EUR/USD Weekly Fundamental Analysis, August 3 – August 7, 2015 Forecast

Weekly Analysis and Recommendations:

The EUR/USD closed higher last week, driven by a strong end-of-the-week rally on Friday. The move was highlighted by a report which showed the inflation rate held steady in July. Consumer inflation rose an annual 0.2 percent, the same pace as in June, matching trader expectations. Core inflation surprisingly accelerated to 1 percent, the fastest in 15 months according to the European Union’s statistical office.

Traders probably overreacted to the inflation data because a steady reading is not growth.in addition, the spike in core inflation is not likely to last according to economists. It may be a sign that the low point for inflation is in, but there are no signs yet that this represents a trend.

Although inflation may have risen the past three months, the rate remains well below the European Central Bank’s goal of just under 2 percent. Last week, the International Monetary Fund said lingering low inflation puts the Euro Zone economy at risk and that the ECB is going to have to continue its asset-buying stimulus program beyond September 2016. This would cap any rallies and could even lead to lower prices.

The key factor influencing this market is the divergence between the ECB and U.S. Federal Reserve monetary policies. Last week, the Fed issued a hawkish statement, but at the same time expressed no hurry to raise rates. Since an improving labor market is the key to a rate hike, traders are going to be paying close attention to Friday’s U.S. Non-Farm Payrolls report.

Investors are looking for a reading of 224K. A number substantially above this level will be bearish for the EUR/USD. A number substantially below this figure could launch another round of selling pressure.

The reaction to last week’s U.S. employment-cost index on Friday serves as proof as to just how sensitive this Forex pair will be to the labor report.

Look for a sideways market most of the week then watch for better-than-average volatility after the release of the jobs data on Friday.

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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