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Forex - EUR/USD weekly outlook: November 4 - 8

Published 11/03/2013, 11:17 AM
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Investing.com - The euro fell sharply against the dollar on Friday as expectations that the European Central Bank may cut rates weighed, while the dollar was lifted after unexpectedly strong U.S. manufacturing data reinforced the view that the Federal Reserve could start tapering stimulus sooner than expected.

EUR/USD ended Friday’s session at 1.3492, 0.68% lower for the day. For the week, the pair lost 2.15%.

The pair is likely to find support at 1.3425 and resistance at 1.3570, the high of October 15.

The euro slid after data on Thursday showing that euro zone inflation fell to a four year low in October raised concerns that the ECB may ease monetary policy as soon as this week to help shore up growth.

Eurostat said consumer price inflation in the currency bloc slowed to 0.7% in October, the slowest pace since November 2009, from 1.1% in September.

A separate report showed that the euro zone unemployment rate rose to a record high 12.2% in September.

The dollar was boosted after unexpectedly strong U.S. manufacturing data added to expectations that the Fed could start to taper its asset purchase program as early as next month.

The Institute of Supply Management said its manufacturing purchasing managers’ index rose to 56.4 in October, the highest since April 2011, from 56.2 in September. Economists had expected the index to tick down to 55.0.

The Fed left its USD85 billion-a-month asset purchase program in place following its monthly meeting on Wednesday and was more optimistic than expected in its assessment of the economy. Fed officials said the economy is expanding "at a moderate pace" and said downside risks were diminishing.

The bank gave no clear indication whether it would start scaling back stimulus at the December meeting or continue it into the start of 2014.

The single currency also ended the week sharply lower against the pound and the yen, with EUR/GBP falling 0.83% to 0.8472 and EUR/JPY down 1.08% to settle at 133.16.

In the week ahead, investors will be awaiting the outcome of Thursday’s ECB policy meeting and press conference with President Mario Draghi.

On Friday the U.S. is to release the nonfarm payrolls report for October, which will help investors assess expectations for a possible reduction in Fed stimulus.

Data released on Wednesday showed that the U.S. private sector added fewer jobs than expected in October. Payroll processing firm ADP said non-farm private employment rose by a seasonally adjusted 130,000 in October, below expectations for an increase of 150,000.

The U.S. is also to release preliminary data on third quarter economic growth.

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

Monday, November 4

In the euro zone, Spain and Italy are to release data on manufacturing activity.

The U.S. is to release data on factory orders, a leading indicator of production.

Tuesday, November 5

In the U.S., the ISM is to release a report on service sector activity.

Wednesday, November 6

The euro zone is to release data on retail sales. Meanwhile, Spain and Italy are to release data on service sector activity and Germany is to publish a report on factory orders.

Thursday, November 7

Germany is to release a report on industrial production. Later in the day, the ECB is to announce its benchmark interest rate. The announcement is to be followed by a press conference with President Mario Draghi.

The U.S. is to publish a preliminary estimate of third quarter gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth. Meanwhile, the Labor Department is to release its weekly report on initial jobless claims.

Friday, November 8

In the euro zone, Germany is to release data on the trade balance, while France is to produce a report on industrial production.

The University of Michigan is to release the preliminary reading of its consumer sentiment index. The U.S. is to round up the week with the closely watched government data on nonfarm payrolls and the unemployment rate.



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