EUR/USD Weekly Forecast December 26-30, 2011, Fundamental Analysis

The EUR/USD fluctuated heavily last week but generally was stable and trying to consolidate around $1.30 areas.

We started from last week to see the thin holiday volume with the choppy trading evident as the eyes were on the ECB three year loans which flooded banks with 489 billion euros and the market still has a cautious reaction to it.

This week we are surly in the holiday mode and with thin volumes of trading any move might be violent and especially with the lack of major data.

The major event will be the Italian debt sale and the US manufacturing and confidence data. In general we expect choppy, tight range and volatile trading in the last week of the year and investors might attempt to be hopeful and continue the upside correction yet likely will be limited as what awaits ahead remains gloomy and uncertain for the debt crisis and the global economy.

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

Monday December 26:

Markets closed for Christmas holiday.

Tuesday December 27:

The United States will release the Consumer Confidence for December at 15:00 GMT which is expected to rise to rise to 58.5 from 56.0.

Wednesday December 28:

No major news scheduled and the market movement will be thin on low volume and focused on the sentiment. The eyes will be on Italy that will be preparing to auction new bonds.

Thursday December 29:

Germany is set to release the preliminary CPI estimate for December where the index is expected with 0.8% rise on the month from a flat previous and 2.2% on the year from 2.4%. In EU Harmonized terms it’s expected to rise also by 0.8% from a flat previous and on the year to ease to 2.4% from 2.8%.

The euro area will release the M3 Money Supply for November at 09:00 GMT which is expected to hold at 2.8% in the three months to November and on the year to fall slightly to 2.5% from 2.6%.

The U.S. will start with the weekly jobless claims for the week ending December 24 at 13:30 GMT after last week they dropped to 364,000.

The Chicago PMI for December is due at 14:45 GMT and expected to ease to 60.2 from 62.6. At 15:00 GMT we have the pending home sales for November which is expected to ease to 1.8% after the 10.4% surge.

Friday December 30:

No major news scheduled and the market movement will be thin on low volume and focused on the sentiment.