EUR/USD Weekly Forecast Fundamental Analysis

The EUR/USD pair ended a strongly bearish week, where during last week the pair kept on extending the losses as pessimism and rising debt concerns controlled markets and investors and pushed them away from demanding risky investments, especially after yields surged on indebted nation’s bonds, which raised fears that the debt crisis is spreading now in terms of higher yields on European bonds.

However, a slight wave of optimism spread in the market after the European Central Bank intervened and bought Italian and Spanish bonds, which sent yields lower and supported bonds to gain value, which in result supported the euro to recover some of the losses incurred during the week on Friday.

Greece and Ital ywere able to end the political instability this week, as both nations assigned new Prime Ministers to save the nations from a deeper crisis, where Greece assigned the former European Central Bank vice president, Lucas Papademos as the new Premier, while Italy handed the former European Commissioner, Mario Monti the premiership.

Greece and Italy accelerated the implementation of the austerity measures and will pass them through the parliament and now all eyes will be focused during this week on the European Union leaders’ meeting in Brussels, where both new premiers are to join them in a discussion about the economic and financial situation in the euro-area region, while during the meeting both premiers will present their plans to cut spending and meet targets.

On Sunday, general elections will take place in Spain, as the Spanish Prime Minister’s period came to an end and now eyes will be focused on the new elected government, with expectations that the People’s Party will take the lead and the party leader will become the next Premier, which could add positivity to the market as he pledged to lower Spain’s deficit to 4.4% of the total GDP next year.

During the week, investors will have their eyes concentrated on bonds auctions in Italy, France and Spain, where all markets are tracking yields’ behavior and movements in Europe, as last week yields climbed to all-time record since founding the one currency union, which sent the euro south, where rising yields could prevent European nations from accessing the capital market as they rise to unsustainable levels.

Eyes will also be concentrated on the United States, where by November 23 (Wednesday) lawmakers should find common grounds and provide markets with a final plan to cut the U.S. huge budget deficit over the coming ten years, where in case lawmakers didn’t agree, a previously set plan, which is expected to cut the deficit by 1.2 trillion dollar over the period, will be activated as they reached the deadline without providing any comprehensive measures.

Turning to critical fundamentals expected this week, Germany and U.S. will release the gross domestic product figures, which are expected to have major impact on the pair, while the euro zone and Germany will provide data regarding the manufacturing and services sectors’ performance in November, and finally the United States will release the income report.

Volatility and heavy fluctuations are highly possible this week, especially with heavy fundamentals load in addition to the political and financial decisions from Europe and the U.S, noting that the United States will be in the Thanks Giving Holiday on Thursday, while on Friday there will be an early closing in the New York session.

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

Monday November 21:

The euro zone will start this week at 09:00 GMT with the current account figures for September, where the previous non-seasonally adjusted deficit was 6.3 billion euros, while the previous seasonally adjusted deficit was 5.0 billion euros.

The United States will join the session at 15:00 GMT with the existing home sales figures for October, with expectations that the existing homes sales could have retreated to 4.80 million houses from 4.91 millions. In addition, the monthly existing home sales index could show that sales dropped by 2.2% from the previous drop of 3.0%.

Tuesday November 22:

The euro zone will start the session at 15:00 GMT with the consumer confidence indicator for November in the advanced reading, where the indicator stood at -19.9 in the previous month.

At 13:30 GMT the United States will join the session with the GDP figures for the third quarter in a second reading, where the quarterly annualized GDP index could have lingered at 2.5%, while the personal consumption index could have stood at 2.4%, in the time GDP price index is expected unchanged at 2.5%. Finally, the quarterly core PCE is projected steady at 2.1%.

At 19:00 GMT the Federal Reserve will release the Minutes of FOMC last meeting.

Wednesday November 23:

Germany will start the session at 08:30 GMT with the PMI manufacturing and service for November in an advanced reading, where the PMI manufacturing is expected to decline further to 48.4 from 49.1, while the PMI services could have slipped to 50.0 from 50.6.

