EUR/USD Weekly Fundamental Analysis September 10-14, 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 broke though multi month highs to end the week at 1.2816 after the release of the nonfarm report which showed that US employers added 96,000 jobs last month, a weak figure that could slow the momentum President Barack Obama hoped to gain from his speech to the Democratic National Convention. The unemployment rate fell to 8.1 per cent from 8.3 per cent in July. But that was only because more people gave up looking for jobs. People who are out of work are counted as unemployed only if they’re looking for a job. The government also said that 41,000 fewer jobs were created in July and June than first estimated. The economy has added just 139,000 jobs a month since the start of the year, below 2011′s average of 153,000. Cash-short governments were a key reason the job market was weaker in June and July than first estimated. Federal, state and local governments cut 39,000 jobs in those months – above the earlier estimate of 18,000. In previous recoveries, governments have typically added jobs, not shed them.

The report increased the likelihood of Fed QE at the FOMC meeting on the 13th of September, weakening the greenback and pushing the euro to new highs. Market sentiment was already strong after Super Mario introduced his new Outright Monetary Transaction program of bond buying sterilization for weakened EU economies.

With the ECB and the FOMC almost behind us, markets will deal with Chinese data due to be dumped this weekend. Last week the PBoC announced some new liquidity plans that seem to be preparing markets for an injection of stimulus, also the government announced a major infrastructure plan aimed at creating jobs and growth.

Date

Last

Open

High

Low

Change %

Sep 07, 2012

1.2816

1.2631

1.2817

1.2627

1.46%

Sep 06, 2012

1.2631

1.2601

1.2647

1.2562

0.25%

Sep 05, 2012

1.2600

1.2534

1.2625

1.2502

0.53%

Sep 04, 2012

1.2534

1.2587

1.2628

1.2527

-0.42%

Sep 03, 2012

1.2587

1.2574

1.2611

1.2561

0.10%

 

Once the central banks are finished, traders will turn back to eco data and to Greece, Spain and Italy, who still face economic and debt programs.

Following this week’s estimates from Germany and Spain, industrial production (IP) figures for July will be reported for France, Italy and the euro area aggregate next week. We expect continued declines in the yearly growth rates, reflecting the region’s intensifying economic downturn. The manufacturing purchasing managers’ indexes (PMIs), which track the yearly IP series fairly closely (see chart), have remained in contractionary territory across the euro zone since late 2011 or early 2012, and actually worsened between June and July. Fading confidence and resurgence in oil prices have dampened business investment and consumer spending. Moreover, external demand for European manufactured products has also ebbed as emerging and developed nations around the globe struggle with the process of deleveraging and the financial market spillovers from the euro crisis. We expect IP to fall 3.7% y/y in France, 11.5% in Italy, and 2.8% in the euro area, with the downward trend likely to continue in the months ahead.

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 3-7, 2012 actual v. forecast for Euro, GPB, the Franc, and USD

Date

Time

Currency

Event

Actual

Forecast

Previous

Sep. 03 

08:15

CHF

Retail Sales (YoY) 

3.2%

4.3%

3.3%

 

08:30

CHF

SVME PMI 

46.7

49.0

48.6

 

08:45

EUR

Italian Manufacturing PMI 

43.60

45.00

44.30

 

08:50

EUR

French Manufacturing PMI 

46.0

46.2

46.2

 

08:55

EUR

German Manufacturing PMI 

44.7

45.1

45.1

 

09:00

EUR

Manufacturing PMI 

45.1

45.3

45.3

 

09:30

GBP

Manufacturing PMI 

49.5

46.2

45.2

Sep. 04

06:45

CHF

GDP (QoQ) 

-0.1%

0.2%

0.5%

 

08:00

EUR

Spanish Unemployment Change 

38.20K

 

-27.80K

 

15:00

USD

ISM Manufacturing Index 

49.6

50.0

49.8

 

15:40

GBP

Services PMI 

53.7

51.5

51.0

Sep. 05

08:15

CHF

CPI (MoM) 

0.0%

0.1%

-0.5%

 

10:00

EUR

Retail Sales (MoM) 

-0.2%

-0.2%

0.1%

 

10:35

EUR

German 10-Year Bund Auction 

1.420%

 

1.420%

 

13:30

USD

Nonfarm Productivity (QoQ) 

