EUR/USD Weekly Forecast December 19-23, 2011, Fundamental Analysis

The EUR/USD ended last week with heavy losses after the market saw the ECB and the EU summit nothing but a major disappointment and rating agencies continued to add their negative imputes to the abysmal equation.

We can surely see the euro crisis predominant in the market and this week our eyes will be on market movements rather than the data as this is the last week before Christmas and the end of the week and position squaring and closing the books will be evident as traders step aside ahead of the New Year and that will be the main focus.

We need to track the debt sales this week as well with eyes on Italy, France, Greece and Portugal as the yields and demand will be closely observed. The euro area lacks major fundamentals yet the debt crisis developments and any comments from leaders will be watched and the Italian Senates are expected to follow the lower house of Parliament vote and also okay Monti’s 30 billion austerity package this week.

As for the United States the data is heavy housing data alongside the GDP and income report. The data will add to the volatility in the market, especially if the data worsens and adds to fears of slowing global growth yet good data might help in easing the strain on markets that are preparing for the holidays ahead.

Other news from the euro area and the U.S. economy to affect the pair this week:

Monday December 19:

The euro area will start the week at 09:00 GMT with the Current Account for October where the deficit might have widened from the previous 0.5 billion after we saw the trade surplus on Friday shrink to 0.3 billion from the previous 2.1 billion euros.

Construction Output for October is due at 10:00 GMT and unlikely to have improved drastically after the previous drop of 1.3%.

Tuesday December 20:

Germany will release the Gfk Consumer Confidence Survey for January at 07:00 GMT which is expected to slow slightly to 5.5 from 5.6.

Also at 07:00 GMT we have the Producer Price Index from Germany which is expected with 0.1% gain in November after 0.2% and on the year to ease to 5.2% after 5.3%.

At 09:00 GMT we have the IFO survey for December were the Business Climate index is expected to fall to 106.0 from 106.6, the Current Assessment index to fall to 116.0 from 116.7 and the Expectations index to fall to 97.0 from 97.3.

The United States will start the day at 13:30 GMT with the November housing starts which are expected with 0.3% rebound to 630 thousand from 628 thousand. Building permits are expected to drop 1.8% to 633 thousand from 653 thousand.

Wednesday December 21:

At 15:00 GMT the US Existing Home Sales for November are due and expected with 2.2% rise to 5.06 million from 4.97 million.

Thursday December 22:

The United States will start the busy day at 13:30 GMT with the final and third revision for the third quarter GDP as the expansion is expected unrevised at 2.0%. Personal consumption is expected to hold at 2.3% and the Core PCE to remain at 2.0%.

The Jobless Claims are due the same time after the unexpected huge drop in the past week to 366 the lowest in three and a half years.

The University of Michigan Confidence final estimate for December is due at 14:55 GMT and expected with an upside revision to 68.0 from 67.7.

The leading indicators for November will be released at 13:00 GMT and expected to ease to 0.3% from 0.9%.

Friday December 23:

The week will end with the United States as well starting with the Durable Goods Orders at 13:30 GMT which is expected with 2.1% rebound in November after 0.7% drop and excluding transportation it’s expected to rise by 0.4% after 0.7% gain.

The November Income Report is also due at 13:30 GMT with the Personal Income expected with 0.3% rise after 0.4% and personal spending expected to rise 0.3% after 0.1% as for the core PCE it is expected to hold at the previous gains with 0.1% rise on the month and 1.7% on the year.

New Home Sales for November will be released at 13:00 GMT which is expected with 2.0% rise after 1.3% gain to 313 thousand.