EUR/USD Weekly Fundamental Analysis

We can still see the heavy pressure on the market and the evident risk aversion and anxiety for a new protracted and harsh recession, which is still keeping the EUR/USD under heavy pressure.

Last week the EUR/USD fluctuated heavily with the mixed sentiment and the jitters are evident with the slowing growth in the United States and deepening debt crisis in the euro area, all pressuring risk aversion and affecting the euro’s stability.

The euro is expected to continue fragile this week after Merkel and Sarkozy failed to stem the confidence crisis and the instability on the back of prevailing fear of contagion and deepening debt crisis. Last week the sluggish GDP from the euro area will add more pressure with the expected weak sectors performance and contraction expected in the manufacturing sector, further pressuring the euro.

Eyes will also be on the U.S. GDP which is expected with a downside revision that will keep the fear predominant and risk aversion the strong theme in the market.

The pessimism is dominant and the negativity is gaining momentum and we do not expect a drastic change from the data which will keep the EUR/USD biased south on haven demand and risk aversion and the only support to the sentiment is an intervention from policy makers to stem the crisis and coordinated action to ease the jitters and calm investors which so far is still not expected and accordingly we can expected the same trend and fear to prevail this week as well.

Other news from the euro area and the U.S. economy to affect the pair this week:

Monday August 22:

No major data is queued for release from both nations on Monday as the start of the week will be focused on the prevailing downbeat sentiment and fear of the worsening outlook.

Tuesday August 23:

Germany will start at 07:30 with the flash Manufacturing PMI for August which is expected to slow to 51.0 from 52.0 while the PMI Services is also expected weaker at 52.0 from 52.9.

The euro area starts the fundamentals this week with the flash estimate for the August PMI at 08:00 GMT. The Manufacturing PMI is expected to contract in August at 49.5 from 50.4 while the services PMI is expected to slow to 51.0 from 51.6 and the Composite PMI is expected flat at 50 from 51.1.

Germany will return with the ZEW Survey for August at 09:00 GMT with the Current Situation Index expected to slow to 85.0 from 90.6 while the Economic Sentiment to slow to -25.0 from -15.1.

The euro Area ZEW Economic Sentiment Index is due also at 09:00 GMT and likely declined in August following -7.0.

The United States will start the data at 14:00 GMT with the New Home Sales for July which are expected with 1.0% rebound to 315 thousand from 312 thousand.

Wednesday August 24:

Germany will start at 08:00 GMT with the IFO Survey for August. The IFO Business Climate index is expected to slow to 111.2 from 112.9 while the Current Assessment is expect at 120.1 from 121.4 and the IFO Expectations to drop to 103.2 from 105.0.

The euro area will report the Industrial New Orders for June at 09:00 GMT which is expected flat down from the previous month’s rally of 3.6%.

The Durable Goods Orders are due from the United States at 12:30 GMT for July and expected with 2.0% rebound following 2.1% slump while excluding transportation expected with 0.6% drop following 0.1% rise.

Thursday August 25:

Germany will start at 06:00 GMT with the Gfk Consumer confidence for September which is expected to slow to 5.2 from 5.4.

The weekly jobless claims are due from the U.S. as usual at 12:30 GMT after last week they unexpectedly rose to 408 thousand.

Friday August 26:

The euro area’s week will end with the M3 Money Supply for July at 08:00 GMT which is expected to rise slightly on the year to 2.2% from 2.1%.

The week will end with the infamous GDP from the U.S. at 12:30 GMT. The preliminary reading for the second quarter is expected downbeat on the market with the projected downside revision to 1.1% from 1.3%. Personal consumption expected with upside revision to 0.2% from 0.1% while the Core PCE expected steady at 2.1%.

The week will end with the University of Michigan Confidence final reading for August at 13:55 which is expected with an upside revision to 56.0 from the advanced estimate of 54.9.


USD/JPY Weekly Fundamental Analysis

The USD/JPY pair dropped for the second week reaching its pre-intervention levels, as market jitters prevail which drove market participants to abandon higher-yielding currencies and open the door for the safe haven currencies like yen and dollar to increase against other major currencies.

