EUR/USD Weekly Fundamental Analysis October 22-26, 2012 Forecast

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EUR/USD Weekly Fundamental Analysis October 22-26, 2012 Forecast

EUR/USD Weekly Fundamental Analysis October 22-26, 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 fell from its weekly high of 1.3139 to end the week at 1.3023 and is drifting lower as sentiment towards the euro has turned negative. Although traders did not expect any results from the EU Summit they did hope. Spain dodged the bullet again, and did not request a bailout, which markets were anticipating. And Greece was not resolved. So after much anticipation markets deflated after the final announcements on Friday. The only positive note from last week was the Chinese data dump which met or exceeded expectations, relieving worries of investors.

Date

Last

Open

High

Low

Change %

Oct 19, 2012

1.3023

1.3069

1.3077

1.3014

-0.35%

Oct 18, 2012

1.3069

1.3112

1.3129

1.3056

-0.34%

Oct 17, 2012

1.3113

1.3106

1.3139

1.3086

0.06%

Oct 16, 2012

1.3105

1.2966

1.3123

1.2952

1.07%

Oct 15, 2012

1.2966

1.2933

1.2978

1.2890

0.26%

This week the Chinese data will give a better understanding of the current Chinese economy as the PMI number will have to be above 49 to generate “risk-on trading activity.  The bigger risk is if it comes in lower as it will (call) into question the veracity of the data previously released.

Draghi’s speech will review the ECB’s recent outright monetary transaction plan and what it means for European sovereigns. Given his audience, the risk is that he will sound more hawkish to assuage the German politicians…. Tough talk from Draghi coupled with weaker than expected PMI data will hurt the euro.

Across the pond, the two-day meeting of the Federal Open Market Committee, which concludes Wednesday. Analysts said considering that QE3 was announced in the September meeting, they now expect the FOMC “to enter a holding pattern while watching for signs of a ‘substantial’ improvement in the labor market…. With the FOMC in wait-and-see mode, the ongoing discussion among participants around crafting a consensus forecast is likely to intensify, while other discussion may focus on what to do when Operation Twist ends in December.

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 October 15-19, 2012 actual v. forecast for Euro, GPB, the Franc, and USD

Date

Currency

Event

Actual

Forecast

Previous

Oct. 15

GBP

Rightmove House Price Index (MoM) 

3.5%

 

-0.6%

 

CHF

PPI (MoM) 

0.3%

0.2%

0.5%

 

USD

Core Retail Sales (MoM) 

1.1%

0.6%

1.0%

 

USD

Retail Sales (MoM) 

1.1%

0.8%

1.2%

 

USD

NY Empire State Manufacturing Index 

-6.2

-4.5

-10.4

Oct. 16

GBP

Core CPI (YoY) 

2.1%

2.1%

2.1%

 

GBP

CPI (YoY) 

2.2%

2.2%

2.5%

 

GBP

PPI Input (MoM) 

-0.2%

-0.1%

1.9%

 

GBP

CPI (MoM) 

0.4%

0.4%

0.5%

 

GBP

PPI Input (YoY) 

-1.2%

-0.8%

1.1%

 

EUR

CPI (YoY) 

2.6%

2.7%

2.7%

 

EUR

German ZEW Economic Sentiment 

-11.5

-15.0

-18.2

 

EUR

ZEW Economic Sentiment 

-1.4

-1.1

-3.8

 

EUR

Core CPI (YoY) 

1.5%

1.6%

1.5%

 

USD

Core CPI (MoM) 

0.1%

0.2%

0.1%

 

USD

CPI (MoM) 

0.6%

0.5%

0.6%

 

USD

CPI (YoY) 

2.0%

1.9%

1.7%

 

USD

Core CPI (YoY) 

2.0%

2.0%

1.9%

 

USD

TIC Net Long-Term Transactions 

90.0B

45.3B

67.2B

 

USD

Industrial Production (MoM) 

0.4%

0.2%

-1.4%

Oct. 17

GBP

Average Earnings Index +Bonus 

1.7%

1.6%

1.6%

 

GBP

Claimant Count Change 

-4.0K

-1.0K

-14.2K

 

USD

Building Permits 

0.894M

0.810M

0.801M

 

USD

Housing Starts 

0.872M

0.770M

0.758M

 Oct. 18

GBP

Retail Sales (MoM) 

0.6%

0.4%

-0.1%

 

GBP

Retail Sales (YoY) 

2.5%

2.1%

2.5%

 

EUR

Spanish 10-Year Obligation Auction 

5.458%

 

5.666%

 

USD

Initial Jobless Claims 

388K

365K

342K

 

USD

Continuing Jobless Claims 

3252K

3275K

3281K

 

USD

Philadelphia Fed Manufacturing Index 

5.7

1.0

-1.9

Oct. 19 

USD

Existing Home Sales 

4.75M

4.75M

4.83M

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

Forecast

Previous

Oct. 24 

07:58

EUR

French Manufacturing PMI 

44.0 

42.7 

 

08:28

EUR

German Manufacturing PMI 

48.0 

47.4 

 

09:00

EUR

German Ifo Business Climate Index 

101.6 

101.4 

 

09:00

EUR

German Current Assessment 

109.7 

110.3 

 

09:00

EUR

German Business Expectations 

94.3 

93.2 

 

11:00

GBP

CBI Industrial Trends Orders 

 

-8 

 

15:00

USD

New Home Sales

385K

373K

Oct.26 

07:00

EUR

GfK German Consumer Climate 

5.9 

5.9 

 

08:00

CHF

KOF Leading Indicators 

1.67 

1.67 

Government Bond Auction

Date Time Country 

Oct 22 09:10 Norway 

Oct 23 08:30 Spain 

Oct 23 14:30 UK 

Oct 23 17:00 US 

Oct 24 09:10 Sweden 

Oct 24 09:30 Germany 

Oct 24 14:30 Sweden 

Oct 24 15:30 Italy  

Oct 24 16:30 US 

Oct 25 00:30 Japan 

Oct 25 09:10 Sweden 

Oct 25 15:30 Italy  

Oct 25 17:00 US 

Oct 26 09:10 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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