By FX Empire.com
Economic Events: (GMT)
Please review the individual daily forecast for explanations and expected results
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EUR/USD Weekly Fundamental Analysis February 6-10, 2012, Forecast
Historical:
Highest: 1.5091 USD on 03 Dec 2009.
Average: 1.3709 USD over this period.
Lowest: 1.19 USD on 07 Jun 2010.
Rules:
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.
Trading comprises of careful market studying, strategizing, planning and executing the plan in a timely manner. This is entirely different to scalping which is resorted to by many a trader on a regular basis. These traders are often clueless as to the market situation and just use this as a type of defense mechanism to compensate for the general lack of information and knowledge. The EUR/USD is a currency pair that certainly offers a lot of currencies trading opportunities if handled correctly.
Characteristics
Average broker spread: 2-3 pips
Daily range average: 90-100 pips
Best time to trade: Euro Session (0700 GMT – 1700 GMT)
some factors affecting the EUR/USD rate:
- 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
Trading the EUR/USD
Trading Experience: New and Advanced currency traders
Trading Style: Day trading and Swing trading
1) Applying Technical Analysis and/or Analyzing Fundamental News from the Euro and US zone to make EUR/USD trading decisions. Breaking strong psychological levels (1.3000, 1.2000,..) and/or surprising economic news releases can make the EUR/USD move a lot in one direction without much retracements.
2) Since the EUR/USD pair tends to be negatively correlated to the USD/CHF, it is always a good idea to compare both EUR/USD and USD/CHF charts in order to predict future moves, if USD/CHF breaks above an important resistance level and EUR/USD didn’t break support level yet, the EUR/USD is very likely to break below support level.
Analysis and Recommendation:
The EUR/USD closed at 1.3158.The euro was on a roller-coaster ride on Friday after the U.S. Labor Department reported that 243,000 jobs were added in January and the unemployment rate dipped to 8.3%.
The markets all week have been reacting only to news and economic reports. US jobs data and unemployment figures surprised the market this week, adding 243k jobs and unemployment dropping to 8.3%. Overall this was a strong week for the US and the greenback. The euro fell close to the 1.305 mark before regaining strength against the greenback. The moving back up to 1.3158.
After reacting to the news and pushing the dollar up against all major currencies, the markets realized that this would reduce the need for Fed intervention, diminishing the chances of more QE or changes in monetary policy. Compounding this with more craziness is Greece, the USD gave back some of its gains.
Greece is still not resolved and the special meeting of the EU that was scheduled for Monday to review the Greek proposal has been cancelled.
There are several problems, which include Germany wanting to have more control over the Greek budget in the future, since it will be mostly German taxpayers who will be funding the bailout. Also the Greek politicians are not supportive of the addition austerity measures, facing elections in April; many political leaders are more concerned with re-election that demands from the EU and IMF.
The Greek Prime Minister said in a statement on Saturday, that the deal will be concluded by the end of the Sunday, satisfying politicians, creditors and the EU, ECB and IMF. The markets will await this new agreement.
Strength:
1) US- Jan Payroll gains show big upside surprise of 243k, about 100k more than expected, unemployment rate falls to 8.3%
2) US- ISM services index rises to best since Feb ’11
3) US-ISM manufacturing up 1 pt but touch less than expected
4) US -Jan vehicle sales at 14.1mm is best since clunker month in Aug ’09 and the most since May ’08 before that
5) US – savings rate rises to 4% from 3.5%
6) US -Initial Jobless Claims fall 12k
7) Germany -unemployed fall again, rate at 6.7%
UK- manufacturing and services PMI figures both rise
9) Eurozone- manufacturing and services PMI in line with initial
10) Portuguese bond yields fall from highs, Italian yields lower too with Spain flat
11)China – manufacturing PMI stays above 50, Taiwan and South Korea rise but remain below 50
12) India – manufacturing and services PMI both jump
Weakness:
1) US- Jan Consumer Confidence falls almost 4 pts to 61.1, well below expectations of 68 as labor market answers soften and those that plan to buy a home falls to lowest since Aug and those that plan to buy a car down at lowest since Oct ’10
2) US -CS home price index falls to lowest since Feb ’03
3) US -MBA said refi’s fell 3.6% and purchase apps were down 1.7%
4) Canada – Jan jobs report disappoints
5) China – PMI services index falls to 52.9 from 56, the 2nd lowest since Feb ’11
6) Taiwan -economy in a recession after Q4 contraction q/o/q
7) Greek- debt discussions for another week are hours away from wrapping up, becoming a nightmare
Eurozone -Amount of LTRO funds from ECB continue to be redeposited with the ECB
Feb 07 09:00 Netherlands Eur 5.0bn Jul 2022 DSL
Feb 07 10:10 Greece 6M T-bill auction
Feb 07 10.30 UK Auctions 1.75% 2017 conventional Gilt
Feb 07 15:30 UK Details gilt auction on Feb 16
Feb 07 18:00 US Auctions 3Y Notes
Feb 08 10:10 Sweden Nominal bond auction
Feb 08 10:30 Germany Eur 4.0bn Feb 2017 Bobl
Feb 08 10:30 Swiss Bond auction
Feb 08 16:30 Italy Details BOT auction on Feb 13
Feb 08 18:00 US Auctions 10Y Notes
Feb 09 10:10 Sweden Sek 0.75bn I/L bond auction
Feb 09 15:30 Sweden Details I/L bond auction on Mar 23
Feb 09 16:00 US Announces auctions of 30Y TIPS on Feb 16
Feb 09 16:30 Italy Details BTP/CCTeu auction on Feb 14
Feb 09 18:00 Italy Auctions 30Y Bonds
Feb 10 11:00 Belgium OLO auction
Originally posted here