The bearish bias dominated the USD/JPY pair even after the BOJ intervened in the FX market, as the current financial situation inU.S.and EU fueled more fears regarding the global recovery outlook.

Investors increased demand for safer assets as risk aversion controls the market, where the Japanese yen was the first target for investors which ignored the fact that the yen is already at its highest level against greenback.

The drop in Japanese exports affected the outlook, as the world’s third-largest economy is depending on the exports to lead the Japanese recovery.

On the other hand, the U.S. economy slowdown coupled with declining demand from China diminished any hope of recovery in Japan’s exports, which already suffer from the March 11 earthquake.

Major highlights for this week that will affect the USD/JPY pair’s trading:

Monday August 22:

The Japanese economy will release the supermarket store sales for July at 05:00 GMT, where the previous reading showed a rise of 0.1%. The convenience store sales for July will be released at 07:00 GMT, where it had a prior reading of 9.0%.

The U.S. economy will issue the Chicago Fed Activity Index for July at 12:30 GMT, where it’s expected to drop by 0.48 from the previous fall of 0.46.

Tuesday August 23:

On Tuesday at 14:00 GMT, the U.S. economy will release the new home sales for July, where the previous reading was down by 1.0% at 312 thousands and expected to rebound by 1.0% to 315 thousand.

Wednesday August 24:

The U.S. durable goods orders for July will be due at 12:30 GMT, where it’s expected to show a rise of 2.0% from the prior drop of 2.1%. On the other hand, the durable goods excluding transportations for July had a previous reading of 0.1%, and expected to drop by 0.6%.

The house price index for June will be released at 14:00 GMT, where the previous reading was up by 0.4% and expected to come at 0.2%. As for the house price purchase index for the second quarter, it had a prior reading of –2.5%.

Thursday August 25:

At 12:30 GMT, U.S. economy will issue its weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance increased 408 thousand last week.

Friday August 26:

On Friday at 23:50 GMT (Thursday), Japan will release the national consumer price index (YoY), where the previous reading was up by 0.2% and expected to show a rise of 0.1%.

The national CPI exclude fresh food for July is expected to show a drop of 0.1% from the previous rise of 0.4%, while the national CPI excluding food and energy for July is expected at –0.6% from the previous 0.1%.

The U.S. economy will release the annualized Gross Domestic Product for the second quarter at 12:30 GMT, where the previous reading showed a growth of 1.3% and expected to be revised lower to 1.1%.

The Personal Consumption for the second quarter is expected to show a rise of 0.2% from the prior reading of 0.1%, while the core PCE for the second quarter is expected to remain unrevised at 2.1%.

At 13:55 GMT, the U.S. economy will release the University of Michigan survey of consumer confidence sentiment for August, where the final reading is expected to be revised higher to 56.0 from 54.9.


GBP/USD Weekly Fundamental Analysis

The GBP/USD showed advance as the dollar weakness pushed the pair to the upside. Data from theU.S.worsened the outlook of the economy more, especially after it lost its AAA top rating in the week ended August 12. Data from theU.S.showed a drop in manufacturing and rise in jobless claims and inflation along with the slowdown seen over the recent data raised speculations theU.S.would lead the world to another recession.

On the other hand, the situation was not much better as the data released from the U.K, moved in line with the latest cut to growth outlook by the BoE. Retail sales retreated, jobless claims rose to the highest level in more than two years and inflation accelerated to 4.4% in July, causing King to write the third letter this year. In addition, MPC policy makers Dale and Weale stalled their call for increasing interest rate and joined the majority as the outlook for the economy worsens, according to August’s BoE minutes. Yet, the pound rose on technical movements and on bets theU.K.economy would recover faster than theU.S.economy.

This week, the main focus will be on growth data from both economies as investors will be eager to see whether there will be revisions to the second quarter readings to assess the extent of slowdown.

In theU.S., the annualized GDP for the second quarter is predicted to be downwardly revised which may increase worries that the slowdown would lead theU.S.to another recession, whileU.K.growth is estimated to remain unrevised.

