Euro/USD Weekly Outlook –May 29- June 1

The Euro/USD continued its downward trend during most of last week. There are several reports that might also affect the direction of Euro/USD including: U.S GDP for Q1, non-farm payroll report, a speech by President of ECB Draghi, EU monetary development 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 29th to June 1st  

Forex Market May Update:

The Euro to USD declined by 2.07% during last week to reach by Friday 1.2517; during May, the Euro /USD decreased by 5.5%.

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

Chart Euro to us dollar Exchange Rates May 28Correlations among Currencies– May Update

The chart below shows the changes in the linear correlation (moving correlation) between the Euro/USD and the AUD/U.S dollar (daily percent changes) during the last few months (up to May 25th).

Correlations Euro to us dollar and AUD USD  2011-2012 May 28

The chart presents the very strong positive relation between the two currencies pairs; nevertheless the correlation has weakened in the past several weeks. The current correlation between the two daily percent changes of these currencies is nearly 0.518 for May. This may suggest the effect (if at all) of the Euro/USD on the direction of the AUD/USD is still very robust but weaken than it once was.

Current Forex Indexes May 28th

Euro to US Dollar is traded at 1.2579 a 0.50% increase as of 11:43*.

AUD /USD is traded at 0.9877 a 1.22% increase as of 11:43*.

(* GMT)

Euro/USD Related News for the Week

Tuesday – U.S Consumer Confidence: according to the previous report, the consumer confidence index remained flat in April. The current expectations are that the April index may decline;

Wednesday – Euro Area Monetary Development: This monthly report will show the development of the M3, M1 and loans to private sector in the Euro area during April 2012. In the previous March report, the annual growth rate for M3 sharply rose to 3.2%. The M1 also increased to 2.7%;

Wednesday – Italian 10 Year Bond Auction: the Italian government will issue another bond auction;

Wednesday – U.S. Pending Home Sales: in the previous report the pending home sales index increased by 4.1% (M-over-M). Based on last week’s results on housing sales the pending sales may continue to increase;

Wednesday – ECB President Draghi Speaks: The President of the European Central Bank, Mario Draghi will give a speech at European Policy Council in Brussels. Given the recent changes in Greece and the fragile state in which several EU countries are at, if Draghi will refer to the ECB policy on the European debt crisis this might affect the financial markets;

Thursday – German Retail Sales: According to March 2012, retail sales increased by 0.8%; if this report will continue to be positive then it could strengthen the Euro;

Thursday – Euro Area Flash Estimate of Annual Inflation: the inflation in Euro Area reached 2.6% in April. If the upcoming inflation rate estimate will change direction and increase, it may lower the chances of ECB lowering the interest rate;

Thursday – U.S. Jobless Claims Weekly Report:  in the latest update the jobless claims didn’t change much at 370,000; this upcoming weekly report may affect the U.S dollar;

Thursday – Second Estimate of U.S GDP 1Q 2012: In the first estimate the GDP expanded by 2.2% (annual rate). If the second estimate will be much different than the first estimate it could affect forex traders (for the first estimate of 1Q GDP).

Friday – U.S. Non-Farm Payroll Report: in the recent report the number of non-farm payroll employment rose by only 115k; if the upcoming report will continue to show low growth of nearly 100 thousand mark (in additional jobs), this may raise the chances of the Fed introducing additional stimulus plan in the future; this report might affect USD (see here my last review on the U.S employment report).

Euro to USD Weekly Outlook

The ongoing speculation around the future of Greece in Europe will likely to keep the Euro weak. Finally the U.S reports including U.S non-farm payroll, pending homes sales, GDP for Q1 and U.S jobless claims might also affect the Euro/USD and if these reports won’t meet expectations then they may curb the recent tumble of the Euro/USD .

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