EUR/USD Forecast Dec. 14, 2011, Fundamental Analysis

most of Tuesday and fluctuated heavily especially with the debt sales in focus and ahead of the FOMC decision.

The pair is still governed by the worsening outlook for the euro area and with the alarm raised from rating agencies since the start of the week that nations are under the spotlight as Brussels failed to produce a strong plan, where Moody’s warning was followed late Monday by Fitch.

The selloff nonetheless eased on Tuesday after the heavy decline seen on Monday where the economic sentiment improved slightly and more importantly a strong bond sale from Spain with falling yields and surging demand alongside the good first auction for EFSF short term bills eased the pressure on the euro.

Overall, the market is still wary over the euro outlook especially as Brussels delivered nothing to solve the now problems which leaves the speculation again that only the ECB can solve the crisis and with its reluctance to move and the lack of other developments means that the negative view will be dominant in the market.

On Wednesday the pair will surely reflect anything from the late FOMC decision that will linger in reaction on European markets if the feds signal any move as they are expected to keep their monetary policy unchanged late Tuesday.

We also have more debt sales from Italy and Germany on Wednesday and both remain critical and not just Italy and its high yields, its Germany and its low yields considering the rising risk over the outlook and especially with the rating agencies warnings for all the EU and especially from S&P that put the major 6 triple-A rated euro nations under its review.

The euro zone will start the session at 10:00 GMT with the industrial production index for October, where the annual working-day adjusted index previous reading was 2.2%, while the seasonally-adjusted monthly index is expected to drop by 0.3% from the previous drop of 2.0%.

The United States will join the session at 13:30 GMT with the import price index for November, where the monthly index is expected to expand by 1.0% from the previous drop of 0.6%, while the annual index previous reading was 11.0%.