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

[thenews]

The euro was lower against the dollar on Friday as the dollar recovered from a selloff that started Wednesday when Federal Reserve Chairman Ben Bernanke indicated that the bank may not be as close to tapering its asset purchase program as previously believed.

EUR/USD hit session lows of 1.3000, before pulling back to settle at 1.3068, down 0.21% for the day, and ending the week 1.62% higher.

The pair is likely to find support at 1.2961, Thursday’s low and resistance at 1.3150.

The euro came under pressure after ratings agency Fitch downgraded France from its triple-A rating on Friday, citing growing government debt levels and the weak outlook for economic growth.

Meanwhile, data showed that industrial production in the euro zone fell 0.3% in May, slightly more than expectations for a 0.2% decline.

The euro found support as the yield on Portuguese 10-year bonds eased after rising sharply earlier in the session when Lisbon asked international creditors to delay the next review of its bailout program.

In the U.S., data on Friday showed that consumer sentiment ticked lower in July, with the University of Michigan’s consumer sentiment index slipping to 83.9 from 84.1 in June, compared to expectations for a reading of 85.0.

The dollar fell sharply on Wednesday after Bernanke said the Fed will continue to maintain accommodative monetary policy for the foreseeable future, citing low levels of inflation and the high unemployment rate.

Bernanke said the bank will not raise interest rates until the U.S. unemployment rate hits 6.5%.

The comments came after the minutes of the central bank’s June policy meeting showed that Fed policymakers remain divided over when to begin tapering its USD85 billion-a-month asset purchase program.

Around half of Fed policymakers believe the bank should start to scale back bond purchases by the end of the year, while many others believe the labor market still remains too weak.

Philadelphia Fed President Charles Plosser said Friday the U.S. central bank should wind down its monetary stimulus program by the end of this year. Elsewhere, St. Louis Fed President James Bullard said the bank should not start tapering asset purchases if inflation remains weak.

In the week ahead, investors will be looking ahead to U.S. data on retail sales, consumer inflation and housing sector activity. Tuesday’s ZEW report on German economic sentiment will also be closely watched.

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

Monday, July 15

The U.S. is to produce official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. The U.S. is also to publish the Empire state manufacturing index and a report on business inventories.

Tuesday, July 16

The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health, as well as data on economic sentiment in the wider euro zone.

The euro zone is to release official data on consumer price inflation.

The U.S. is to release official data on consumer price inflation, industrial production and the capacity utilization rate.

Wednesday, July 17

The U.S. is to release official data on building permits, a leading indicator of future construction sector activity, as well as data on housing starts. The Federal Reserve is to release its Beige book.

Thursday, July 18

In the euro zone, Spain and France are to hold auctions of 10-year government bonds.

The U.S. is to release the weekly government report on initial jobless claims and the Philly Fed manufacturing index.

Friday, July 19

In the euro zone, Germany is to release official data on producer price inflation.

source ...

[techmac]

If we are going to wait until the U.S. unemployment rate hits 6.5%, we are looking into a not so short wait