EUR/USD Weekly Fundamental Analysis July 2-6, 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 surged on Friday to trade close to the 1.27 level, and closed the month and quarter at 1.2662. After a week of bickering and arguing, gesturing and positioning by the EU Ministers markets had given up on any hopes of any success. The euro fell all week, over the disappointment and the worries about the continued EU situation. With rates climbing in Spain and Italy and Greece threatening to depart from the EU, markets were very weary.

Date

Last

Open

High

Low

Change %

Jun 29, 2012

1.2662

1.2441

1.2692

1.2433

1.77%

Jun 28, 2012

1.2442

1.2470

1.2525

1.2408

-0.22%

Jun 27, 2012

1.2470

1.2485

1.2508

1.2446

-0.13%

Jun 26, 2012

1.2486

1.2503

1.2531

1.2442

-0.14%

Jun 25, 2012

1.2503

1.2538

1.2545

1.2472

-0.28%

On Friday, EU Ministers announced a new plan to immediately assist EU nations dealing with debt problems and interest rates and liquidity.

Summary of Euro Area Summit Statement:

1. A proposal for a single bank supervisor.

2. After a single bank supervisor is established, the ESM could have the possibility to recapitalize banks directly.

3. Ireland will be treated equally as well as all prior agreement.

4. The EFSF will be used until the ESM becomes available.

5. EFSF loans will be transferred to the ESM without any seniority.

6. Strong commitment to do what is necessary.

7. The above to be implemented by July 9, 2012.

There was also a reiteration of the €130bn growth pact that the gang of 4 had agreed to last Friday. Markets will take the weekend to review the new plans and Monday will tell the story.

This week there is a lot of eco risk coming at the markets. In the US ISM manufacturing data will be release followed by the Nonfarm Payroll reports. In Europe, markets are facing a series of eco reports ranging from jobs to housing.  With prior readings on the German economy turning down, markets will be closely watching that country’s factory data.  German factory orders (Thursday) fell 1.9% m/m in April and are expected to be flat in May.  Similarly, German industrial production (Friday) slid by 2.2% m/m in April and is expected to rise only marginally in May.  Manufacturing data remains a global theme for the week with the UK’s PMI expected to remain in contraction when it is updated on Monday.  Key EC releases will include the unemployment rate that stands at 11.1% by the last reading, and retail trade that fell hard in April and which is expected to rise only marginally in May.  Also worth watching will be planned post-Summit meetings and speeches involving each of Merkel, Monti, and Hollande, as well as the European Commission’s release of its quarterly report on the Euro Area on Friday.

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 June 25 – 29 actual v. forecast for Euro, GPB and the Franc

Date

Currency

 Event

Actual

Forecast

Previous

Jun 26

EUR

GfK German Consumer Climate

5.8

5.7

5.7

GBP

Public Sector Net Borrowing

15.6B

13.6B

-19.9B

Jun 27

EUR

German Prelim CPI m/m

-0.1%

0.0%

-0.2%

GBP

BBA Mortgage Approvals

30.2K

32.8K

32.1K

GBP

CBI Realized Sales

42

12

21

Jun 28

GBP

Nationwide HPI m/m

-0.6%

0.3%

0.2%

EUR

German Unemployment Change

7K

4K

1K

GBP

Current Account

-11.2B

-8.9B

-7.2B

GBP

Final GDP q/q

-0.3%

-0.3%

-0.3%

GBP

Final GDP q/q

-0.3%

-0.3%

-0.3%

GBP

GfK Consumer Confidence

-29

-30

-29

EUR

German Retail Sales m/m

-0.3%

0.1%

-0.2%

Jun 29

EUR

French Consumer Spending m/m

0.4%

0.0%

0.7%

CHF

KOF Economic Barometer

1.16

0.87

0.80

EUR

M3 Money Supply y/y

2.9%

2.4%

2.5%

EUR

CPI Flash Estimate y/y

2.4%

2.4%

2.4%

 

Historical:

Highest: 1.5091 USD on Dec 03, 2009.

Average: 1.3709 USD over this period.

Lowest: 1.19 USD on Jun 07, 2010.

 

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

Date

Time

Currency

 Event

Forecast

Previous

Jul 2

3:15am

CHF

Retail Sales y/y

0.9%

0.1%

3:30am

CHF

SVME PMI

44.6

45.4

3:45am

EUR

Italian Manufacturing PMI

44.6

44.8

4:30am

GBP

Manufacturing PMI

46.7

45.9

5:00am

EUR

Unemployment Rate

11.1%

11.0%

10:00am

USD

ISM Manufacturing PMI

52.1

53.5

Jul 3

3rd-6th

GBP

Halifax HPI m/m

-0.3%

0.5%

4:30am

GBP

Construction PMI

53.1

54.4

4:30am

GBP

Net Lending to Individuals m/m

1.1B

1.4B

10:00am

USD

Factory Orders m/m

0.1%

-0.6%

Jul 4

 

 

 

 

Jul 5

4:00am

EUR

Final Services PMI

46.8

46.8

4:30am

GBP

Services PMI

53.0

53.3

5:00am

EUR

Retail Sales m/m

0.2%

-1.0%

6:00am

EUR

German Factory Orders m/m

0.2%

-1.9%

7:00am

GBP

Official Bank Rate

0.50%

0.50%

7:45am

EUR

Minimum Bid Rate

0.75%

1.00%

8:15am

USD

ADP Non-Farm Employment Change

101K

133K

8:30am

USD

Unemployment Claims

385K

386K

10:00am

USD

ISM Non-Manufacturing PMI

53.1

53.7

11:00am

USD

Crude Oil Inventories

 

-0.1M

Jul 6

3:00am

CHF

Foreign Currency Reserves

 

303.8B

3:15am

CHF

CPI m/m

-0.3%

0.0%

4:30am

GBP

PPI Input m/m

-2.1%

-2.5%

6:00am

EUR

German Industrial Production m/m

0.3%

-2.2%

8:30am

USD

Non-Farm Employment Change

92K

69K

8:30am

USD

Unemployment Rate

8.2%

8.2%

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About:FX Empire Analyst - Barry Norman

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