EUR/USD Weekly Fundamental Analysis December 3 – 7, 2012, Forecast

Introduction: Out of the major currency pairs the most popular and easy to trade currency pair is the EUR/USD. It has become so popular with traders these days that even when there is no visible trade to be had it is yet traded as a matter of habit. This is of course something that should be avoided and any investor who trades this currency pair wisely can do so successfully with sizable profits at the end of the day.

The first thing with trading currencies is to realize that the EUR/USD is made up of two separate currencies although considered to be one unit when taken as a pair. The weaknesses and strengths of each currency have to be taken into consideration when trading the unit as it influences the final outcome. Another factor that is often overlooked by traders or investors is that the weakening of one currency along with the strengthening of the other currency in the pair results in the generation of pips. It is according to this that entry and exit from the Forex market has to be done in order to maintain profitability.

• The interest rate differential between the European Bank(ECB) and the Federal Reserve(FED)
• Dollar strength drives EUR/USD lower
• FED intervention to weaken the dollar the sends EUR/USD higher

 

Weekly Analysis and Recommendation:

The EUR/USD ended the week just about where it started, the euro closed at 1.2987 having opened this past Monday at 1.2973. The pair broke above the 1.30 price twice this week but was unable to sustain it.

The US dollar remained strong on positive eco data after traders were assured midweek by President Obama, that he was ready to sign a bill to avert the fiscal disasters scheduled for Jan 1, as soon as it was presented. Markets are sure that US lawmakers will reach an agreement at the last minute as they always do.

The euro was buoyed after successful negotiations with Greece were completed and paid little attention to the fact that the EU had drifted back into a recession. German data was very mixed this week, which worried traders.

European markets will put monetary policy decisions and fiscal risk front and centre as each of France and Italy present budget balance updates next Friday and Monday, respectively.  Rating agencies have downgraded France (Moody’s and S&P, Fitch likely to follow) and kept it on negative outlook pending performance on fiscal plans.  Euro area finance ministers meet on Monday, followed by an EU-27 finance ministers meeting the next day.  These regularly scheduled meetings follow the recent emergency meeting that paved the way for a new Greek aid deal with disbursements to begin in two weeks.  There are low expectations for both meetings as EU budget talks have become derailed, and Spain is unlikely to move toward a conditional aid request at this juncture.  No changes in policy directions are expected for either the Bank of England or the ECB on Thursday for either the rate decisions.

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 and we provide daily updates and outlooks.

Major Economic Events for the week of November 26 – 30 actual v. forecast for Euro, GPB, the Franc, and USD

Historical: From 2010 to Present

Highest: 1.4940 USD on May 04, 2011.

Average: 1.3434 USD over this period.

Lowest: 1.1877 USD on Jun 07, 2010.

 

Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD

Government Bond Auction

Date Time Country 

Dec 03 10:30 Germany 

Dec 04 01:30 Japan 

Dec 04 10:30 Belgium 

Dec 04 15:30 UK 

Dec 05 09:30 Spain 

Dec 05 10:30 Germany 

Dec 05 11:00 Norway 

Dec 05 15:30 Sweden 

Dec 06 01:30 Japan 

Dec 06 09:50 France 

Dec 06 16:00 US 

Dec 07 16:30 Italy