2.2%

1.8%

1.6%

 

13:30

USD

Unit Labor Costs (QoQ) 

1.5%

1.5%

1.7%

Sep. 06 

08:00

GBP

Halifax House Price Index (MoM) 

-0.4%

0.3%

-0.7%

 

10:00

EUR

GDP (QoQ) 

-0.2%

-0.2%

-0.2%

 

11:00

EUR

German Factory Orders (MoM) 

0.5%

0.2%

-1.6%

 

12:00

GBP

Interest Rate Decision 

0.50%

0.50%

0.50%

 

12:00

GBP

BOE QE Total 

375B

375B

375B

 

12:45

EUR

Interest Rate Decision 

0.75%

0.75%

0.75%

 

13:15

USD

ADP Nonfarm Employment Change 

201K

140K

173K

 

13:30

USD

Initial Jobless Claims 

365K

370K

377K

 

13:30

USD

Continuing Jobless Claims 

3322K

3315K

3328K

 

15:00

USD

ISM Non-Manufacturing Index 

53.7

52.5

52.6

Sep. 07

06:45

CHF

Unemployment Rate 

2.9%

2.9%

2.9%

 

09:30

GBP

Industrial Production (MoM) 

2.9%

1.5%

-2.4%

 

09:30

GBP

Manufacturing Production (MoM) 

3.2%

2.0%

-2.9%

 

09:30

GBP

PPI Input (MoM) 

2.0%

1.7%

0.4%

 

09:30

GBP

PPI Input (YoY) 

1.4%

1.2%

-2.4%

 

09:30

GBP

Industrial Production (YoY) 

-0.8%

-2.8%

-3.8%

 

11:00

EUR

German Industrial Production (MoM) 

1.3%

0.2%

-0.4%

 

13:30

USD

Average Hourly Earnings (MoM) 

0.0%

0.2%

0.1%

 

13:30

USD

Nonfarm Payrolls 

96K

125K

141K

 

13:30

USD

Unemployment Rate 

8.1%

8.3%

8.3%

 

13:30

USD

Average Weekly Hours 

34.4

34.5

34.4

 

13:30

USD

Private Nonfarm Payrolls 

103K

138K

162K

 

15:00

GBP

NIESR GDP Estimate 

0.2%

 

0.3%

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

Sep. 11

00:01

GBP

RICS House Price Balance 

-22% 

-24% 

 

09:30

GBP

Trade Balance 

-9.0B 

-10.1B 

 

13:30

USD

Trade Balance 

-44.2B 

-42.9B 

Sep. 12 

06:30

EUR

French CPI (MoM) 

 

-0.4% 

 

07:00

EUR

German CPI (MoM) 

0.3% 

0.3% 

 

07:00

EUR

German CPI (YoY) 

2.0% 

2.0% 

 

09:30

GBP

Average Earnings Index +Bonus 

1.6% 

1.6% 

 

09:30

GBP

Claimant Count Change 

0.5K 

-5.9K 

 

10:00

EUR

Industrial Production (MoM) 

-0.1% 

-0.6% 

 

13:30

USD

Import Price Index (MoM) 

1.3% 

-0.6% 

Sep. 13

08:15

CHF

PPI (MoM) 

-0.4% 

-0.3% 

Sep. 14

10:00

EUR

CPI (YoY) 

2.6% 

2.6% 

 

10:00

EUR

Employment Change (QoQ) 

 

-0.2% 

 

10:00

EUR

Core CPI (YoY) 

 

1.7% 

Government Bond Auction

Date Time Country 

Sep 10 09:30 Germany 

Sep 10 15:30 Italy  

Sep 11 00:30 Japan 

Sep 11 08:30 Holland 

Sep 11 09:10 Greece 

Sep 11 09:30 UK 

Sep 11 14:30 UK 

Sep 11 17:00 US 

Sep 12 09:10 Italy  

Sep 12 09:10 Sweden 

Sep 12 09:30 Germany 

Sep 12 09:30 Swiss 

Sep 12 14:30 Sweden 

Sep 12 17:00 US 

Sep 13 00:30 Japan 

Sep 13 09:10 Italy  

Sep 13 09:30 UK 

Sep 13 15:00 US 

Sep 13 17:00 US 

Sep 14 10:00 Belgium

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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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