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Forex - EUR/USD weekly outlook: August 15 - 19

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Forexpros - The euro edged modestly higher against the U.S. dollar on Friday, capping a tumultuous and volatile week for currency markets, highlighted by an historic downgrade to the U.S. credit rating and heightened concerns over sovereign debt contagion in the euro zone.

EUR/USD hit 1.4102 on Thursday, the lowest since August 5; the pair subsequently consolidated at 1.4245 by close of trade on Friday, dropping 1.2% over the week.

The pair is likely to find short-term support at 1.4102, Thursday's low and resistance at 1.4400, Wednesday's high.

The euro came under pressure on Monday, as market sentiment was rattled after ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA after markets closed last Friday.

The ratings agency kept the rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.

The downgrade prompted investors to shun riskier assets, such as stocks and higher yielding currencies, and flock to traditional safe haven assets like the yen, Swiss franc and gold.

But the single currency rebounded on Tuesday after the Federal Reserve pledged to keep its benchmark interest rate at an all-time low until "at least through mid-2013."

In a statement, the Fed said growth was much slower than expected and the labor market had deteriorated, underlining concerns over the U.S. economic outlook.

On Wednesday, risk appetite crumbled as fears grew that the euro zone's debt crisis could spill over to the region's banking sector, while speculation over a French sovereign debt downgrade raised concerns over the health of major French lenders, particularly Societe Generale.

The euro edged higher on Thursday after rating agencies Moody's, Standard & Poor's and Fitch's reaffirmed France's top-tier AAA credit rating and said its outlook was stable.

Meanwhile, on Friday, government data showed that U.S. retail sales rose 0.5% in July, the biggest gain in four months.

However, concerns over the U.S. economic outlook remained after the University of Michigan's preliminary index of consumer sentiment plunged to a three-decade low in August.

Also Friday, several European governments, including France, Italy and Spain imposed bans on short selling of financial stocks on Friday in an effort to stem recent volatility in Europe's financial sector.

Looking ahead to the coming week, U.S. data on consumer price inflation will be a major focus of attention, while Tuesday's meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy will also be in focus.

Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.

Monday, August 15

In the euro zone, markets in France and Italy are to remain closed for national holidays.

Meanwhile, the U.S. is to produce official data on manufacturing activity in New York State and a report on the balance of domestic and foreign investment in the U.S.

Tuesday, August 16

The euro zone is to publish preliminary data on GDP, while Germany is also to publish a report on economic growth. The single currency bloc will also produce data on its trade balance.

Later in the day, the U.S. is to publish official data on building permits, an excellent gage of future construction activity, as well as data on housing starts. The U.S. is also to release data on import prices, the capacity utilization rate and industrial production, a leading indicator of economic health.

Wednesday, August 17

The euro zone is to release official data on consumer price inflation, which accounts for a majority of overall inflation as well as data on the region's current account.

Meanwhile, the U.S. is to publish official data on producer price inflation, a leading indicator of consumer inflation, as well as government data on crude oil stockpiles.

Thursday, August 18

The U.S. is to publish a flurry of economic data with government reports on initial jobless claims, consumer price inflation, existing home sales, manufacturing activity in Philadelphia as well as a report on natural gas stockpiles.

Friday, August 19

In the euro zone, Germany is to publish official data on producer price inflation, a leading indicator of consumer price inflation.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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