EUR/USD Weekly Fundamental Analysis March 16-24, 2012, Forecast
Introduction: 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 bounced around all week, almost falling through the 1.30level and almost breaking through the top of 1.32. The euro has ended the week trading at 1.3174. This week is very light on news and economic data. As our long term forecast is for the euro to trade between 1.29-1.30 range we can expect it this week to start a slow decline most likely staying to the bottom of the current price range of 1.32/1.30. As the month and the 1st quarter draw to a close we should see the euro begin to reveal its value, once the current distractions are behind. With Greece out of the picture, Hungary still needs to be handled and Spain, Italy and Portugal are problems to be dealt with. Portugal is perhaps the least since the EU approved their package this past week. Spain continues to see its economy shrink and its deficit grow. Germany and France will have to start producing some strong numbers to assure investor confidence. Last week we saw a very positive ZEW sentiment report, but Germany will have to show some very positive strength. This is the middle of the month week; it is next week that the numbers will begin to tell a story.
Last week the first-ever release of GDP data covering all the Group of 20 countries showed the world economy slowed to a quarter-on-quarter growth rate of 0.7% in the fourth quarter from 0.9% in the third quarter.
The Federal Reserve was in the news most of the week, pushing the economic recovery supported by numerous economic reports from jobs to retail sales, all showing a slow economic recovery in the US.
Historical:
Highest: 1.5091 USD on 03 Dec 2009.
Average: 1.3709 USD over this period.
Lowest: 1.19 USD on 07 Jun 2010.
Major Economic Events for the week of March 19-24
|
Mar. 20 |
01:30 |
AUD |
Monetary Policy Meeting Minutes |
|
Mar. 21 |
10:30 |
GBP |
MPC Meeting Minutes |
|
15:00 |
USD |
Existing Home Sales |
|
|
22:45 |
NZD |
GDP (QoQ) |
|
|
Mar. 22 |
10:30 |
GBP |
Retail Sales (MoM) |
|
13:30 |
Core Retail Sales (MoM) |
||
|
13:30 |
USD |
Initial Jobless Claims |
|
|
17:00 |
EUR |
ECB President Draghi Speaks |
|
|
Mar. 23 |
12:00 |
CAD |
Core CPI (MoM) |
|
15:00 |
USD |
New Home Sales |
The next week’s highlights
In Australia, data on skilled vacancies and merchandise imports is set for release.
The Bank of England will also release the minutes of its last meeting, while data on housing starts and building approvals is due in the United States.
The European Union will release draft proposals regarding the regulation of shadow banks.
The International Monetary Fund will host high level talks at the two day China-India conference in New Delhi.
RBA Governor Glenn Stevens will speak at an investment conference in the week ahead.
Monday
The National Association of Home Builders housing market index for March will be released in the United States on Monday.
Tuesday
The RBA will release the minutes of its March policy meeting, where it kept the official cash rate on hold for the second consecutive time. Investors will watch carefully for any reflection on the expected direction that rates will take over the rest of the year. Most economists are still expecting at least one more rate cut in 2012.
US February housing starts figures and building approval data released. Economists are forecasting housing starts to be flat for the month, at around 700,000.
In the United Kingdom, February consumer price index data is awaited, alongside retail price index figures for the month.
Wednesday
The international merchandise figures for February reported by the Australian Bureau of Statistics. Also the Department of Education and Workplace Relations will release its skilled vacancies index for February.
February existing home sales figures in the US, along with the weekly Energy Information Administration petroleum status report. Analysts expect the data to show a rise in home sales of about two per cent.
Thursday
UK Mortgage Bankers Association mortgage applications figures are also due.
Elsewhere, the Bank of England will release the minutes of its last policy meeting.
UK public sector net borrowing for February is also due.
Also due is the highly anticipated jobless claims data is out in the US. February retail sales data is expected in the UK.
Friday
US new home sales figures for February and experts expect sales to have risen by 6,000 to 327,000.
Economic Releases for the week of March 12-16
|
Mar. 13 |
JPY |
Interest Rate Decision |
0.10% |
0.10% |
0.10% |
|
EUR |
German ZEW Economic Sentiment |
22.3 |
10.5 |
5.4 |
|
|
USD |
Core Retail Sales (MoM) |
0.9% |
0.8% |
1.1% |
|
|
USD |
Retail Sales (MoM) |
1.1% |
1.1% |
0.6% |
|
|
USD |
Interest Rate Decision |
0.25% |
0.25% |
0.25% |
|
|
Mar. 14 |
GBP |
Claimant Count Change |
7.2K |
6.0K |
7.0K |
|
Mar. 15 |
CHF |
Interest Rate Decision |
0.00% |
0.00% |
0.00% |
|
USD |
Initial Jobless Claims |
351K |
356K |
365K |
|
|
Mar. 16 |
USD |
Core CPI (MoM) |
0.1% |
0.2% |
0.2% |
|
USD |
CPI (MoM) |
0.4% |
0.4% |
0.2% |
Government Bond Auctions (this week)
Mar 19 n/a Greece CDS Auction
Mar 19 10:10 Slovakia Bond auction
Mar 19 10:10 Norway T-bill auction
Mar 20 09:30 Spain 12 & 18M T-bill auction
Mar 21 10:10 Sweden Nominal bond auction
Mar 21 10:30 Germany Eur 5.0bn Mar 2014 Schatz
Mar 21 10:30 Portugal Eur 0.75-1.0bn 4 & 6M T-bills
Mar 22 10:10 Sweden I/L bond auction
Mar 22 10.30 UK Auctions 0.625% 2042 I/L Gilt
Mar 22 15:00 US
Announces auctions of 2Y Notes on Mar 27, 5Y Notes on Mar
28 & 7Y Notes on Mar 29
Originally posted here
