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
Weekly Analysis and Recommendation:
The EUR/USD ended the difficult week at 1.2779 even though it was able to gain some momentum on Friday and overall market sentiment remains negative and there is little in the way of support for the euro in the short term. Greece has called for new elections in mid June and until this is accomplished Greece will continue to be the albatross around the market. Spain’s banks are beginning to fail as the economy of Spain is developing cracks and crumbling. Market see a rescue plan as inevitable, but with the lack of clear leadership in the EU there is no one to drive this bailout.
|
Date |
Open |
High |
Low |
Change % |
|
|
May 18, 2012 |
1.2779 |
1.2698 |
1.2794 |
1.2643 |
0.64% |
|
May 17, 2012 |
1.2698 |
1.2732 |
1.2749 |
1.2668 |
-0.27% |
|
May 16, 2012 |
1.2732 |
1.2735 |
1.2759 |
1.2682 |
-0.02% |
|
May 15, 2012 |
1.2735 |
1.2832 |
1.2869 |
1.2722 |
-0.74% |
|
May 14, 2012 |
1.2830 |
1.2898 |
1.2905 |
1.2816 |
-0.53% |
The euro had a terrible week, shown in the charts below. Just a few short weeks ago the euro was breaking the 1.33 level.
Market sentiment remains negative towards Europe and any asset class tied to the EU.
Markets are flat to mixed across multiple asset classes this morning. Currency markets were also mixed with crosses like the won, NZ$, A$ and Yen dropping against the USD while currencies including CAD and the Scandinavian crosses appreciated.
There were few fresh overnight catalysts to market behavior. Moody’s downgraded Spanish banks following the North American market close yesterday.
Further, the rhetoric regarding Greece’s challenges turned up a notch overnight. A WSJ interview with the head of Greece’s left wing Syriza party gets the blackmail message across fairly pointedly
German Finance Minister Schaeuble retorted “We want Greece to stay in the euro. But that presupposes that Greece does on its side what is necessary to develop its economy. It’s up to the Greek politicians to explain reality, not make false promises.”
He also repeated Merkel’s line that Germany is open to suggestions targeting faster growth.
Major Economic Events for the week of May 14-18 actual v. forecast for Euro, GPB, and the Franc
|
CHF |
PPI (MoM) |
-0.1% |
0.3% |
0.3% |
|
EUR |
Industrial Production (MoM) |
-0.3% |
0.4% |
0.8% |
|
GBP |
Trade Balance |
-8.6B |
-8.4B |
-8.6B |
|
EUR |
GDP (QoQ) |
0.0% |
-0.2% |
-0.3% |
|
EUR |
ZEW Economic Sentiment |
-2.4 |
11.7 |
13.1 |
|
GBP |
Claimant Count Change |
-13.7K |
5.0K |
-5.4K |
|
GBP |
Average Earnings Index +Bonus |
0.6% |
1.0% |
1.1% |
|
EUR |
Core CPI (YoY) |
1.6% |
1.5% |
1.6% |
|
EUR |
CPI (YoY) |
2.6% |
2.6% |
2.6% |
Historical:
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, CHF and the USD
|
May 21 |
5:45 |
CHF |
SECO Consumer Climate |
-18 |
-19 |
|
May 22 |
8:30 |
GBP |
CPI y/y |
3.5% |
|
|
8:30 |
GBP |
Public Sector Net Borrowing |
15.9B |
||
|
8:30 |
GBP |
RPI y/y |
3.6% |
||
|
TBD |
GBP |
BOE Inflation Letter |
|||
|
14:00 |
USD |
Existing Home Sales |
4.48M |
||
|
May 23 |
8:00 |
EUR |
Current Account |
-1.3B |
|
|
8:30 |
GBP |
MPC Meeting Minutes |
0-0-9 |
||
|
TBD |
EUR |
Industrial New Orders m/m |
-1.2% |
||
|
10:00 |
GBP |
CBI Industrial Order Expectations |
-8 |
||
|
TBD |
GBP |
Inflation Report Hearings |
|||
|
14:00 |
USD |
New Home Sales |
328K |
||
|
14:30 |
USD |
Crude Oil Inventories |
|||
|
May 24 |
6:00 |
CHF |
Trade Balance |
1.69B |
|
|
7:00 |
EUR |
French Flash Manufacturing PMI |
46.9 |
||
|
7:00 |
EUR |
French Flash Services PMI |
45.2 |
||
|
7:30 |
EUR |
German Flash Manufacturing PMI |
46.2 |
||
|
7:30 |
EUR |
German Flash Services PMI |
52.2 |
||
|
8:00 |
EUR |
German Ifo Business Climate |
109.9 |
||
|
8:00 |
EUR |
Flash Manufacturing PMI |
45.9 |
||
|
8:00 |
EUR |
Flash Services PMI |
46.9 |
||
|
8:30 |
GBP |
Retail Sales m/m |
1.8% |
||
|
8:30 |
GBP |
Revised GDP q/q |
-0.2% |
||
|
8:30 |
GBP |
BBA Mortgage Approvals |
31.9K |
||
|
8:30 |
GBP |
Prelim Business Investment q/q |
-3.3% |
||
|
12:30 |
USD |
Unemployment Claims |
|||
|
12:30 |
USD |
Durable Goods Orders m/m |
-4.0% |
||
|
13:00 |
EUR |
Belgium NBB Business Climate |
-10.7 |
Originally posted here
