Euro/USD Weekly Outlook –May 21-25

The Euro/USD continued its descent during most of last week except on Friday when the Euro bounced back. There are several reports that might also affect the direction of Euro/USD including: U.S home sales reports, minutes of recent German business climate report, a speech by President of ECB Draghi, U.S core durable goods report and U.S. jobless claims.

 Here is a short outlook for the Euro/USD currency pair including the main news items and publications that may affect the Euro/USD for May 21st to May 25th

Forex Market May Update:

The Euro to USD decreased by 1.05% during last week to reach by Friday 1.2782; during May, the Euro /USD decreased by 2.4%.

The chart below shows the downward trend of the Euro to USD during the month (UTD).

Chart Euro to us dollar Exchange Rates May 21Correlations among Currencies– May Update

The chart below is the developments in the linear correlation (moving correlation) between the Euro/USD and the U.S dollar/CHF (daily percent changes) during the last several months (up to May 18th).

Correlations Euro to us dollar and CHF USD  2011-2012 May 21

The chart presents the very strong positive relation between the two currencies pairs; furthermore the correlation has strengthened in the past several weeks. The current correlation between the two daily percent changes of these currencies is nearly -0.989 for May. This may suggest the effect (if at all) of the Euro/USD on the direction of the USD/CHF is still very robust and strong.

Euro/USD Related News for the Week

Monday– FOMC Member Lockhart Speaks: Following the recent FOMC meeting, the FOMC member Lockhart will give a speech. If he will hint offer some insight about the future steps of the FOMC it might affect the financial markets;

Tuesday– U.S. Existing Home Sales: in the recent report for March the number of homes sold decreased by 2.3% to a seasonally adjusted annual rate of 4.48 million home sales; if this trend will continue it may curb the rise in the USD;

Wednesday– U.S. New Home Sales: in the latest update (for March), the sales of new homes fell by 7.1% to an annual rate of 328,000; if the number of home sales will continue to decline, it may further indicate a slowdown in the U.S real estate market which may also affect the USD.

Thursday – German Business Climate Survey: In the previous report for  April 2012, the business climate index edged up from 109.8 in February to 109.9 in April; if this upward trend will continue, it might positively affect the Euro;

Thursday – U.S Core Durable Goods: According to March, new orders of manufactured durable goods fell by $8.4 billion; if this report will continue to be negative then it might weaken the US dollar;

Thursday – U.S. Jobless Claims Report:  in the latest report the jobless claims remained flat at 370,000; this upcoming weekly update may affect the U.S dollar;

Thursday – ECB President Draghi Speaks: Mario Draghi will talk at Bank of Italy in Rome. Given the recent political changes in Greece and the fragile state in which several EU countries are at, if Draghi will refer to the ECB stands on the current situation this could affect the financial markets;

Friday – German Consumer Climate: Gfk group will publish their German consumer climate index. If this report will be positive it might also have a positive effect on the Euro;

Euro to USD Weekly Outlook

The ongoing developments in Europe including the news of the new elections in Greece and Moody’s downgrade of several big Spanish Banks may have been among the factors in dragging down the Euro. The speculation around the future role of Greece may keep the Euro weak. Finally the U.S reports including U.S durable goods, homes sales (new and existing) and U.S jobless claims might also adversely affect the Euro/USD assuming they will be positive. 

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