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Forex - EUR/USD weekly outlook: August 8 - 12

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Forexpros - Last week saw the euro pull back from a two-week low against the U.S. dollar on Friday after the European Central Bank said it would begin buying Italian and Spanish bonds in exchange for fiscal reforms, boosting sentiment on the single currency.

EUR/USD hit 1.4054 on Friday, the lowest since July 18; the pair subsequently consolidated at 1.4279 by close of trade on Friday, edging down 0.69% over the week.

The pair is likely to find support at 1.4054, Friday's low and a two-week low and short-term resistance at 1.4370, last Thursday's high.

The European Central Bank said it would begin buying Italian and Spanish government bonds in exchange for fiscal reforms, in an attempt to ease investors concerns over the region's ongoing debt crisis.

Italian Prime Minister Silvio Berlusconi said Friday that the country will accelerate austerity measures and introduce a balanced budget rule to bring down the country's debt by 2013.

Meanwhile, the U.S. Department of Labor said Friday that nonfarm payrolls rose by 117,000 in July, above expectations for an increase of 95,000, while the previous month's figure was revised up to a gain of 46,000 from a previously reported 18,000.

The unemployment rate dipped unexpectedly to 9.1% from 9.2%, the first decline in four months.

On Thursday, ECB President Jean Claude-Trichet said that the central bank will lend euro-area banks as much money as they need for six months and extend its existing liquidity measures through the end of the year.

The ECB kept its benchmark interest rate at 1.5% in a widely anticipated decision. ECB rates are still "accommodative" and inflation risks "remain on the upside," Trichet said.

Concerns over the risk of sovereign debt contagion in the euro zone intensified earlier in the week after yields on Italian and Spanish bonds surged to euro-lifetime highs.

After markets closed Friday, ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA, and kept the rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.

S&P said the debt ceiling deal reached by lawmakers to cut the federal deficit by an estimated USD2.1 trillion over a decade did not go far enough and "America's governance and policymaking is becoming less stable, less effective, and less predictable than what we previously believed."

In the week ahead, markets will get their first chance to react to the historic U.S. debt downgrade. Traders will also be paying close attention to Tuesday's Federal Reserve rate announcement and its statement on monetary policy for any hints regarding further easing.

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

Monday, August 8

The euro zone is to publish a report on investor confidence, a leading indicator of economic health.

Tuesday, August 9

In the euro zone, Germany and France are to publish government data on their respective trade balances, the difference in value between imported and exported goods over the month.

Meanwhile, the U.S. is to publish preliminary data on nonfarm productivity and labor costs, which are closely linked to consumer inflation.

In addition, the Federal Reserve is to announce the federal funds rate. The announcement will be followed by the bank's rate statement, which gives important insights into the economic conditions that influenced the rate decision.

Wednesday, August 10

In the euro zone, France is to publish official data on industrial production, a leading indicator of economic health, while Germany is to release government data on consumer price inflation.

Later in the day, the U.S. is to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.

Thursday, August 11

The European Central Bank is to publish its monthly bulletin, which gives a detailed analysis of current and future economic conditions from the bank's point of view.

Meanwhile, the U.S. to publish official data on its trade balance, as well as a government report on initial jobless claims and natural gas stockpiles.

Friday, August 12

In the euro zone, France is to release preliminary data on gross domestic product and non-farm payrolls. The country is also to produce official data on consumer price inflation.

In addition, Italy is to publish a report on its trade balance, while the single currency bloc is to produce official data on industrial production, a leading indicator of economic health.

Later in the day, the U.S. is to round up the week with government data on retail sales, the primary gauge of consumer spending, while the University of Michigan is to produce preliminary data on consumer sentiment and inflation expectations.

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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