EUR/USD Weekly Fundamental Analysis July 9-13, 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 pair has fallen off a cliff. Trading at the end of the week at 1.2286 a surprise to most of the markets. The euro was forecast to trade at 1.23 by the end of the second quarter, which was delayed by false hope offered by the EU Ministers on the morning of June 29th, which rescued the euro and sent it flying by 2 cents in hours. As the week progressed, the euro remained strong. On Wednesday the US markets were closed for the Independence Day Holiday. On Thursday the much anticipated ECB rate decision and statement were due.

Date

Last

Open

High

Low

Change %

Jul 06, 2012

1.2286

1.2393

1.2401

1.2260

-0.86%

Jul 05, 2012

1.2393

1.2516

1.2539

1.2364

-0.98%

Jul 04, 2012

1.2516

1.2605

1.2607

1.2508

-0.71%

Jul 03, 2012

1.2605

1.2580

1.2626

1.2560

0.20%

Jul 02, 2012

1.2580

1.2656

1.2668

1.2568

-0.59%

As expected the bank reduced its key lending rate by 25bps as markets expected, but what they did not anticipate was a reduction in deposit rates to zero as well as the negative sentiments in Draghi’s economic summary in this statement. His pessimism sent the euro tumbling. As the USD gained on the weakness of the euro, market players moved their attention to the all important make it or break it, Nonfarm report. Which was so poor, it supported the theory that the US economy had hit a stall once again. Traders now turned to excitement that the Fed’s might pull out the big guns and offer huge stimulus packages to get the economy up and running.

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 July 2 – 6 actual v. forecast for Euro, GPB, the Franc, and USD

Date

Currency

 Event

Actual

Forecast

Previous

Jul 2

CHF

Retail Sales y/y

6.2%

2.1%

0.2%

EUR

Spanish Manufacturing PMI

41.1

 

42.0

GBP

Manufacturing PMI

48.6

46.6

45.9

USD

ISM Manufacturing PMI

49.7

52.1

53.5

Jul 3

GBP

Construction PMI

48.2

53.1

54.4

Jul 4

GBP

Services PMI

51.3

52.9

53.3

Jul 5

EUR

Spanish 10-y Bond Auction

6.43|3.2

 

6.04|3.3

GBP

Asset Purchase Facility

375B

375B

325B

GBP

Official Bank Rate

0.50%

0.50%

0.50%

EUR

Minimum Bid Rate

0.75%

0.75%

1.00%

USD

ADP Non-Farm Employment Change

176K

103K

136K

USD

Unemployment Claims

374K

385K

388K

USD

ISM Non-Manufacturing PMI

52.1

53.1

53.7

Jul 6

CHF

Foreign Currency Reserves

364.9B

 

305.9B

CHF

CPI m/m

-0.3%

-0.3%

0.0%

GBP

PPI Input m/m

-2.2%

-2.1%

-2.6%

USD

Non-Farm Employment Change

80K

97K

77K

USD

Unemployment Rate

8.2%

8.2%

8.2%


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

Previous

Jul 9

8:00

EUR

Sentix Investor Confidence

-28.9

23:01

GBP

BRC Retail Sales Monitor y/y

1.3%

23:01

GBP

RICS House Price Balance

-16%

Jul 10

6:45

EUR

French Industrial Production m/m

1.5%

8:30

GBP

Manufacturing Production m/m

-0.7%

8:30

GBP

Trade Balance

-10.1B

14:00

GBP

NIESR GDP Estimate

0.1%

Jul 11

12:30

USD

Trade Balance

-50.1B

14:30

USD

Crude Oil Inventories

-4.3M

Jul 12

9:00

EUR

Industrial Production m/m

-0.8%

12:30

USD

Unemployment Claims

 

12:30

USD

Import Prices m/m

-1.0%

18:00

USD

Federal Budget Balance

-124.6B

7:15

CHF

PPI m/m

-0.2%

Jul 13

12:30

USD

PPI m/m

-1.0%

13:55

USD

Prelim UoM Consumer Sentiment

73.2

 

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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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