EUR/USD Weekly Fundamental Analysis October 1-5, 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 1.2858 after hitting a high of 1.2980 at the beginning of the week. Economic data released this week showed a deteriorating outlook in the US economic recovery. 2Q GDP growth was revised lower to a surprising 1.3% from the prior 1.7% estimate, durable goods orders saw the largest decline since January 2009, the September Chicago PMI fell below the pivotal 50 level for the first time since 2009, and personal income grew a mere 0.1% in August. U.S. treasury yields have fallen with the 10-year yield back below the 100-day SMA.

Thanks to a sharp rally through Friday, the US dollar managed to close out this past week in the green. However, we are once again lacking the conviction of a definable trend for the greenback – whether bullish or bearish. This indecision will not likely last for very long, however, as we head into the fourth quarter. Rather than jumping from headline-to-headline or release-to-release, the markets are facing matters that will redefine investor sentiment and determine whether sidelined long-term investors return or the speculative build up of the past few years is reversed. What we need is the catalyst – both fundamental and technical – that sets us on our course.

Date

Last

Open

High

Low

Change %

Sep 28, 2012

1.2858

1.2912

1.2959

1.2839

-0.42%

Sep 27, 2012

1.2912

1.2878

1.2928

1.2831

0.26%

Sep 26, 2012

1.2878

1.2898

1.2913

1.2835

-0.16%

Sep 25, 2012

1.2898

1.2940

1.2971

1.2888

-0.33%

Sep 24, 2012

1.2941

1.2967

1.2980

1.2892

-0.20%

Economic data next week includes key labor reports such as the ADP employment change and the September nonfarm payrolls (NFP) and unemployment rate. As monetary policy takes time to work its way into the economy, it is unlikely that we will see the benefits of the recent round of easing in next week’s releases. Furthermore, with heightened uncertainty over the looming fiscal cliff, employers may be reluctant to increase hiring which has been a factor in subdued job growth. Weaker labor data could put renewed pressure on the dollar as the Fed acts to promote sustained improvement in labor market conditions.

While Euro data was negative for the week, sentiment toward the euro was negative, as Spain just simply refused to ask for a bailout and Greece continued to play games, as riots and protests broke out in both countries.

Also next week, more global manufacturing data will be released with China and Europe announcing Purchasing Managers Index data, while the U.S. ISM manufacturing index also is slated for release.

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 September 24-28, 2012 actual v. forecast for Euro, GPB, the Franc, and USD

Date

Currency

Event

Actual

Forecast

Previous

Sep. 24 

EUR

German Ifo Business Climate Index 

101.4

102.5

102.3

 

EUR

German Current Assessment 

110.3

111.0

111.1

 

EUR

German Business Expectations 

93.2

95.0

94.2

Sep. 25

EUR

GfK German Consumer Climate 

5.9

5.9

5.9

 

GBP

BBA Mortgage Approvals 

30.5K

28.6K

28.8K

 

USD

CB Consumer Confidence 

70.3

63.0

61.3

 Sep. 26

EUR

German 10-Year Bund Auction 

1.520%

 

1.420%

 

GBP

CBI Distributive Trades Survey 

6

5

-3

 

EUR

German CPI (MoM) 

0.0%

0.0%

0.4%

 

EUR

German CPI (YoY) 

2.0%

2.0%

2.1%

 

USD

New Home Sales 

373K

380K

374K

 Sep. 27

EUR

German Unemployment Change 

9K

10K

11K

 

GBP

Business Investment (QoQ) 

0.9%

-1.5%

-1.5%

 

GBP

Current Account 

-20.8B

-12.4B

-15.4B

 

GBP

GDP (QoQ) 

-0.4%

-0.5%

-0.5%

 

GBP

GDP (YoY) 

-0.5%

-0.5%

-0.5%

 

EUR

Italian 10-Year BTP Auction 

5.24%

 

5.82%

 

USD

Core Durable Goods Orders (MoM) 

-1.6%

0.3%

-1.3%

 

USD

Durable Goods Orders (MoM) 

-13.2%

-5.0%

3.3%

 

USD

Initial Jobless Claims 

359K

378K

385K

 

USD

GDP (QoQ) 

1.3%

1.7%

1.7%

 

USD

Continuing Jobless Claims 

3271K

3285K

3275K

 

USD

Pending Home Sales (MoM) 

-2.6%

-0.7%

2.6%

 Sep. 28

EUR

French GDP (QoQ) 

0.0%

0.0%

0.0%

 

EUR

French Consumer Spending (MoM) 

0.4%

-0.1%

0.4%

 

CHF

KOF Leading Indicators 

1.67

1.57

1.59

 

EUR

CPI (YoY) 

2.7%

2.4%

2.6%

 

USD

Core PCE Price Index (MoM) 

0.1%

0.1%

0.1%

 

USD

Personal Spending (MoM) 

0.5%

0.5%

0.4%

 

USD

Chicago PMI 

49.7

53.0

53.0

 

USD

Michigan Consumer Sentiment 

78.3

79.0

79.2

 

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

Date

Time

Currency

Event

Forecast

Previous

Oct. 01 

08:15

CHF

Retail Sales (YoY) 

5.0% 

3.2% 

 

08:30

CHF

SVME PMI 

47.0 

46.7 

 

15:00

USD

ISM Manufacturing Index 

49.8 

49.6 

Oct. 02 

07:00

GBP

Nationwide HPI (MoM) 

0.2% 

1.3% 

Oct. 03 

10:00

EUR

Retail Sales (MoM) 

-0.2% 

-0.2% 

Oct. 04

12:00

GBP

Interest Rate Decision 

0.50% 

0.50% 

 

12:00

GBP

BOE QE Total 

375B 

375B 

 

12:45

EUR

Interest Rate Decision 

0.75% 

0.75% 

Oct. 05

11:00

EUR

German Factory Orders (MoM) 

-0.7% 

0.5% 

Government Bond Auction

Date Time Country 

Oct 01 10:00 Norway 

Oct 02 09:15 Austria 

Oct 02 09:30 Belgium 

Oct 02 09:30 UK 

Oct 02 14:30 UK 

Oct 03 09:10 Sweden 

Oct 03 10:00 Norway 

Oct 04 08:30 Spain 

Oct 04 08:50 France 

Oct 04 15:00 US 

Oct 05 15:30 Italy 

 

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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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