EURUSD continued to fall further last week, as the growing sovereign debt problems in Eastern Europe - notably Hungary this time - started weighing on the rate once more.

Despite the fact that Hungary is not a part of the European Union, the comments made on Tuesday by a spokesman for the newly elected Hungarian Prime Minister Orban implied that the economy of Hungary was in such a serious state that it may even make default on the country's debit a possibility.

In related comments made at the G20 meeting held in Seoul, Korea over this past weekend, Dominique Strauss-Kahn, the Managing Director of the IMF, expressed his surprise at these comments made on behalf of the new Hungarian leader.

This news affected EURUSD negatively, taking the rate down from its weekly high of 1.2340 seen on Tuesday after the European Unemployment Rate came out at 10.1%, as was widely expected.

In addition, Tuesday's U.S. ISM Manufacturing PMI came out slightly better than expected at 59.7 versus a 59.3 consensus.

Wednesday saw EURUSD come under renewed selling pressure after the Iranian central bank announced to the general surprise of the forex market that it would be selling €45B from its reserves. Apparently, the bank intends to purchase U.S. Dollars and gold with the Euros it has been holding.

This new policy indicates a complete reversal from Iran's previous policy of lowering the country's U.S. Dollar exposure as a result of ongoing friction between Iran and the United States.

Iran's sale of Euros started last week, and the bank anticipated that the reserve shift would be fully completed as of the end of the summer. This would indicate a September 22^nd target date for the finalization of this massive reserve adjustment.

EURUSD continued to decline further on Thursday as disappointing European Retail Sales numbers came out that showed a fall of -1.2% on the month against an expected increase of +0.1%.

Last Friday then saw the rate make a weekly low of 1.1955, a level that had not been seen since the first quarter of 2006. The Euro fell against the Greenback in spite of disappointing U.S. Non-Farm Payroll numbers that came out up only 431K against the anticipated 521K rise that was artificially buoyed by temporary government census workers.

In addition, Friday's U.S. Unemployment Rate was a bit better that the market had expected. The number dropped to 9.7% against expectations for a 9.8% number.

EURUSD went on to close the week at 1.1967 on Friday. The rate was down 2.5% from the previous week's close and just above its weekly low.

Fundamental Outlook for EURUSD

The primary market-moving economic data releases and policymaker speeches scheduled for this coming week in the Eurozone and the United States are as follows:

Eurozone:

The coming week of economic data scheduled in the Eurozone has less activity than last, although it features the key ECB rate decision due out on Thursday.

Monday begins the week with the release of German Factory Orders (-0.1% M/M) and the Sentix Investor Confidence Index (-5.2).

Tuesday offers the French Trade Balance (-4.3B) and the German Trade Balance reports (14.2B), as well as the French Government's Budget Balance (-28.9B) and German Industrial Production (0.7% M/M).

Wednesday has little notable due out, while Thursday has the highlighted ECB rate statement and rate decision. Once again, the central bank is widely expected to maintain its Minimum Bid Rate benchmark at the 1.0% level.

Also due out on Thursday are French Final Non-Farm Payrolls (-0.1% Q/Q) and French Industrial Production (0.7% M/M), as well as German Final CPI (0.1% M/M) and Italian Industrial Production (0.4% M/M).

Friday ends the week with the release of German WPI (1.3% M/M) data.

United States:

This week's economic release calendar for the United States offers some important data, featuring the Trade Balance report due out on Thursday and a number of important policymaker speeches.

Monday begins the week with the release of Consumer Credit (1.1B M/M).

Tuesday has the IBD/TIPP Economic Optimism index (49.3) due out, in addition to a speech scheduled to be given in Washington D.C. by Fed Chairman Bernanke and a speech in Hollywood by FOMC Member Duke.

Wednesday offers Wholesale Inventories (0.6% M/M) and the Fed's Beige Book. In addition, Wednesday has a speech scheduled in Kansas City by FOMC Member Hoenig, plus some important testimony in front of the House Budget Committee in Washington D.C. by Federal Reserve Chairman Ben Bernanke. Bernanke is also scheduled to speak later in the day in Richmond.

Thursday is the week's highlight, featuring the major Trade Balance data (-40.8B), in addition to Initial Jobless Claims (447K), plus the Federal Budget Balance (-138.6B).

Friday closes the week with the release of Retail Sales (0.1% Core and 0.2% M/M) and Business Inventories (0.6% M/M), in addition to the Preliminary University of Michigan Inflation Expectations (last 3.2%) and Consumer Sentiment index (74.7).

The Technical Picture for EURUSD

On the technical front, EURUSD has now fallen to yet another new low at 1.1955 as part of its prevailing medium term downtrend. In addition, the rate closed last week under its key psychological 1.2000 level as it broke the lower defining line of a potential descending triangle pattern on increasing trading volume to now target a measured move objective at 1.1568 for EURUSD.

This fresh decline has also pushed the 14-day RSI for EURUSD just into oversold territory where it shows a current reading of 29. The key indicator has also confirmed the new low in the rate with a new low.

Furthermore, the medium-term technical outlook for EURUSD remains bearish since the rate is trading well below its 200-day Moving Average that now comes in at 1.3997 and is sloping convincingly downwards. Nevertheless, given the current historically wide difference between the current rate and this long term moving average, some closure of this gap seems likely in the near term.

Overall, this scenario tends to argue for a corrective bounce in EURUSD early in the week that could present another selling opportunity for the lower levels expected later.

Resistance for EURUSD shows up at the psychological 1.2000 level, as well as at the 1.2143 and 1.2452 levels. Support for EURUSD is indicated at 1.1955, 1.1825 and 1.1660.

Figure 1: Daily candlestick chart of EURUSD showing its 200-day MA in red, Bollinger Bands in green and the 14-day RSI in the indicator box in blue.