EUR/USD Weekly Fundamental Analysis April 23-27, 2012, Forecast

By FXEmpire.com

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

Analysis and Recommendation:

The EUR/USD is trading at 1.3218 after soaring on the release of german eco data. The pair has had a crazy week bounding up and down. The euro dropped under the critical 1.30 level and then climbed as high as 1.3228

As the weekends, worries over Euro Zone debt and economic growth in the US and China continue to grip commodities and were seen trading in a very tight range waiting for fresh cues for further directional moves. In a lackluster trading, spot gold held steady. Base metals in LME traded mostly flat as investors remained cautious after weak economic indicators from the U.S. Though, successful French and Spanish bond auction allayed concerns over Euro Zone’s deteriorating financial health to some extent. Unexpected rise in German business climate assessed by Ifo lifted the sentiments too. LME copper managed to hang above $8000 a ton. In tandem with the international market, movements in MCX base metal complex and bullions were dreary. Crude oil rose for the first time in three days supported by positive German data. Meanwhile, G-20 finance ministers and central bankers are to meet in Washington later today. The Indian rupee was seen bouncing off a 3-month low it hit during previous session at 52.11 up 0.17 percent

Market emotions remained rather subdued in the wake of persistent debt concerns in the Euro region in spite of a strong German business sentiment. Looking into the evening, no major economic data is slated for release. The ongoing G-20 finance minister’s meet in Washington would be the key event markets would be looking up to take cues from. With Chinese economy going through a lean patch, possible Chinese Central bank liquidity action in the coming days could be a marquee event and have a real impact on the commodities.

The number of Americans who filed requests for jobless benefits totaled 386,000 last week, keeping claims at a four-month high, the U.S. Labor Department said Thursday. Claims from two weeks ago were revised up to 388,000 from an initial reading of 380,000. Economists had projected claims would drop to a seasonally adjusted 374,000 in the week ended April 14, so the number is likely to disappoint investors. The average of new claims over the past four weeks, meanwhile, rose by 5,500 to 374,750, the highest level since late January. Continuing claims increased by 26,000 to a seasonally adjusted 3.3 million in the week ended April 7, the Labor Department said.

Sales of existing homes fell 2.6% in March, the second monthly drop though the sales pace in the first quarter was the best in five years, according to data released Thursday. The National Association of Realtors said.

A gradual improvement in U.S. economic growth is expected past the summer, the Conference Board said Thursday as it reported that its index of leading economic indicators increased 0.3% in March, led by the interest rate spread.

The Italian government will delay its plan to reach a balanced budget in 2013 by a year due to a weaker economic outlook, Reuters reported Wednesday, citing a draft document expected to be approved by Prime Minister Mario Monti’s cabinet later.

Bad debts held by Spanish banks rose to a fresh 17-year high in February, topping 8% for the first time since October 1994, as companies and households fell further behind on debt payments amid a deepening housing and economic slump.

The European Union has no plans to activate its bailout funds to recapitalize Spanish banks, a European Commission spokesman said Thursday in Brussels, according to news reports. “There is no plan to activate the EFSF

France sold 7.97 billion euros ($10.5 billion) of government bonds Thursday, news reports said, near the top end of its planned range of 7 billion to 8 billion euros. France’s debt agency sold 3.55 billion euros of 2014 notes at a yield of 0.85%, while a sale of 2.7 billion euros of 2017 notes produced a yield of 1.83%, reports said. A sale of 1.73 billion euros of April 2015 bonds produced a 1.06% yield.

Traders and analysts said unspecified rumors of a possible downgrade of France’s sovereign debt rating triggered a sharp selloff in French government bonds and added to losses for peripheral euro-zone bonds Thursday morning.

Spain’s economy is back in recession after a mild recovery in early and mid-2011, and faces an “exceptional” situation that may led to further increases in unemployment, Bank of Spain Governor Miguel Angel Fernandez Ordonez said Tuesday.

There isn’t much in the way of eurozone eco this week, except for the United Kingdom

Tuesday sees new home sales data for March released in the US, along with consumer confidence figures.
The Richmond Federal Reserve manufacturing index for April and the S&P Case-Shiller home price index is also on tap.
Wednesday brings March durable goods orders figures in the US, and the weekly Energy Information Administration petroleum status report.
Elsewhere, the US Federal Reserve will meet for its April policy meeting, where it will make its decision on interest rates for the month.

On Thursday, US jobless claims and the pending home sales index will be released.
Friday brings highly anticipated US gross domestic product data. Analysts tip annualized growth of 2.3 per cent – good but not great – but forecasts range from 2 per cent to 3.6 per cent.

Consumer sentiment data will also be released, while the employment cost index is also awaited.

Major Economic Events for the past week actual v. forecast

USD	Retail Sales (MoM)	0.8%	0.3%	1.0%
USD	Core Retail Sales (MoM)	0.8%	0.6%	0.9%
AUD	Monetary Policy Meeting Minutes
EUR	ECB President Draghi Speaks
CAD	Interest Rate Decision	1.00%	1.00%	1.00%
GBP	MPC Meeting Minutes
GBP	Claimant Count Change	3.6K	7.0K	4.5K
CAD	BoC Monetary Policy Report
USD	Initial Jobless Claims	386K	370K	388K
USD	Existing Home Sales	4.48M	4.62M	4.60M
GBP	Retail Sales (MoM)	1.8%	0.5%	-0.8%
GBP	Retail Sales (YoY)	3.3%	1.4%	1.0%
CAD	Core CPI (MoM)	0.3%	0.4%

Highest: 1.5091 USD on 03 Dec 2009.

Average: 1.3709 USD over this period.

Lowest: 1.19 USD on 07 Jun 2010.

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

EUR	Industrial New Orders (MoM)	-0.5%	-2.3%
USD	New Home Sales	320K	313K
USD	CB Consumer Confidence	70.3	70.8
GBP	GDP (YoY)	0.3%	0.5%
GBP	CBI Industrial Trends Orders	-20	-8
USD	Durable Goods Orders (MoM)	-1.5%	2.4%
USD	Core Durable Goods Orders (MoM)	0.5%	1.8%
USD	Interest Rate Decision
GBP	Nationwide Consumer Confidence	44
GBP	CBI Distributive Trades Survey	-4
CHF	KOF Leading Indicators	0.26	0.08

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Originally posted here