EUR/USD Weekly Fundamental Analysis September 3-7, 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 continued a week of positive gains, trading at the close on Friday at 1.2577 gaining from the opening on Monday at 1.2506. The highlight of the week was Mr. Draghi’s withdrawal from the Jackson Hole event, due to the work load at the ECB. The rumor of the week was that Chancellor Merkel was traveling Europe asking leaders to with hold bailout requests.
Also news that the German Central Bank director has threatened or has in fact resigned over the ECB bond purchase program.
Aug 31, 2012
Aug 30, 2012
Aug 29, 2012
Aug 28, 2012
Aug 27, 2012
The market is on tenterhooks regarding a forthcoming announcement from European Central Bank president Mario Draghi, in which he’s expected to announce measures that significantly reduce the pressure on Spain and Italy.
It all started about a month ago, when Mr. Draghi declared in a speech in London, “The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
Since then, the only thing the markets have talked about is what action the ECB might take. That now looks to be buying Spanish and Italian government bonds, to reduce borrowing costs for these countries and so enable them to reform their economies without worrying about financial pressures.
Yet, even now, the details of the central bank’s scheme are unknown. It’s hoped the ECB will make its full announcement next week, on September 6th, at its monthly meeting.
Of course, that means that though the euro is strong for the moment, it could quite easily weaken if next week the European Central Bank disappoints.
Although market expectations for ECB action are high, there are in fact significant pressures on the central bank that limit what steps it can take.
These pressures chiefly come in the form of Jens Weidmann, the head of Germany’s central bank the Bundesbank. Mr. Weidmann opposes the ECB’s proposed bond buying scheme, arguing it comes dangerously close to illegal central bank funding of governments.
There will be plenty of headline risk scattered throughout the week with EU Economic and Monetary Affairs Commissioner Olli Rehn debating banking union with EU Financial Services Commissioner Michel Barnier missions Joaquin Almunia (Draghi dropped out of this debate). German Finance Minister Schaeuble speaks on the future of Europe’s single market. Italian Prime Minister Mario Monti and French President Francois Hollande meet, and so do the EU’s Van Rompuy and Hollande. Auction risk is also elevated with Spain and France poised to tap bond markets hours before the ECB announcement and press conference, and each of Belgium, Austria, the UK and Germany auctioning bonds earlier in the week. Data risk will be a distant influence behind the ECB meeting. This includes fresh manufacturing PMI readings for the UK and Italy. German factory orders have been falling for two of the past three months and signaling net downside risk to Germany’s factory sector, so fresher data for July will help clarify the trend. So will a round of updates for European trade and industrial production figures.
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.
Tier 1 and 2 Economic Releases for August 27-31, 2012
Swedish Retail Sales (MoM)
German Ifo Business Climate Index
German Current Assessment
German Business Expectations
HIA New Home Sales (MoM)
GfK German Consumer Climate
CB Consumer Confidence
Construction Work Done (QoQ)
KOF Leading Indicators
German CPI (MoM)
Pending Home Sales (MoM)
Building Consents (MoM)
Retail Sales (YoY)
Building Approvals (MoM)
Private New Capital Expenditure (QoQ)
German Unemployment Change
Core PCE Price Index (MoM)
Personal Spending (MoM)
Initial Jobless Claims
Continuing Jobless Claims
South Korean Industrial Production (YoY)
Tokyo Core CPI (YoY)
Industrial Production (MoM)
Nationwide HPI (MoM)
Michigan Consumer Sentiment
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 for the upcoming week… Tiers 3 keep your eyes on these
Upcoming Government Bond Auctions
Date Time Country
Government Bond Auction
Date Time Country
Sep 03 09:10 Norway Bond auction
Sep 03 10:00 Belgium OLO auction
Sep 04 00:30 Japan Auctions 10Y JGBs
Sep 04 09:15 Austria Bond auction
Sep 04 09:30 Belgium Auctions Dec 2012 (3M) & Feb 2013 (6M) T-bills
Sep 04 14:30 UK Details 0.75% 2034 I/L Gilt & 1.75% Sep 2022 Gilt on Sep
Sep 05 09:10 Sweden Nominal bond auction
Sep 05 09:30 Germany Eur 5.0bn Sep 2022 Bund auction
Sep 05 09:30 UK 4.5% 2042 Gilt auction
Sep 06 00:30 Japan Auctions 30Y JGBs
Sep 06 08:30 Spain Bono auction
Sep 06 08:50 France OAT auction
Sep 06 09:10 Sweden I/L bond auction
Sep 06 15:00 US Announces 3Y Notes on Sep 11, 10Y Notes on Sep 12 &
Sep 07 15:30 Italy
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.comView all of FX Empire Analyst - Barry Norman's Articles