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 week on a low note of 1.3084 with markets expecting a complete collapse in the upcoming days.
The U.S. economy has regained some traction, but the pace of activity is very uneven. Increasing employment has helped reinforce consumer confidence and spending, and enhanced competitiveness has underpinned a revival in industrial output, especially on motor vehicles. Even so, the recent softening in hiring and decline in savings is again raising concerns over the durability of the improved performance. Investors have found the silver lining in the negative jobs report on Friday and have supported the USD with hopes of some Fed assistance.
Worries over Spain’s debt problems and Frances elections as well as the Greek elections have sparked negative sentiment towards the euro.
Investors appear to have factored in a victory by Socialist challenger Fran?ois Hollande in France’s presidential election, but fear a potentially chaotic Greek parliamentary election could trigger renewed market turmoil.
Retail sales in the 17 countries that use the euro rose slightly in March, driven by pickups in Germany and France, the currency area’s largest members. However, sales were down in a number of euro-zone members that have embarked on tough austerity programs. A contraction in private-sector business activity across the 17-nation euro zone accelerated sharply in April, according to the Markit composite purchasing managers’ index, or PMI, released Friday. The index fell to 46.7 from 49.1 in March
Major Economic Events for the past week actual v. forecast
|
AUD |
Interest Rate Decision |
3.75% |
4.00% |
4.25% |
|
USD |
ISM Manufacturing Index |
54.8 |
53.0 |
53.4 |
|
USD |
ADP Nonfarm Employment Change |
119K |
177K |
201K |
|
NZD |
Unemployment Rate |
6.7% |
6.3% |
6.4% |
|
EUR |
Interest Rate Decision |
1.00% |
1.00% |
1.00% |
|
USD |
Initial Jobless Claims |
365K |
380K |
392K |
|
USD |
Nonfarm Payrolls |
115K |
170K |
154K |
|
USD |
Unemployment Rate |
8.1% |
8.2% |
8.2% |
|
Ivey PMI |
52.7 |
61.0 |
63.5 |
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 7 |
7:00 |
CHF |
Foreign Currency Reserves |
237.5B |
|
7:15 |
CHF |
CPI m/m |
0.6% |
|
|
May 10 |
8:30 |
GBP |
Manufacturing Production m/m |
-1.0% |
|
11:00 |
GBP |
Official Bank Rate |
0.50% |
|
|
12:30 |
USD |
Trade Balance |
-46.0B |
|
|
12:30 |
USD |
Unemployment Claims |
365K |
|
|
May 11 |
8:30 |
GBP |
PPI Input m/m |
1.9% |
|
12:30 |
USD |
PPI m/m |
0.0% |
|
|
13:55 |
USD |
Prelim UoM Consumer Sentiment |
76.4 |
Upcoming Government Bond Auctions
Date Time Country
May 08 09:15 Austria
May 08 09:30 Belgium
May 08 14:30 UK
May 08 15:30 Italy
May 08 17:00 US
May 09 09:10 Sweden
May 09 09:30 Germany
May 09 09:30 Swiss
May 09 09:30 UK
May 09 14:30 Sweden
May 09 15:30 Italy
May 09 17:00 US
May 10 15:00 US
May 10 17:00 US
May 11 09:10 Italy BOT auction
May 11 10:00 Belgium
Originally posted here
