| British Pound Forecast – December 14-18 Posted: 12 Dec 2009 07:14 AM PST 
The Pound lost over 200 pips this week, suffering from a strong dollar and a problematic budget from Alistair Darling. The upcoming week contains inflation, retail sales employment figures and more. Here’s an outlook for a busy week for British Pound traders, and an updated technical analysis for GBP/USD. GBP/USD chart with support and resistance lines marked on it. Click to enlarge: 
One thing the Pound didn’t enjoy was the unofficial NIESR GDP estimate, that showed a cautious return to growth in November. The upcoming week contains 12 events. Many of them cannot be overlooked. Let’s review them. The technical analysis will follow: - Rightmove HPI: While this is not the most accurate house price data, it comes very early in the month, and very early in the trading week – on Monday at midnight GMT. This indicator disappointed with a fall of 1.6% month, after two months of growth. It’s now expected to rise modestly, under 1%. An acceleration in house prices is necessary for an acceleration in consumer prices as well.
- RICS House Price Balance: This indicator shows the relative part of surveyors reporting a rise in prices. In the past three months, the people reporting a rise in prices were winning. Last month’s 34% is predicted to be followed by 39% this time. Published on Tuesday at midnight GMT.
- CPI: The slowdown in prices seems to have reached the bottom in Britain, as CPI rose last month to an annual rate of 1.5%, after dropping for quite some time. Consumer prices are expected to rise to 1.8%, still in the government’s target inflation range. Core CPI is expected to remain stable at a 1.8% annual growth rate. Published on Tuesday at 9:30 GMT.
- RPI: Published together with the CPI, the Retail Price Index is of high importance, as it is sometimes considered more accurate. According to the RPI, prices have fallen in the past 8 months. This time, prices are expected to rise by 0.2%. Such an outcome will boost the Pound. Published on Tuesday at 9:30 GMT.
- David Miles talks: After the recent rate decision left the interest rate and the QE program both unchanged (contrary to the previous surprise), a Miles, a senior MPC member, will make a public appearance. He’ll start talking on Tuesday at 8:30 GMT, and may shake the Pound.
- Claimant Count Change: This important employment indicator is published on Wednesday at 9:30 GMT. This figure relates to November, that ended recently – what makes this figure fresh and important. Last month’s number of people asking for unemployment benefits rose by 12.9K, much less than previous months and early expectations. This improvement is now expected to be slightly erased, with a rise of 14.2K jobs this time. Published on Wednesday at 9:30 GMT.
- Unemployment Rate: This employment figure relates to October, but is still very important – it’s highly quoted by the media and impacts policymakers, especially as Britain is entering an election year. Also this month, Britain’s unemployment rate is expected to rise to 8%, but last month’s same predictions were beaten – the rate fell to 7.8%. Published with the Claimant Count Change, on Wednesday at 9:30 GMT.
- Retail Sales: British consumers have been upping their spending recently, with a 0.4% rise that followed to unchanged months. More growth is expected to be seen this time – by 0.5%. Note that this figure didn’t fall for 5 months, during the time that the economy shrank. Published on Thursday at 9:30 GMT.
- Consumer Inflation Expectations: This additional inflation figure is also published on Thursday at 9:30 GMT, and will be somewhat overshadowed by retail sales. This quarterly figure has reached a bottom in Q1, with expectations of a 2.1% rise in prices. In the past two quarters, it has risen to 2.4%. The upcoming release should show higher expectations, as prices have risen. Note that expectations are always higher than official releases.
- CBI Realized Sales: The Confederation of British Industry published showed a higher sale volume in the past 3 months, with the score reaching 13 points last month. Another rise is expected this time, up to 16 points. This survey touches the wholesalers, which move more slowly, so these numbers have a long term meaning. Published on Thursday at 11:00 GMT.
- BOE Financial Stability Report: This report by the BOE has been delayed for a long time, and is finally due on Friday at midnight GMT. With other European countries suffering from fragile economic conditions, British stability, especially in the financial sector is important for Britain and for other countries as well. The Bank of England publishes this report twice a year.
- Public Sector Net Borrowing: The British government’s expenditure has come under scrutiny. The high deficit won’t be addressed in an election year, a we’ve seen from Alistair Darling in last week’s pre budget release. So, the British government is expected to borrow 23,1 billion pounds this time, double last month’s 11.4 billion, which was also more than expected. This weighs on the Pound.
