Euro/USD Weekly Outlook –April 30 – May 4

The Euro/USD slightly increased in the past week but didn’t break free from its range of 1.31 and 1.33. Will this stalemate continue during the week to come? The recent FOMC meeting didn’t bring any new headlines as the Fed kept the door open on another stimulus plan but didn’t introduce any additional monetary expansion steps. The U.S GDP grew by 2.2% according to a report which was published on Friday. These news items only slightly affected the U.S dollar to trade down against major currencies. During the upcoming week there are several important news items on the agenda most notably the ECB rate decision on Thursday and the U.S employment report on Friday. The Spanish economic slowdown will probably continue to be in the headlines.  Currently, the Euro/USD is traded down.

Here is a short outlook for the Euro/USD exchange rate including the main news items and events that may affect its direction for April 30th to May 4th

Forex Market April Update:

The Euro to USD slightly rose by 0.26% during last week to reach on Friday 1.3254; during April, the Euro /USD slipped by 0.7%.

The chart below shows the development of the Euro to USD during April (UTD).

Chart Euro to us dollar Exchange Rates  April 30Correlations among Exchange Rates – April Update

The chart below is the shifts in the linear correlation (moving correlation) between the Euro/USD and the Aussie dollar/U.S dollar (daily percent changes) during the last several months (up to April 27th).

Correlations Euro to us dollar and AUD USD  2011-2012 April 30

The chart shows the strong positive relation between the two exchange rates, but the correlation has weakened in the past several months. The current correlation between the two daily percent changes of these currencies is nearly 0.54 for March. This may suggest the effect (if at all) of the Euro/USD on the direction of the AUD/USD is still slightly weaker than in the past but is still robust.

Current Forex Indexes April 30th

Euro to US Dollar is traded at 1.3231 a 0.39% decrease as of 16:49*.

AUD /USD is traded at 1.041 a 0.58% decrease as of 16:49*.

(* GMT)

Euro/USD Related News for the Week

Monday, 09:00 – Euro Area M1 M3 and Private Loans: In the February report, the annual growth rate for M3 sharply rose to 2.8%. The M1 also rose to 2.5%. Finally, the annual growth rate of loans to private sector declined to 1.1% in February. If the M1 and M3 will continue to rise according to the upcoming April report it could serve as another indicator for the increasing inflation pressures  in the  EU;

Tuesday 15:00 – U.S. ISM Manufacturing PMI: This report will refer to the monthly development in the manufacturing sector on a national level during April 2012. During March 2012 the index edged up to 53.4%, which means the manufacturing is growing at a slightly faster pace; this index might affect the US dollar;

Wednesday 10:00 – Euro Area Unemployment Rate: the Euro Area unemployment rate edged up from 10.7% in January to 10.8% in February; if this upward trend will continue it may adversely affect the direction of the Euro;

Thursday 13:30 – U.S. Jobless Claims Weekly Report:  this report will refer to the weekly changes in the initial jobless claims for the week ending on April 28th; in the previous update the jobless claims slipped to 388,000; this upcoming weekly report may affect the direction of the U.S dollar and consequently commodities prices;

Thursday 13:30 –Euro Rate Decision: In previous decision the President of ECB, left the rate flat at 1%; if the ECB will make a move, it may affect the Euro to US dollar exchange rate and perhaps even push it out of its current range;

Friday 13:30 – U.S. Employment Report: in the previous report regarding March 2012, the labor market didn’t improve as it did in the previous months as the number of non-farm payroll employment rose by only 120k; if the upcoming report will be positive and reach the 180-200 thousand mark (in additional jobs), this may lower the chances of the Fed to introduce additional stimulus plan in the future FOMC meeting; this report might affect the strength of the  U.S dollar.

Euro to USD Weekly Outlook

The news coming from Spain (GDP contracted by 0.3% and thus The Spanish economy is in a recession (it had two down consecutive quarters of GDP) may adversely affect the Euro. The EU reports might also adversely affect the Euro if the reports will show a contraction in the EU economies. On the other hand if the ECB will step up and make an announcement it could strengthen the Euro. Finally the U.S reports including U.S labor report may affect the Euro/USD. If the labor report will not be positive (below the 150k) this may help rally the Euro/USD.  

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