Forex - EUR/USD weekly outlook: February 11 - 15

The euro extended losses against the dollar for a second day on Friday after European Central Bank President Mario Draghi said the bank would closely monitor developments in the markets to see if the stronger euro had an effect on the bank’s inflation outlook. 

EUR/USD 1.3354 on Friday, the pair’s lowest since January 25, before settling at 1.3369, down 0.22% for the day and 1.06% lower for the week.

The pair is likely to find support at 1.3263, the low of January 23 and resistance at 1.3428, Friday’s high.

The euro weakened broadly on Thursday after Draghi said the said the bank will monitor the strength of the euro.

Draghi said the recent appreciation in the single currency reflected growing signs of a return of investor confidence in the euro zone and added that the exchange rate was not a policy target.

Speaking at the bank’s post-policy meeting press conference, Draghi said that economic weakness in the euro area would persist during the early part of 2013 but said the economy should start to recover “later” in the year.

The ECB left interest rates at 0.75% on Thursday, in line with market expectations.

Meanwhile, European leaders reached an agreement on a seven year budget on Friday.  European Union governments will contribute slightly less to this budget, after adjusting for inflation, than they did to the past seven-year funding plan, following calls to curb spending by Brussels.

In the U.S., data on Friday showed that the trade deficit narrowed to the smallest since January 2010 in December as exports rose sharply.

The upbeat data fuelled hopes that figures for fourth quarter growth may be revised upwards after preliminary data last week showed that the economy contracted by an annualized 0.1% in the three months to December.

The Commerce Department said trade deficit narrowed to USD38.5 billion from a USD48.6 billion deficit in November, compared to expectations for a deficit of USD46.0 billion.

Elsewhere, Chinese data showing that exports surged 25% and imports climbed 29% in January added to signs of a recovery in the world’s second largest economy and bolstered market sentiment.

In the week ahead, investors will be anticipating U.S. data on retail sales and consumer sentiment, while euro zone data on fourth quarter growth will be in focus. 

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

Monday, February 11

In the euro zone, France is to publish official data on industrial production. In addition, the eurogroup of euro zone finance ministers is to hold talks in Brussels.

Tuesday, February 12

In the euro zone, the Economic and Financial Affairs Council is to hold talks in Brussels. 

Later in the day, the U.S. is to publish data on the federal budget balance.

Wednesday, February 13

The U.S. is to publish 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 data on import prices, business inventories and crude oil stockpiles.

Thursday, February 14

The euro zone is to release preliminary data on fourth quarter growth, while Germany, France and Italy are also to publish individual reports. The ECB is to publish its monthly bulletin, which details economic conditions from the bank’s perspective. In addition, Italy 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.

Friday, February 15

The euro zone is to publish data on the trade balance, while Spain is to hold an auction of 10-year government bonds.