EUR/USD Weekly Fundamental Analysis, August 17 – August 21, 2015 Forecast

Weekly Analysis and Recommendations:

The EUR/USD posted a strong gain last week, fueled by oversold technical factors and an intervention by China after the People’s Bank of China devalued the Yuan three times last week. Also contributing to the weakness were comments from Federal Reserve vice chairman Stanley Fischer who said early last week that low inflation may prevent the Fed from raising interest rates in September. 

U.S. economic reports will dominate the markets this week. On Monday, traders will get the opportunity to react to the latest Empire State Manufacturing Index. This report should be considered a leading indicator of economic activity. It is expected to show a reading of 5.0 versus a previous reading of 3.9. 

On Tuesday, the focus will be on the U.S. housing industry. Traders are looking for building permits issued in July to edge higher by 1.21 million units. In June, they were up about 7.4% to 1.34 million units. This was its highest level since 2007. Builder confidence is growing indicating that the housing market should continue to improve in the coming months. Housing starts are expected to show a gain of 1.20 million units. 

Wednesday could produce the most volatile reactions to reports with the release of the U.S. consumer inflation report and the latest Fed minutes. U.S. consumer inflation is expected to show an increase of 0.2%. In June, it showed a reading of 0.3%. Lower energy prices are being blamed for the decline. This report is important because it is a major component in the Fed’s decision process as to whether to raise rates in September or refrain. The Fed minutes are expected to reveal how wide the gaps are between the hawks and the doves, and how real a September rate hike is. 

Thursday’s session features more U.S. data with traders turning their attention to weekly unemployment claims, the Philly Fed Manufacturing index and Existing Home Sales. 

Friday’s session features Euro zone Flash Manufacturing and Services PMI data as well as U.S. Flash Manufacturing PMI data. 

Look for increased volatility on Wednesday. A lower than expected U.S. consumer inflation number is likely to be bullish for the EUR/USD. If the guidance in the Fed minutes favors the doves then look for this news to support the EUR/USD also. Because of China’s devaluation activity last week, more traders are now looking for the Fed to take a pass on a September rate hike. This could also underpin the Euro. 

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports. 

Reports to Watch This Week: 

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