhere Monti stepped in for a minute or two.

Well just a week or so ago Mr. Draghi, pulled out his trusty sword, through down the gauntlet and promised to save the kingdom. Seems that he found a wench, drank too much Ale and forgot his mission.

Well the markets got tired of the same old story. The three mean sisters, Spain, Greece and Italy, seem to be ganging up again, with no Prince Charming to ride to the rescue.

We do have Christine Lagarde asking the village people to give up their farms and their food for Greece. Spain keeps sneaking in the barn door and stealing while Italy, just claims they need nothing, while they are taking everything they can get their hands on.

I think this well sum up the EU…

The USD is another bed time story. It is more fun, it’s about the train that couldn’t stop, just spending money and more money, until it runs off the tracks.

Date

Last

Open

High

Low

Change %

Aug 10, 2012

1.2290

1.2293

1.2316

1.2242

-0.02%

Aug 09, 2012

1.2293

1.2372

1.2388

1.2268

-0.64%

Aug 08, 2012

1.2372

1.2385

1.2403

1.2327

-0.10%

Aug 07, 2012

1.2385

1.2389

1.2442

1.2376

-0.03%

Aug 06, 2012

1.2389

1.2427

1.2429

1.2342

-0.31%

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 recent analysis and information in our weekly reports and we provide daily updates and outlooks.

 

Major Economic Events for the week of Aug 6-10 actual v. forecast for Euro, GPB, the Franc, and USD

Date

Currency

Event 

Actual

Forecast

Previous

Aug 6

GBP

Halifax HPI m/m

-0.6%

-0.5%

0.8%

 

EUR

Sentix Investor Confidence

-30.3

-30.8

-29.6

 

GBP

BRC Retail Sales Monitor y/y

0.1%

 

1.4%

Aug 7

CHF

Foreign Currency Reserves

406.5B

 

365.1B

 

CHF

CPI m/m

-0.5%

-0.5%

-0.3%

 

EUR

Italian Industrial Production m/m

-1.4%

-1.0%

1.0%

 

GBP

Manufacturing Production m/m

-2.9%

-4.0%

1.2%

 

EUR

Italian Prelim GDP q/q

-0.7%

-0.7%

-0.8%

 

EUR

German Factory Orders m/m

-1.7%

-0.9%

0.7%

 

GBP

NIESR GDP Estimate

-0.2%

 

-0.7%

Aug 8

CHF

SECO Consumer Climate

-17

-4

-8

 

EUR

German 10-y Bond Auction

1.42|1.8

 

1.31|1.5

 

EUR

German Industrial Production m/m

-0.9%

-0.8%

1.7%

 

USD

Prelim Nonfarm Productivity q/q

1.6%

1.5%

-0.9%

 

USD

Prelim Unit Labor Costs q/q

1.7%

0.5%

1.3%

 

USD

Crude Oil Inventories

-3.7M

-0.6M

-6.5M

 

USD

10-y Bond Auction

1.68|2.5

 

1.46|3.6

Aug 9

GBP

Trade Balance

-10.1B

-8.5B

-8.4B

 

USD

Trade Balance

-42.9B

-47.4B

-48.0B

 

USD

Unemployment Claims

361K

371K

367K

 

USD

Mortgage Delinquencies

7.58%

 

7.40%

Aug 10

EUR

French Industrial Production m/m

0.0%

0.4%

-2.1%

 

GBP

PPI Input m/m

1.3%

1.4%

-2.9%

 

USD

Import Prices m/m

-0.6%

0.1%

-2.4%

 

USD

Federal Budget Balance

-69.6B

-103.0B

-59.7B

Historical: From 2010 to Present

Highest: 1.4940 USD on May 04, 2011.

Average: 1.3434 USD over this period.

Lowest: 1.1877 USD on Jun 07, 2010.

Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD

Date

Time

Currency

Event 

Previous

Aug 14

5:30

EUR

French Prelim GDP q/q

0.0%

 

6:00

EUR

German Prelim GDP q/q

0.5%

 

9:00

EUR

ZEW Economic Sentiment

-22.3

 

12:30

USD

Core Retail Sales m/m

-0.4%

 

12:30

USD

PPI m/m

0.1%

 

12:30

USD

Retail Sales m/m

-0.5%

 

14:00

USD

Business Inventories m/m

0.3%

Aug 15

12:30

USD

Core CPI m/m

0.2%

 

12:30

USD

Empire State Manufacturing Index

7.4

 

13:15

USD

Industrial Production m/m

0.4%

 

14:30

USD

Crude Oil Inventories

-3.7M

Aug6

9:00

CHF

ZEW Economic Expectations

-42.5

 

9:00

EUR

CPI y/y

2.4%

 

12:30

USD

Building Permits

0.76M

 

12:30

USD

Unemployment Claims

361K

 

12:30

USD

Housing Starts

0.76M

 

14:00

USD

Philly Fed Manufacturing Index

-12.9

Aug 17

6:00

EUR

German PPI m/m

-0.4%

 

8:00

EUR

Current Account

10.9B

 

13:55

USD

Prelim UoM Consumer Sentiment

72.3

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