EUR/USD hit 1.2240 on Friday, the pair’s lowest since August 3; the pair subsequently consolidated at 1.2287 by close of trade on Friday, shedding 0.88% over the week.
The pair is likely to find support at 1.2165, the low of August 3 and resistance at 1.2386, the high of August 9.
Market sentiment came under pressure on Friday, after data showed that Chinese exports grew just 1.0% on the year in July, down from the 11.3% gain seen in June, while imports rose 4.7% year-over-year, down from 6.3% in June.
The report came after weaker-than-forecast German data, earlier in the week, underlined concerns over the impact of the long running debt crisis on the region’s largest economy.
On Thursday, the ECB said in its monthly bulletin that the economic outlook for the euro zone faced a number of downside risks, with financial market tensions and their potential impact on growth posing the key threats.
The ECB revised down its forecast for economic growth to 0.6% in 2013, down from 1% previously and forecast a 0.3% contraction in growth this year, slightly worse than its previous forecast of for a 0.2% contraction.
In addition, optimism that the ECB will soon move to cut high Spanish and Italian borrowing costs faded as investors waited for more details of the bank’s proposed bond buying program to emerge.
Meanwhile, the greenback remained supported after robust employment and trade data on Thursday eased concerns over the U.S. economic outlook.
The Department of Labor said that the number of people who filed for unemployment assistance in the U.S. declined to 361,000 last week, from an upwardly revised 367,000 in the previous week, against expectations for an increase to 370,000.
A separate report showed that the U.S. trade deficit dropped to USD42.9 billion in June, its lowest level in two-and-a-half years.
In the week ahead, market participants will be awaiting data on second quarter growth from the euro zone and looking ahead to central bank minutes from the Bank of Japan and the Bank of England, amid ongoing speculation that world central banks may take steps to shore up economic growth.
Investors will also watching U.S. data on retail sales, inflation and housing in an attempt to assess the strength of the U.S. economic recovery.
Ahead of the coming week, Forex trading outloook today has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday, as there are no relevant events on that day.
Monday, augustt 13 2012
German WPI: Monday, 6:00. German inflation numbers have influence on the ECB, especially concerning interest rates. After a big drop of 1.1% in wholesale prices, a small rise is expected now: 0.4%.
Tuesday, August 14 2012
The euro zone is to release official data on industrial production as well as preliminary data on second quarter gross domestic product, while Germany and France are also to release individual GDP reports. In addition, the ZEW Centre for Economic Research is to publish a report on economic sentiment in Germany and throughout the single currency bloc.
Later Tuesday, the U.S. is to publish official data on retail sales and producer price inflation, followed by data on business inventories.
French GDP (first release): Tuesday, 5:30.
The euro-zone’s second largest economy surprised by growing in the fourth quarter of 2011, and remained flat in Q1 2012. PMIs and other indicators point to contraction in Q2. The consensus stands on -0.2%. Note that the final number usually confirms the first release, also in Germany’s case. Italy’s economy fell sharply, and also Spain contracted.
German GDP (first release): Tuesday, 6:00.
Germany’s strong 0.5% growth in Q1 saved the euro-zone from entering an official recession – it remained flat. However, the situation deteriorated in Q2, and growth is expected to fall to only 0.1%. A drop in Germany’s output will not be very surprising in the current environment.
French Quarterly Non-Farm Payrolls: Tuesday, 6:45.
GDP (first release): Tuesday, 9:00.
French Quarterly Non-Farm Payrolls: Tuesday, 6:45.
The number of payrolls is published in France only once per quarter, making this figure more important. Q1 saw a surprising rise of 0.1% in jobs, after a 0.2% drop beforehand. Another drop of 0.1% is likely now.
GDP (first release): Tuesday, 9:00.
The initial GDP release for the euro-zone in Q2 is slightly overshadowed by the ZEW figure and the earlier releases of French, German, Italian and Spanish figures. Nevertheless, this figure is of high importance and will echo for quite some time. All the signs point to a contraction in Q2 after a flat Q1 and a squeeze of 0.3% beforehand. Contraction of 0.2% is likely now. Note that the estimates are likely to change once Germany and France release their figures.