At 09:00 GMT the euro zone will join the session with the PMI Composite for November in an advanced reading, as the PMI composite is expected to contract further reaching 46.2 from 46.5, while the PMI manufacturing could have contracted further to 46.5 from 47.1, in the time the PMI service is expected lower at 46.0 from 46.4.

At 10:00 GMT the euro zone will provide the industrial new orders figures for September, where the non-seasonally adjusted annual index could have expanded by 8.0% from 6.2%, while the seasonally adjusted monthly index could have dropped by 2.6% from 1.9%.

At 13:30 GMT the United States will join the session with the durable goods figures for October, where durable goods orders could have fallen 1.0% from the previous drop of 0.8%, while durable goods excluding transportation index is expected unchanged, noting that the previous expansion was 1.7%.

The United States will also release the income report at 13:30 GMT, with expectations that the personal income index could have improved 0.3% from 0.1%, while the personal spending index could have expanded by 0.3% from 0.6%. Furthermore, the annual PCE Deflator could have expanded by 2.7% from 2.9%, while the monthly PCE core could have improved 0.1% from the previous zero expansion, in the time the annual PCE core is expected higher at 1.7% from 1.6%.

In addition, the United States will provide markets with the initial jobless claims figure for the 19th of November, where the number of claims could have eased to 385 thousands from 388 thousand.

At 14:55 GMT the United States will end the session with University of Michigan confidence for November in a final reading, where the confidence could have improved slightly to 64.5 from 64.2.

Thursday November 24:

Germany will start the session at 06:00 GMT with the GDP figures for the third quarter in a final reading, where the seasonally adjusted quarterly GDP is expected unchanged at 0.5%, while the working-day adjusted GDP index is expected at 2.6%. In addition, the domestic demand index for the third quarter is expected unchanged at 0.4%, while exports are expected to expand by 1.7% from 2.3%.

At 09:00 GMT Germany will release the IFO survey for November, where the business climate indicator could have retreated to 105.2 from 106.4, while the current assessment indicator could have declined to 115.2 from 116.7, in the time expectations indicator could ease to 96.0 from 97.0.

The United States (Thanks Giving Holiday)

Friday November 25:

There are no fundamentals affecting the EUR/USD pair.

The United States (Early closing)


GBP/USD Forecast GBP/USD Forecast

In the week ended Nov 18, the GBP/USD showed decline for the third week as the tensions stemming from the euro area enhanced demand on the dollar as a refuge.

The rise in Spanish and French bond yields on the back of the soar of Italian 10-year notes above 7%, the highest since the inception of the euro, triggered concerns the debt contagion is spreading among the euro region’s largest economies.

The political changes taking place in the region’s highly indebted nations, namely Greece and Italy, could not allay fears, especially amid disputes between European leaders regarding the role of the ECB to counter crisis and the veil of details of expanding the EFSF rescue fund so far.

In the U.K., the Bank of England (BoE) said in its quarterly inflation report raised concerns as it mentioned that growth outlook is now weaker and inflation will fall sharply over 2012, referring that the outlook for both growth and inflation is likely to depend on the latest developments in the euro zone.

However, the improvement in the U.S. data managed to ease some of the tensions in the market, yet it did not shift the sentiment as the main concern meanwhile is on the euro zone as investors believe the debt crisis may drag global economies into another recession as well as financial turbulences.

This week, the main focus will be on 3q GDP preliminary reading, BoE minutes and public finance data. In theU.S., the main highlight will be GDP 3q annualized second reading, minutes of FOMC meeting and other important data.

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

Monday Nov 21:

While the U.K. economy lacks fundamentals, as of 15:00 GMT, the U.S. will release existing home sales which are estimated to record 2.2% drop in Oct. compared with a prior of -3.0%.

Tuesday Nov 22:

At 09:30 GMT, public finance excluding interventions will be due with expectations referring to a narrowing in deficit to 6.6 billion pounds in Oct. from the prior 14.1 billion pounds.

