EUR/USD Forecast January 2, 2012, Fundamental Analysis

The EUR/USD pair declined sharply last week after the downbeat Italian bond auction, whereItalysold bonds less than the targeted quantity despite the drop in yields, which remained around the 7.0% and are still considered relatively high.

The pair declined sharply after fears spread in the market on Thursday, where the euro hit the lowest record seen in more than 15 months on concerns Italy will not be able to fight the debt crisis anymore in case yields remained unsustainable

The focus on Monday will be onGermanyand the euro zone, which are to release manufacturing data for December, with expectations the performance of the manufacturing sectors will remain contracted in the month, affected by the escalating debt crisis and the global slowdown.

The pair will trade narrowly however due to low volumes with the start of 2012, where theUnited Stateswill be gone for the New Year’s Day holiday.

Germanywill start this week at 08:55 GMT with the final PMI Manufacturing index for December, where the manufacturing performance is expected unrevised at 48.1.

The euro zone will join this week at 09:00 GMT with the final PMI Manufacturing index for December, which is expected to linger at 46.9.

TheUnited Stateswill be on New Year’s DayHoliday.