EUR/USD Weekly Fundamental Analysis June 11-15, 2012, Forecast

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 spent the week on the negative sentiment rollercoaster trading in a range between 1.26 and 1.23, weakened on global risk aversion and safe haven trading. The pair finished the week at 1.2517

European currency started the week with a rebound against US dollar, as the markets were eagerly waiting for the outcome of the G-7 meeting and the ECB meet. After recovering slightly against the greenback, euro resumed its weak trend as the rating agency, Moody’s downgraded the credit rating of several German and Austrian banks, as the banks are not capable of absorbing the losses. In the meanwhile, we heard the Spanish treasury minister saying that the Spain is facing lot of problems in refinancing its debt and that the country will find it difficult to rescue itself from this situation. Turning towards the G-7 meeting, the ministers and the bankers in the G-7 discussed about the financial and the fiscal union in Europe with major focus being on the Spain and Greece. During all these negative sentiments, currency still rebounded. The ECB officials took a neutral stance and kept the rates unchanged at 1% and postponed the policy changes for the month of July.

Where as in the US, a series of poor data last week (ended 1st June, 2012) in the form of rising unemployment rate and drop in the PMI had prompted the investors to rush towards US treasuries. The weak data made the market participants expect another round of monetary easing by the Fed to support the economy. This week we saw some positive economic data such as rise in the services PMI, encouraging the growth of the economy. Along with that we saw the Unemployment claims of the US falling, thereby reflecting positive signs of the labor market conditions.

Several FOMC members put forth their views regarding the state of the economy and future plans. They showed their readiness to take appropriate actions if the country needs boost at any point in time. Then came the significant speech by the Fed chairman Ben Bernanke, where he preferred to keep the market

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 4 – 8 actual v. forecast for Euro, GPB, the Franc, and USD

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 and CHF