EUR/USD Daily Fundamental Analysis for August 23, 2011

The EUR/USD started the week with continued volatility and the odds favored the euro with the lack of major fundamentals from both nations which kept the euro stronger on expectations for further Fed easing.

European stocks and commodities moved to the upside while the dollar weakened most of the session which supported the euro higher as investors increased the bets that the Federal Reserve will likely signal in a strong tone further support for the economy and possible QE3 in Jackson Hole this week.

Still, the heavy data on Tuesday will refuel the volatility and choppy trading with the heavy data from the euro area which are expected to be downbeat confirming the slowing pace of the recovery.

Germany will start at 07:30 with the flash Manufacturing PMI for August which is expected to slow to 51.0 from 52.0 while the PMI Services is also expected weaker at 52.0 from 52.9.

The euro area starts the fundamentals this week with the flash estimate for the August PMI at 08:00 GMT. The Manufacturing PMI is expected to contract in August at 49.5 from 50.4 while the services PMI is expected to slow to 51.0 from 51.6 and the Composite PMI is expected flat at 50 from 51.1.

Germany will return with the ZEW Survey for August at 09:00 GMT with the Current Situation Index expected to slow to 85.0 from 90.6 while the Economic Sentiment to slow to -25.0 from -15.1.

The euro Area ZEW Economic Sentiment Index is due also at 09:00 GMT and likely declined in August following -7.0.

The United States will start the data at 14:00 GMT with the New Home Sales for July which are expected with 1.0% rebound to 315 thousand from 312 thousand.