Forex - EUR/USD weekly outlook: February 20 - 24

Published 02/19/2012, 10:31 AM
EUR/USD
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Investing.com - The euro was fractionally higher against the U.S. dollar on Friday, trimming some of the week’s losses as sentiment was lifted by new hopes that euro zone leaders will soon agree to the release of Greece’s second bailout.

EUR/USD hit 1.2974 on Thursday, the pair’s lowest since January 25; the pair subsequently consolidated at 1.3138 by close of trade on Friday, retreating 0.52% over the week.

The pair is likely to find support at 1.3065, the low of February 3 and resistance at 1.3226, the high of January 30.

The euro found support on Friday after German Chancellor Angela Merkel and Greek Prime Minister Lucas Papademos expressed optimism that an agreement would be reached at Monday's meeting of euro zone finance ministers.

However, investors remained cautious as European officials warned that that there was still a long way to go in order for Greece to meet the target for its debt burden which would allow the EUR130 billion bailout to proceed.

Without a bailout, Greece faces the threat of defaulting when a EUR14.5 billion bond redemption comes due on March 20.

Earlier in the day, the European Central Bank said that its current account rose less-than-expected in December, advancing to EUR2.0 billion from minus EUR0.9 billion the previous month. Analysts had expected the current account to rise to EUR2.3 billion in December.

The data came after the ECB said on Thursday in its monthly bulletin that it expects the euro zone economy to contract this year by 0.1%, slashing its projections for 0.8% growth.  

Data also showed that Germany’s producer price inflation rose 0.6% in January, exceeding expectations for a 0.4% increase.

Meanwhile, sentiment was also boosted by a string of upbeat U.S. economic data. On Thursday, the U.S. Department of Labor said initial jobless claims unexpectedly fell to their lowest level since March 2008 last week, declining to 348,000, confounding expectations for an increase to 364,000.

On Friday, the U.S. Conference Board said that its index of leading economic indicators increased for the fourth consecutive month in January.

In the week ahead, markets will be keenly awaiting the outcome of Monday’s meeting of euro zone finance ministers, while markets in the U.S. will be closed for the Presidents Day holiday.

Also next week, the euro zone is to produce closely watched preliminary data on manufacturing a service sector activity, while the U.S. is to release a flurry of housing sector data.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Tuesday as there are no relevant events on this day.

Monday, February 20

Markets in the U.S. will remain closed for the Presidents Day holiday.

Wednesday, February 22

The euro zone is to release preliminary data on manufacturing and service sector activity, while France and Germany are to produce individual reports. The single currency bloc is also to publish official data on industrial new orders, a key gauge of production.

Also Wednesday, the U.S. is to release industry data on existing home sales, a leading indicator of demand in the housing market, followed by official data on crude oil stockpiles.

Thursday, February 23

In the euro zone, Germany is to publish an Ifo report on business climate, a key gauge of economic health.

The U.S. is to release government data on unemployment claims, an important signal of overall economic health.

Meanwhile, finance ministers and central bankers are to meet throughout the day for the seventh G20 meeting, in Mexico.

Friday, February 24

The U.S. is to round up the week with a revised report by the University of Michigan on consumer sentiment, followed by government data on new home sales, an important signal of economic health.

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