German ZEW Economic Sentiment: Tuesday, 9:00.
German ZEW Economic Sentiment: Tuesday, 9:00.
This survey of 350 analysts and investors has a significant impact on the euro, and it certainly reflected the deteriorating in sentiment, falling in the past three months. The indicator reached -19.6 points last month, disappointing once again, and showing the growing pessimism in the German business community. A very small recovery is forecast for the month of July. The all-European figure, which is less important, is likely to tick up from the -22.3 points recorded last month.
Industrial Production: Tuesday, 9:00.
Industrial Production: Tuesday, 9:00.
Industrial output surprised with by rising 0.6% in May. The tables have likely turned in June, as already seen in the German and French figures. A drop of 0.1% is expected now.
CPI: Thursday, 9:00.
CPI: Thursday, 9:00.
The annual level of inflation is moving very slowly towards the 2% target. The initial figure of 2.4% will likely be confirmed in the final call now, or revised to 2.5%. Core CPI will likely stand on 1.6%.
Wednesday, August 15 2012
In the euro zone, markets in France and Italy are to remain closed due to national holidays.
The U.S. is to release official data on consumer price inflation, as well as a report on manufacturing activity in the New York area and government data on net long term securities transactions. The Federal Reserve is also to produce data on the capacity utilization rate and industrial production, followed by a government report on crude oil inventories.
Thursday, August 16 2012
The euro zone is to produce official data on consumer price inflation, which accounts for the majority of overall inflation.
The U.S. is to publish official data on building permits, a key gauge of future construction activity, as well as weekly government data on unemployment claims. The country is also to release official data on housing starts and a report on manufacturing activity in the Philadelphia area.
Friday, August 17 2012
In the euro zone, the ECB is to release data on the current account, while Germany is to publish official data on producer price inflation.
The U.S. is to round up the week with a preliminary report by the University of Michigan on consumer sentiment and inflation expectations.
German PPI: Friday, 6:00.
Producer prices fell short of expectations for three months in a row, and prices fell in the past two months. July will likely see a correction with a rise of 0.4%.
Current Account: Friday, 8:00.
While this is a relatively late figure, its wide scope (encompassing trade balance, services, flows, etc.) makes it of high important. The euro-zone enjoyed three consecutive months of surpluses, with a strong 10.9 billion euro surplus for May. June will probably see a lower figure of 7.8 billion.
Trade Balance: Friday, 9:00. Also the his more narrow figure is positive, thanks to German exports. The surplus rose from 4.5 to 6.3 billion, and likely dropped now to 5.4 billion.
EUR/USD Technical Analysis
€/$ started the week with a move higher, but found resistance at the 1.2440 line (mentioned last week). It then began deteriorating, finding support at 1.2330, before falling to lower ground.
Technical lines from top to bottom:
The very round 1.30 line is a very important line in case of huge rally. In addition to being a round number, it also served as strong support. 1.29 is also notable on the upside, followed by 1.2814.
1.2750 capped the pair after the Greek elections and also had a similar role in the past. It is now of higher importance. 1.2670 was a double bottom during January and was the high line of the recovery before the Greek elections in June. It also capped the pair at the beginning of July 2012.
1.2623 is the previous 2012 low and remains important despite recent battles over this line. Below, 1.2587 is a clear bottom on the weekly charts but is only a minor line now.
1.2520 had an important role in holding the pair during June, in more than one case, but it’s much weaker now. 1.2440 provided support for the pair at the same time. and worked as double bottom.
It is closely followed by 1.24 that provided some resistance in June 2010 and switched to resistance in July. It is now of higher importance after capping a recovery attempt at the end of July and also at the beginning of August. 1.2360 was temporary support in July 2012 but quickly switched to resistance. It is minor now.
Further below, 1.2330 is another historical line after being the trough following the global financial meltdown in 2008. It’s stronger after working as strong support. It should be closely watched if the pair falls. The now previous 2012 low of 1.2288 is now minor support.
