EUR/USD Forecast Dec. 05, 2011, Fundamental Analysis

The EUR/USD is embracing for another critical week as it has been the case for the past period, and this time the summit for the EU leaders is indeed the last chance to restore order and embrace the mild recession calmly.

The focus will start from Monday on the EU summit and the ECB rate decision with more expected from both sides and surely the start will be with cautious and jitters as investors look atParisfor details from Merkel and Sarkozy over what to expect from the EU.

We still expect volatility and choppy trading especially after a good run for the pair last week and a relief rally that maybe only prepared the grounds for further losses. The euro’s recovery can persist but only depends on what the end of the week will present from the ECB and the EU and accordingly the uncertainty will linger in choppy trading.

Germanywill start this week at 08:55 GMT with the PMI Services for November in a final reading, where the index is expected unrevised at 51.4.

The euro zone will join the session at 09:00 GMT with the PMI Composite and Service for November in a final reading, where the PMI Composite and Services are expected unrevised at 47.2 and 47.8 respectively.

At 10:00 GMT the euro zone will release the Retail Sales index for October, with expectations the monthly index could have expanded by 0.1% from the previous drop of 0.7%, while the annual index is projected to drop by 0.6% compared with the prior drop of 1.5%.

At 15:00 GMT theUnited Stateswill join the session with the ISM Non-Manufacturing Composite for November, which could have improved to 53.5 from 52.9.

TheUnited Stateswill also provide markets with the Factory Orders index for December, with expectations that the index could have shrank 0.3% from the prior 0.3% expansion.

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