EUR/USD Forecast Dec. 15, 2011, Fundamental Analysis

to trade below the psychological areas of $1.30 which is further negative signals for the euro to continue its free fall.

The pair is back to trade around its lowest this year and just shy above the January lowest record for the year as the outlook for the euro area remains the weakest among its major rivals. There were no breakthroughs on Wednesday to alter the sentiment and investors were spooked after an Italian auction again ended with a new historic borrowing record as the debt crisis inflates.

Italy sold 3.0 billion euros of five-year bonds at an average new record yield of 6.47% rising from the previous auction at 6.29%. The pressure of rising yields keeps the alarm ticking on the debt crisis and the materialization of the agony in Italy that investors are just betting it’s a matter of time that it will fall as well.

Merkel urged patience and that Europe will emerge stronger than it is after the crisis that takes hard work yet that did not unwind the pessimism in the market especially after Reuters on Tuesday reported that from sources in her party that she opposes the expansion of the 500 billion euro rescue fund that will be under review in March.

We can clearly see the pessimistic outlook dominant and till now nothing has altered that view with the yields still high stocks tumbling and the euro erasing the entire year’s movement and nearly back to where it all started this year.

Thursday will still be a very busy day for the market with the heavy load of macroeconomic data and likely will keep the pressure on the pair and we hope that the data offers some relief which will only be temporary as clearly the bearishness will extend further.

Germany will start the session at 08:30 GMT with the purchasing managers’ advanced index for manufacturing and services for the month of December, where the PMI manufacturing previous index was 47.9, while the prior PMI services index was 50.3.

The euro zone will join the session at 09:00 GMT with European Central Bank issuing the monthly report for December.

The euro zone will also release the composite, manufacturing and service purchasing managers’ advanced index, where the PMI composite, manufacturing and service previous reading were 47.0, 46.4 and 47.5 respectively.

At 10:00 GMT the euro zone will provide the consumer price index for November, where the annual CPI Core, monthly CPI and annual CPI indexes prior reading were 1.6%, 0.3% and 3.0% respectively.

The euro-area region will also release the employment index for the third quarter, where the quarterly and annual prior changes were 0.3% and 0.4% respectively.

The United States will join the session at 13:30 GMT with the producer price index for November, where the monthly PPI index is expected to expand by 0.2% from the previous drop of 0.3%, while the PPI excluding food and energy monthly index could have expanded by 0.2% from the previous steady reading, in the time the annual PPI index could have remained unchanged at 5.9%, and finally the annual PPI excluding food and energy could have lingered at 2.8%.

The United States will also release the Empire manufacturing index for December, which could have improved to 2.50 from 0.61.

Furthermore, the United States will also provide the initial jobless claims figure (DEC 10), which could have inclined to 390 thousand claims from 381 thousands.

At 14:00 GMT the United States will return with the TIC flows for October, where the net long-term TIC flows previous reading was $68.6 billion, while the total net TIC flows previous reading was 57.4 billion.

At 14:15 GMT the United States will release the Industrial production index for November, where the industrial production index could have expanded by 0.2% from 0.7%, while the capacity utilization index could improve to 77.9% from 77.8%.

At 15:00 GMT the United States will provide markets with the Philadelphia Federal District indicator, which could have improved to 5.0 from 3.6.