NEW YORK (Forex News Now) – The Euro had a difficult first week of 2011 in currency market trading, with the rate generally trending lower off of its weekly high point of 1.3431 seen on Tuesday to today’s lowest level of 1.2906.
EUR/USD currently trades just above that at 1.2929, down an impressive -3.4% from last week’s 1.3365 close, as short covering ahead of the weekend is expected into Friday’s close.
Fundamental and Technical Outlook for EUR/USD
According to various fx trading news sources, the sell off seen in EUR/USD this week has largely been due to an unexpectedly sharp improvement in the U.S. employment picture. The ADP Non-Farm Employment Change out last Wednesday showed its highest ever rise of 297K and the U.S. Unemployment Rate dropped sharply today from 9.8% to 9.4% in December.
U.S. Non-Farm Payrolls was less encouraging, however, showing only a 103K rise compared with the market consensus that was pushed upward from 136K to 159K after the impressive ADP result. Nevertheless, the market’s initial disappointment with the headline NFP number for December was later reversed by the substantial upward revision to November’s number from 39K to 71K and from 172K to 221K for October.
Overall, the Greenback looks set to benefit from a recent boost in business confidence and employment that could be short term results of the Fed’s most recent QEII economic stimulus package. Conversely, the Euro is still weakened by the ongoing Eurozone financial troubles and increasingly well-justified fears that the consolidated European currency will eventually break down as a result. The net result is a fairly bearish fundamental outlook for EUR/USD.
A more technical EURUSD analysis shows that the rate has now fallen below its slightly downward sloping 200-day MA now at 1.3004, which roughly coincides with an important psychological level for EUR/USD at 1.3000. This supports the continued bearish short term technical outlook for the pair, and has even turned the medium term technical outlook mildly bearish should the rate sustain its recent losses below 1.3000.
Next Week’s Economic Data Calendar for EUR/USD
The forex market will now be watching the following chronological list of key data releases for the United States and the Eurozone due out during the coming week of January 10th to the 14th: The likely highlights will be the ECB Rate Decision and the U.S. PPI numbers out on Thursday, as well as Friday’s U.S. CPI and Retail Sales data.
Monday, January 10th
French Industrial Production +0.7% expected -0.8% previous
U.S. Treasury Currency Report (tentative)
Tuesday, January 11th
FOMC Members Plosser and Kocherlakota talk in Philadelphia and Madison respectively.
Wednesday, January 12th
EZ Industrial Production +0.5% expected +0.6% previous
U.S. Import Prices +1.3% expected +1.3% previous
U.S. Fed’s Beige Book
U.S. Federal Budget Balance -150.4B previous
Thursday, January 13th
ECB’s Minimum Bid Rate Decision 1.00% expected 1.00% previous
ECB Press Conference
U.S. Trade Balance -41.2B expected -38.7B previous
U.S. PPI +0.8% expected +0.8% previous
U.S. Core PPI +0.2% expected +0.3% previous
U.S. Weekly Initial Jobless Claims +405K expected +409K previous
U.S. Federal Reserve Chairman Bernanke talks in Arlington
Friday, January 14th
EZ CPI +2.2% expected +2.2% previous
EZ Core CPI +1.1% expected +1.1% previous
U.S. Core Retail Sales +0.7% expected +1.2% previous
U.S. Retail Sales +0.8% expected 0.8% previous
U.S. CPI +0.4% expected +0.1% previous
U.S. Capacity Utilization Rate 75.6% expected 75.2% previous
U.S. Industrial Production +0.5% expected +0.4% previous
U.S. Preliminary Univ. of Mich. Consumer Sentiment 75.6 expected 74.5 previous
U.S. Business Inventories +0.7% expected +0.7% previous