The release of the data this week will be as follows:

Monday August 22:

Both economies lack economic fundamentals which propose that there would be calm trading on the pair which is predicted to follow the general trend in market as it will not able to get direction from data.

Tuesday August 23:

The U.K. will release CBI trends for August at 10:00 GMT , yet it is not expected to have an impact on the pair, where the US new home sales report for July, due at 14:00 GMT, is expected to show 1.0% advance from the prior 1.0% fall. The data is expected to be carefully watched as it will provide evidence about the status of the housing market that led to the eruption of the 2008 financial crisis.

Wednesday August 24:

As the Swiss economy lacks economic data, the main focus will be onU.S.data which are MBA mortgage applications for August 19 at 11:00 GMT followed by durable goods orders which is projected to advance 2.0% in July relative to the preceding 2.1% drop.

Thursday August 25:

Initial jobless claims for the week ended August 19 and continuing claims for the week ending August 13 will be available at 12:30 GMT. The jobless data is predicted to have an impact after the previous one which showed more than expected rise in initial jobless claims, whileU.K.lacks fundamentals.

Friday August 26:

The week ends with the release the most awaited data from both economies which is GDP for the second quarter. As of 08:30 GMT, U.K. GDP is predicted to remain unrevised at 0.2% on the quarter and 0.7% on the year.

In theU.S., GDP annualized for the first second is predicted to be downwardly revised at 1.1% from 1.3%. At 13:55 GMT,University of Michigan confidence will show a rise to 56.0 in August from 54.9 in July, according to median forecasts.


USD/CHF Weekly Fundamental Analysis

The USD/CHF continued its rebound for the second week in the week ended August 19 as the ongoing monetary interventions by the SNB managed to weaken the currency against majors, including the dollar.

The SNB said it would raise sight deposits to 200 billion francs from 120 billion francs, repurchase outstanding SNB bills, and adopt foreign exchange swaps, plus it revealed that it may take further measures if needed.

On the other hand, the dollar benefited from being as safe haven currency as it advanced with the sell-off in shares on the back of the mounting concerns theU.S.would lead the world to another recession. Data from theU.S.worsened the outlook further and added to worries after the downgrade of the country’s sovereign rating in the week ended August 12.

This week, the Swiss economy will release important trade data which will show the status of exports in the month of July and how much it was affected by the franc’s appreciation.

In theU.S., the main focus will probably on GDP for the second quarter in addition to a number of important reports. The annualized GDP for the second quarter is predicted to be downwardly revised which may increase worries that the slowdown would lead theU.S.to another recession.

For this week, the release of the data will be as follows:

Monday August 22:

As of 07:00 GMT, the Swiss economy will release money supply M3 for the year ending April, yet it is expected to have slight effect on the pair’s movements, where theUSwill release some mortgage data.

Tuesday August 23:

At 06:00 GMT, the Swiss economy will release important trade data for July with exports and imports during the month as the recent reports a rise in exports despite the franc’s appreciation, where the US new home sales report for July, due at 14:00 GMT, is expected to show 1.0% advance from the prior 1.0% fall. The data is expected to be carefully watched as it will provide evidence about the status of the housing market that led to the eruption of the 2008 financial crisis.

Wednesday August 24:

As the Swiss economy lacks economic data, the main focus will be onU.S.data which are MBA mortgage applications for August 19 at 11:00 GMT followed by durable goods orders which is projected to advance 2.0% in July relative to the preceding 2.1% drop.

Thursday August 25:

Credit Suisse Zew survey (expectations) for June will be available at 09:00 GMT. For the US, initial jobless claims for the week ended August 19 and continuing claims for the week ending August 13 will be available at 12:30 GMT. The jobless data is predicted to have an impact after the previous one which showed more than expected rise in initial jobless claims.

Friday August 26:

The week ends with the release KOF Swiss leading indicator which is estimated to retreat to 1.85 in August from 2.04 a month earlier, yet the main highlight of the week will be on U.S. growth data due at 12:30 GMT. GDP annualized for the first second is predicted to be downwardly revised at 1.1% from 1.3%. At 13:55 GMT, University of Michigan confidence will show a rise to 56.0 in August from 54.9 in July, according to median forecasts.