EUR/USD Weekly Fundamental Analysis August 20-24, 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 was slightly higher for the week closing at 1.2333. The pair opened Monday at 1.2275 but traded as high as 1.2373 on Monday. Comments from Chancellor Merkel helped drive up the euro as she spoke during her meetings in Canada last week.

Spain is expected to finally ask for a bailout, but this has been going on for weeks now.

The USD was able to regain some ground after positive eco prints this week and the drop in the odds of monetary stimulus, as building permits, housing starts, unemployment and manufacturing all have printed on the positive side.

Markets continue to trade with sanguinity from the previous day, after German Chancellor Merkel backed ECB’s resolution on conditions for helping reduce borrowing costs in indebted countries and also on an upbeat U.S housing numbers. Michigan consumer confidence, shocked markets showing a strong confidence level, which is very positive for the US economy

With reports indicating at a possible release of some of its oil reserves, crude prices could come under pressure, if this report is reliable. With crisis in Europe showing no signs of backing, investors’ would be keenly following bond auctions in Italy and Spain in coming days to take a stance on the situation in Europe. Also, with Greece still on the sidelines over its cuts, Greek Prime Minister Antonis Samaras will next week hold his first meetings with Euro zone leaders since taking office in a bid to assure for more austerity measures. Market sentiments over the week have been buoyed by cheerful U.S data and on reassurance from European leaders to curb the 3-year old crisis.   

Date

Last

Open

High

Low

Change %

Aug 17, 2012

1.2333

1.2357

1.2382

1.2289

-0.19%

Aug 16, 2012

1.2356

1.2289

1.2372

1.2257

0.55%

Aug 15, 2012

1.2289

1.2325

1.2344

1.2264

-0.28%

Aug 14, 2012

1.2324

1.2326

1.2386

1.2317

-0.02%

Aug 13, 2012

1.2326

1.2275

1.2373

1.2261

0.42%

 

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 August 13-17, 2012 actual v. forecast for Euro, GPB, the Franc, and USD

Date

Time

Currency

Event 

Actual

Forecast

Previous

Aug 14

8:30

GBP

CPI y/y

2.6%

2.3%

2.4%

 

9:00

EUR

German ZEW Economic Sentiment

-25.5

-19.4

-19.6

 

12:30

USD

Core Retail Sales m/m

0.8%

0.4%

-0.8%

 

12:30

USD

PPI m/m

0.3%

0.3%

0.1%

 

12:30

USD

Retail Sales m/m

0.8%

0.3%

-0.7%

Aug 15

8:30

GBP

Claimant Count Change

-5.9K

6.2K

1.0K

 

8:30

GBP

MPC Meeting Minutes

0-0-9

0-0-9

0-0-9

 

12:30

USD

Core CPI m/m

0.1%

0.2%

0.2%

Aug 16

8:30

GBP

Retail Sales m/m

0.3%

0.0%

0.8%

 

12:30

USD

Building Permits

0.81M

0.77M

0.76M

 

12:30

USD

Unemployment Claims

366K

365K

364K

 

14:00

USD

Philly Fed Manufacturing Index

-7.1

-4.7

-12.9

Aug 17

13:55

USD

Prelim UoM Consumer Sentiment

73.6

72.5

72.3

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 21

8:30

GBP

Public Sector Net Borrowing

12.1B

 

10:00

GBP

CBI Industrial Order Expectations

-6

Aug 22

14:00

USD

Existing Home Sales

4.37M

 

14:30

USD

Crude Oil Inventories

-3.7M

 

18:00

USD

FOMC Meeting Minutes

 

Aug 23

6:00

CHF

Trade Balance

2.25B

 

7:00

EUR

French Flash Manufacturing PMI

43.4

 

7:00

EUR

French Flash Services PMI

50.0

 

7:30

EUR

German Flash Manufacturing PMI

43.0

 

7:30

EUR

German Flash Services PMI

50.3

 

8:00

EUR

Flash Manufacturing PMI

44.0

 

8:00

EUR

Flash Services PMI

47.9

 

8:30

GBP

BBA Mortgage Approvals

26.3K

 

10:00

GBP

CBI Realized Sales

11

 

12:30

USD

Unemployment Claims

366K

 

13:00

USD

Flash Manufacturing PMI

51.4

 

14:00

USD

New Home Sales

350K

Aug 24

8:30

GBP

Revised GDP q/q

-0.7%

 

8:30

GBP

Prelim Business Investment q/q

1.9%

 

12:30

USD

Core Durable Goods Orders m/m

-1.1%

 

12:30

USD

Durable Goods Orders m/m

1.6%

 

13:00

EUR

Belgium NBB Business Climate

-11.3

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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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