Forex - EUR/USD weekly outlook: March 14-18

Forex Pros – The euro retreated from a four-month high against the U.S. dollar last week, before trimming gains after European Union leaders said they had reached an agreement on a German-inspired competitiveness pact that calls for far reaching reforms across the single currency bloc.

EUR/USD hit 1.4035 on Monday, the pair's highest since November 8; the pair subsequently consolidated at 1.3900 by close of trade on Friday, shedding 0.62% over the week.

The pair is likely to find support at 1.3751, Friday's low and a seven-day low and resistance at 1.4035, last Monday's high.

On Friday, European Union President Herman Van Rompuy said euro-area leaders reached an agreement “in principle on the pact for the euro.”

The plan is intended to boost competitiveness by curbing deficits and reducing labor costs. Leaders scheduled to meet in Brussels have set a March 25 deadline to approve a comprehensive package. The agreement was considered a necessary precursor for EU leaders to reach an agreement to overhaul the 17-nation bloc's bailout fund, the European Financial Stability Facility.

Earlier in the week, the single currency came under pressure amid fresh concerns over the sovereign debt load of peripheral nations. On Thursday, ratings agency Moody's downgraded Spain's sovereign debt to Aa2 from Aa1 with a negative outlook and warned of further cuts, saying plans to bail out the country's banking sector will cost more than the government had expected.

Next week, the major focus for markets will be the Federal Reserve's policy setting meeting on Tuesday. Meanwhile, the euro zone is to publish an important report on German consumer sentiment.

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

The euro zone is to publish official data on industrial production, a leading indicator of economic health.

In the euro zone, the ZEW Centre for Economic Research is to publish a report on German economic sentiment, a leading indicator of economic health.

The U.S. is to publish official data on manufacturing activity in New York state, as well as government reports on import prices and the balance of domestic and foreign investment. In addition, the Federal Reserve is to hold its policy setting meeting before announcing its federal funds rate. The banks rate statement will be closely watched as it discusses the economic outlook and offers clues on the outcome of future votes.

The euro zone is to publish official data on consumer price inflation, which accounts for a majority of overall inflation.

The U.S. is to publish a flurry of government data, with reports on building permits, an excellent gauge of future construction activity, as well as data on producer price inflation, housing starts and crude oil stockpiles.

In the euro zone, markets in Italy are to remain closed for a national holiday.

The U.S. is to publish official data on initial jobless claims, the nation's earliest employment data. The country is also to publish government data on consumer price inflation, industrial production and the capacity utilization rate. Meanwhile, the Federal Reserve Bank of Philadelphia is to publish an index of manufacturing activity, a leading indicator of economic health.

In the euro zone, Germany is to publish a report on producer price inflation, while Italy is to release official data on its trade balance. The euro zone is also to publish official data on its trade balance as well as its current account, which is directly linked to currency demand.

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