In the U.S., the main focus will be on the main highlight of the week which is GDP annualized for the third quarter (second reading), which is predicted to remain unrevised at 2.5%, where it will be available at 13:30 GMT. Thereafter, the concentration will shift to minutes of the FOMC meeting due at 19:00 GMT.

Wednesday Nov 23:

Attention will be toward BoE minutes, due at 09:30 GMT, release which may show a split among policy makers as some may have supported more stimulus to boost the economy amid the sluggish recovery pace. At the same time, U.K. BBA loans for house purchase for the month of Oct. will be released.

For the U.S., eyes will be on MBA mortgage applications for Nov. 18 at 12:00 GMT while will be followed by durable goods and personal spending at 13:30 GMT. Durable goods report is predicted to show a drop of 1.0% in Oct. from the prior 0.8% drop, while personal spending will signal a drop to 0.3% in Oct. from 0.6% in Sep.

Due to thanks giving holiday on Thursday, initial jobless claims for the week ending Nov. 19 and continuing claims for the week ending Nov. 11 will be available at 13:30 GMT. Thereafter, at 14:55 GMT, University of Michigan confidence will show a rise to 64.5 in Nov. from the prior 64.2.

Thursday Nov 24:

The U.K. will release 3q GDP preliminary reading which is estimated to remain unrevised at 0.5%. At 11:00 GMT, CBI trends total orders for Oct. will be out, yet the news is not expected to have a significant impact on the pair’s movements.

However, trading on the pair may be calm due to thanks giving holiday.

Friday Nov 25:

The week ends with the release of no data from both economies which suggest that the pair will follow the general sentiment in market.


USD/CHF Forecast Fundamental Analysis

In the week ended Nov 18, the USD/CHF showed incline for the third week as the tensions stemming from the euro area enhanced demand on the dollar as a refuge.

The rise in Spanish and French bond yields on the back of the soar of Italian 10-year notes above 7%, the highest since the inception of the euro, triggered concerns the debt contagion is spreading among the euro region’s largest economies.

The political changes taking place in the region’s highly indebted nations, namely Greece and Italy, could not allay fears, especially amid disputes between European leaders regarding the role of the ECB to counter crisis and the veil of details of expanding the EFSF rescue fund so far.

However, the improvement in the U.S. data managed to ease some of the tensions in the market, yet it did not shift the sentiment as the main concern meanwhile is on the euro zone as investors believe the debt crisis may drag global economies into another recession as well as financial turbulences.

This week, the main focus will be on Swiss trade data, amid speculations the SNB may intervene again to raise the franc’s cap against the euro, especially as the recent Swiss companies’ earnings reports showed the profits were negatively affected by the franc’s appreciation. In the U.S., the main highlight will be GDP 3q annualized second reading, minutes of FOMC meeting and other important data.

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

Monday Nov 21:

The Swiss economy will start the day with the release money supply M3 for the year ending Oct. at 08:00 GMT.

As of 15:00 GMT, the U.S. will release existing home sales which are estimated to record 2.2% drop in Oct. compared with a prior of -3.0%.

Tuesday Nov 22:

At 06:00 GMT, the Swiss economy will release its most important data for the week which is trade data for Oct. with exports and imports during the month.

In theU.S., the main focus will be on the main highlight of the week which is GDP annualized for the third quarter (second reading), which is predicted to remain unrevised at 2.5%, where it will be available at 13:30 GMT. Thereafter, the concentration will shift to minutes of the FOMC meeting due at 19:00 GMT.

Wednesday Nov 23:

Eyes will be on MBA mortgage applications for Nov. 18 at 12:00 GMT while will be followed by durable goods and personal spending at 13:30 GMT. Durable goods report is predicted to show a drop of 1.0% in Oct. from the prior 0.8% drop, while personal spending will signal a drop to 0.3% in Oct. from 0.6% in Sep.

