Sunday, August 11, 2013

EUR/USD Forecast (August 12-16)

EUR/USD had a positive week, breaking long term resistance. Will it continue marching forward? German ZEW Economic Sentiment and GDP releases are the main events on our calendar. Here is an outlook for the main events of the week and an updated technical analysis for EUR/USD.

Strong data was released for the Eurozone’s locomotive, Germany; trade surplus topped market expectations  industrial output soared 2.4%.  The GDP expectations are now very high. Will Germany keep the euro on high ground? In the US, positive signs and taper talk hardly stopped the fall of the dollar.

German Final CPI: Tuesday, 6:00. German consumer prices advanced 0.1% in June, confirming the preliminary estimate. The reading was preceded by a 0.4% increase in May. Annual inflation increased from 1.5% in May to 1.8% in June. The Bundesbank expects inflation to reach 1.6% in 2013, before declining to 1.5% in 2014. A further climb of 0.5% is anticipated now.

German WPI: Tuesday, 6:00. German wholesale price index dropped more-than-expected on June falling 0.4% after the same drop in the preceding month. The reading missed predictions for a 0.3% rise. An increase of 0.3% is expected.

German ZEW Economic Sentiment: Tuesday, 9:00. The German economic sentiment released by ZEW revealed caution in July, with a decline to 36.3 from 38.5 in the previous month. Economists expected a rise to 39.8. Investors became more concerned with Germany’s faltering economic growth. German economic sentiment is predicted to reach 40.3.
Industrial Production: Tuesday, 9:00.  Euro zone industrial output declined in May after four months of gains, down 0.3% after a 0.5% increase in April. This decline was worse than the 0.2 drop projected by analysts, suggesting  the Eurozone’s recovery is fragile. The ECB implied it would keep rates at a minimum low to help the recovery process pick-up pace. A gain of 1.1% is forecasted now.

ZEW Economic Sentiment: Tuesday, 9:00. German Centre for European Economic Research (ZEW) showed that economic sentiment in the euro-zone edged up unexpectedly to 32.8 in July from 30.6 in June, despite a drop in German economic sentiment. ZEW President Clemens Foster said investors have positive expectations and believe Germany will withhold weaker industrial production and foreign trade data. Another rise to 37.4 is projected now.

French Prelim GDP: Wednesday, 5:30. France economy shrank in the first quarter by 0.2%, hit by recession after another fall of 0.2% in the final quarter of 2012. French economy has not showed any significant progress over the year and a recent poll showed that President Francois Hollande’s approval rating has plunged dramatically to 25%. Unemployment remained high and growth continues to slow. The euro-zone’s No. 2 economy is expected to expand by 0.1% this time.

German Prelim GDP: Wednesday, 6:00. German GDP demonstrated a hesitant growth in the first quarter, rising by a mere 0.1%, lower than the 0.3% growth rate estimated by analysts. The slow growth was preceded by a 0.7% contraction in the last quarter of 2012, indicating Europe’s largest economy not immune to the euro crisis. German economy is expected to grow 0.6%.

French Prelim Non-Farm Payrolls: Wednesday, 6:45. French non-farm payrolls fell less than expected in the first quarter, dropping 0.1% after a 0.3% decline in the final quarter of 2012. Unemployment in France reached 10.2% last year, rising from 9.6% in 2011, Eurostat predicts Jobless rate would pick up to 10.6% this year and rise to 10.9% in 2014. No change is expected in the number of jobs this time.
Flash GDP: Wednesday, 9:00. Gross domestic product in the 17-nation euro area declined 0.2% in the first quarter, mainly due to the ongoing recession in France. The Eurozone grown was in contraction since the third quarter of 2011, the longest period of declining output in the eurozone’s history. Germany, which accounts for about 30% of eurozone output, expanded by a mere 0.1% in the quarter, French output fall by 0.2% for a second consecutive quarter adding concerns the Euro area is still in recession. The Eurozone is expected to advance 0.2%.

Current Account: Friday, 8:00. The eurozone’s current account surplus narrowed to 19.6 billion euros in May from 23.8 billion euros in April. Analysts expected a smaller drop to 21.3 billion euros. Over the 12 months to May, the current account showed a surplus of 189.5 billion euros, compared with a surplus of 53.3 billion euros a year earlier. Surplus is expected to grow to 21.2 billion euros.

Inflation data: Friday, 9:00. Euro-zone annual inflation increased to 1.6% in June, up from 1.4% in May, and in line with market expectations. The rise was largely due to an increase in food and electricity prices. Meanwhile Core inflation, excluding food, energy, alcohol, and tobacco, remained unchanged at 1.2%, as forecasted. CPI is expected to remain 1.6% while core CPI is expected to decline to 1.1%

*All times are GMT
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