1.22 is now a more serious support line, after serving as such in June 2010. 1.2144 is already a very strong line on the downside: it was a clear separator two years ago, when Greece received its first bailout. Also in July and August 2012, it worked as a separator.
The new 2012 low of 1.2043 is the next line, although it may prove to be weak on a downfall. Next we have the 1.20 line, which is a round psychological figure.
The post crisis low of 1.1876 is the final frontier before lines last seen in the good years. The launch price of 1.17 is the next line.
Wednesday, August 15 2012
In the euro zone, markets in France and Italy are to remain closed due to national holidays.
The U.S. is to release official data on consumer price inflation, as well as a report on manufacturing activity in the New York area and government data on net long term securities transactions. The Federal Reserve is also to produce data on the capacity utilization rate and industrial production, followed by a government report on crude oil inventories.
Thursday, August 16 2012
The euro zone is to produce official data on consumer price inflation, which accounts for the majority of overall inflation.
The U.S. is to publish official data on building permits, a key gauge of future construction activity, as well as weekly government data on unemployment claims. The country is also to release official data on housing starts and a report on manufacturing activity in the Philadelphia area.
Friday, August 17 2012
In the euro zone, the ECB is to release data on the current account, while Germany is to publish official data on producer price inflation.
The U.S. is to round up the week with a preliminary report by the University of Michigan on consumer sentiment and inflation expectations.
German PPI: Friday, 6:00.
Producer prices fell short of expectations for three months in a row, and prices fell in the past two months. July will likely see a correction with a rise of 0.4%.
Current Account: Friday, 8:00.
While this is a relatively late figure, its wide scope (encompassing trade balance, services, flows, etc.) makes it of high important. The euro-zone enjoyed three consecutive months of surpluses, with a strong 10.9 billion euro surplus for May. June will probably see a lower figure of 7.8 billion.
Trade Balance: Friday, 9:00. Also the his more narrow figure is positive, thanks to German exports. The surplus rose from 4.5 to 6.3 billion, and likely dropped now to 5.4 billion.
EUR/USD Technical Analysis
€/$ started the week with a move higher, but found resistance at the 1.2440 line (mentioned last week). It then began deteriorating, finding support at 1.2330, before falling to lower ground.
Technical lines from top to bottom:
The very round 1.30 line is a very important line in case of huge rally. In addition to being a round number, it also served as strong support. 1.29 is also notable on the upside, followed by 1.2814.
1.2750 capped the pair after the Greek elections and also had a similar role in the past. It is now of higher importance. 1.2670 was a double bottom during January and was the high line of the recovery before the Greek elections in June. It also capped the pair at the beginning of July 2012.
1.2623 is the previous 2012 low and remains important despite recent battles over this line. Below, 1.2587 is a clear bottom on the weekly charts but is only a minor line now.
1.2520 had an important role in holding the pair during June, in more than one case, but it’s much weaker now. 1.2440 provided support for the pair at the same time. and worked as double bottom.
It is closely followed by 1.24 that provided some resistance in June 2010 and switched to resistance in July. It is now of higher importance after capping a recovery attempt at the end of July and also at the beginning of August. 1.2360 was temporary support in July 2012 but quickly switched to resistance. It is minor now.
Further below, 1.2330 is another historical line after being the trough following the global financial meltdown in 2008. It’s stronger after working as strong support. It should be closely watched if the pair falls. The now previous 2012 low of 1.2288 is now minor support.
1.22 is now a more serious support line, after serving as such in June 2010. 1.2144 is already a very strong line on the downside: it was a clear separator two years ago, when Greece received its first bailout. Also in July and August 2012, it worked as a separator.
The new 2012 low of 1.2043 is the next line, although it may prove to be weak on a downfall. Next we have the 1.20 line, which is a round psychological figure.
The post crisis low of 1.1876 is the final frontier before lines last seen in the good years. The launch price of 1.17 is the next line.
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