Due to thanks giving holiday on Thursday, initial jobless claims for the week ending Nov. 19 and continuing claims for the week ending Nov. 11 will be available at 13:30 GMT. Thereafter, at 14:55 GMT, University of Michigan confidence will show a rise to 64.5 in Nov. from the prior 64.2.

Thursday Nov 24:

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

Friday Nov 25:

The week ends with the release of no data from both economies which suggest that the pair will follow the general sentiment in market.


USD/JPY Weekly Forecast Fundamental Analysis

The USD/JPY dropped for the second consecutive week since the BOJ intervened in the FX market, where risk aversion returned in the financial market to increase demand for safe have currencies such as the yen and greenback.

Bank of Japan did not introduce any new support to the Japanese economy during the last meeting, while the Japanese authorities lowered the economic assessment, increasing fears among investors which returned to prefer investment in the Japanese currency.

The greenback also witnessed a strong performance against most of its major counterparts excluding the yen, where the federal currency reached its highest level in five weeks against the euro and the highest in four weeks against the British pound.

The EU debt crisis still dominates investors’ sentiment and reflected negatively on other economies performance, fueling the pessimistic outlook for the global economy, pushing readers to abandon riskier assets.

Adding to the gloomy picture, the credit agency Fitch warned the United States banking sector of a possible infection from the EU crisis, which could lead to downgrade some banks in U.S.

On the other hand, the expected movement for the USD/JPY pair is to continue moving to downside adding more pressure on the BOJ to intervene once again in the FX market.

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

Monday November 21:

On Monday at 23:50 GMT (Sunday), Japan will issue Merchandise Trade Balance for October, where it’s expected to show surplus of 28.8 billion yen compare to the previous surplus of 300.4 billion yen.

The Adjusted Merchandise Trade Balance for October is expected to show a deficit of 82.0 billion yen widening from 21.8 billion yen deficit.

At 04:30 GMT, the Japanese economy will release the All Industry Activity Index for September, where it’s expected to fall by 1.0% from the previous reading of –0.5%.

Coincident Index for September will be released at 05:00 GMT, where it had a prior reading of 88.9, while the Leading Index for the same month had a previous reading of 91.6.

At 15:00 GMT, the U.S. economy will release the Existing Home Sales for October, where it’s expected to come at 4.80 million down by 2.2% from the previous reading of 4.91 million which is down by 3.0%.

Tuesday November 22:

On Tuesday at 13:30 GMT, the U.S. economy will release the annualized Gross Domestic Product for the third quarter, where it’s expected unrevised at 2.5%.

The Personal Consumption for the third quarter is also expected unrevised at 2.4% as well as the Core Personal Consumption Expenditure to hold at 2.1%.

At 19:00 GMT, the Federal Reserve Bank will release its minutes for the Nov. 1-2 FOMC meeting.

Wednesday November 23:

On Wednesday at 13:30 GMT, the U.S. economy will release the Durable Goods Orders for October, which is expected to come at –1.0% from the previous –0.8%.

Also the Personal Income for October will be released at the same time and expected to improve to 0.3% from 0.1% while the U.S. Personal Spending is expected to slow to 0.3% from 0.6%.

The annual Personal Consumption Expenditure Core for October is expected to come at 1.7% compare to the previous reading of 1.6%.

At 13:30 GMT, the U.S. economy will issue its weekly initial claims, where the number of people filing for first-time claims for the state unemployment insurance fell to 388 thousand last week.

Finally, the U.S. economy will release the University of Michigan Confidence for November at 14:55 GMT, where the final reading is expected to come at 64.5 from the prior reading of 64.2.

Thursday November 24:

Both economies will not release any data on Thursday, while U.S. markets will be closed for Thanksgiving Holiday.

Friday November 25:

On Friday at 23:30 GMT (Thursday), Japan will release the annual National Consumer Price Index for October, where it’s expected to come at –0.2% from the previous reading of 0.0%.

The National Consumer Price Index Ex-Fresh Food is expected to show a drop of 0.1%.