EUR/USD Forecast Nov. 15, 2011, Fundamental Analysis

It was a strong bearish opening for the EUR/USD this week with heavy losses seen despite the expected relief on the new Italian government.

The relief rally on the new Mario Monti government in Italy and the ability of the debt-ridden nation to meet the target in the bond sale did not ease the jitters. The high yields and warning from Merkel that Europe is facing the toughest hour since WWII fueled fears and skepticism that the crisis is far from over and leaders will not be able to contain the damage.

We still see heavy headwinds for the euro and since the relief failed to prop the common currency on Monday, the outlook for the week seems more pro-dollar as the jitters and risk aversion might persist with heavy data Tuesday especially the expected weak GDP figures from the euro area.

Germany will start the day with the GDP for the third quarter at 07:00 GMT where the economy is expected to expand by 0.5% after 0.1% the previous quarter.

From Germany we also have the Zew Survey for November at 10:00 GMT where the Current Situation index is expected to slow to 35.0 from 38.4 and the Economic Sentiment Index to fall further to -52.0 from -48.3.

Turning to the euro area, the GDP is also due at 10:00 GMT where the economy is expected to have contracted as well by 0.2% in the third quarter in line with the pace seen in the second quarter.

The Trade Balance is due at the same time for the month of September which is expected to hold at 1.0 billion euros deficit from the previous month.

The U.S. economy will start the data at 13:30 GMT with the Producer Price Index for October which is expected with 0.1% drop after 0.8% rise and on the year to ease to 6.3% from 6.9%. Excluding food and energy it is expected with 0.1% rise from 0.2% and on the year to rise to 2.9% from 2.5%.

Also at the same time we have the Retail Sales Index for October which is expected to slow with 0.3% gain after 1.1% surge and excluding autos to rise 0.2% after 0.6% rise in September.

As for the Empire Manufacturing Index for November it is expected to ease the contraction to -2.30 from -8.48.

At 15:00 GMT the Business Inventories for September are due and expected to slow to 0.2% from 0.5% previous rise.

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