GBP/USD Technical Analysis The Pound fell at the beginning of the week and continued afterwards below the 1.6260 support line down to 1.6160. It finally closed at 1.6260 and is now in crossroads. I haven’t made changes to last week’s support and resistance lines, but they will probably be updated next week, as the Pound is falling. Looking down, 1.6110 serves as an initial and significant support line. It served as a resistance line before the pair made a break upwards. Further down, 1.5720 supplies huge support. The Pound bounced off this line when it began the big comeback. Looking up, 1.65 serves as a minor support line. Further up, 1.6876 was a peak in recent weeks, and 1.7042 is the year-to-date high. I am a big bear on GBP/USD. While the unofficial GDP suggests hope, and also employment should show more improvement, Britain is suffering from a heavy deficit, and cannot withstand the greenback’s strength. Further reading: Trade together with Currensee |
| EUR/USD Forecast – December 14-18 Posted: 12 Dec 2009 07:13 AM PST 
The Euro starts the new week in a weak position, after edging below a support line on Friday. The upcoming week features two major business sentiment surveys as well as important inflation figures. Here’s an outlook for the major events that await the Euro, and an updated technical analysis for EUR/USD. EUR/USD chart with support and resistance lines marked on it. Click to enlarge: 
Debt problems in Greece, credit downgrade in Spain and a surrender to excellent American figures all hurt the Euro. Will it get back up on its feet? Let’s review the 11 events that await the Euro. The technical analysis will follow: - Industrial Production: The all-European industrial production is published after the Germany and France publish their figures. But since we’ve witnessed the big differences between the member states, and previous surprises, this figure’s release is important. After two months of growth, last month’s 0.3% rise is expected to be followed by a dip of 0.6%. Published on Monday at 10:00 GMT.
- Employment Change: Also here, the whole continent’s quarterly figure is published rather late, but still is significant. European jobs are expected to decline for the fifth quarter in a row, after a drop of 0.5% in Q2. Published on Monday at 10:00 GMT.
- French CPI:Also in the continent’s second largest economy, prices are hardly moving. The rise of 0.1% last month is expected to be followed by a rise of 0.2% in prices this time – not something that will push for a rate hike. Published on Tuesday at 7:45 GMT.
- German ZEW Economic Sentiment: This is already a major indicator for the Euro. The highly regarded survey of investors is known to be very indicative. After improving for many months, this figure dropped in recent months from the peak of 57.7 to 51.11 points. While this is still positive, the decline hurt the Euro. Another drop is predicted this time, down to 50.2 points. Together with the German sentiment, the institute also published the figure for all of Europe, but this is less significant. Also here, sentiment fell from the peak of 59.6 down to 51.8 and is continued to drop to 50.9. Published on Tuesday at 10:00 GMT.
- French Flash PMI: On Wednesday morning, purchasing managers’ indexes will be released gradually in the continent, with PMI separated to the manufacturing and services sectors. France starts at 8:00 GMT. French Flash Manufacturing PMI is above the critical 50 point mark in the past 5 months, but has slightly dropped last month to 54.2 points. It’s expected to regain some of its loss, and rise to 54.8. French Flash Services PMI has been positive, above 50 for four months, and showed strong gains. This time it’s predicted to relax from the peak of 60.4 and drop to 60.1 points.
- German Flash PMI: Half an hour later, on Wednesday at 8:30 GMT, the continent’s largest economy releases its figures. German Flash Manufacturing PMI has a hard time to remain above the 50 mark, and dipped below it (meaning contraction) three months ago. The recent rise to 52 is expected to be followed by a further gain to 52.6 points. Also the German Flash Services PMI isn’t all the time on the rise, but it didn’t dip below 50. The result of 51.4 is expected to be followed by a rise to 52 points.
- European Flash PMI: PMI for the whole continent is published at 9:00 GMT. Flash Manufacturing PMI is expected to post a third month above of expansion expectations, and rise from 51.2 to 51.5 points. Flash Services PMI is predicted to edge up from 53 to 53.3 points, closing a fourth month of expansion.
- CPI: Consumer prices in Europe have declined for 5 straight months. Deflation is a real burden on the Euro. This time, there’s hope for higher prices, as this was seen in the preliminary release and the German numbers. So, CPI is expected to rise by 0.6% (annualized) this time, matching the Flash release. Also Core CPI is expected to show a rise – of 1.2% (annualized) exactly as in the past two months. Published on Wednesday at 10:00 GMT.
- German PPI: Moving to producer prices, also here a rise in prices is expected. PPI hasn’t been stable in Germany, with prices going up and down occasionally. Last month’s unchanged number is expected to be followed by a 0.2% rise this time. Published on Friday at 7:00 GMT.
- German Ifo Business Climate: The second major survey from Germany is published on Friday at 9:00 GMT. This wide survey of 7000 businesses also has a strong impact on the Euro. It has risen in the past 8 months, and reached 93.9 points last month. It’s expected to edge up to 94.6 this time.
- Current Account: European current account has surprised with a surplus 3 months ago, but turned negative once again afterwards. The flow of goods, cash and services has shown a deficit of 5.4 billion last month. It’s predicted to squeeze down to 2.3 billion this time. Published on Friday at 9:00 GMT.
EUR/USD Technical Analysis The Euro began last week by breaking below the 1.48 line that served as the bottom line for the range during November. It never got back above it. After range trading between 1.4690 to 1.4790 (a lower range), it fell as low as 1.4586 before closing at 1.4613, a little below the 1.4626 support line. So now, 1.4626 is the initial point of resistance, rather than support last week. Further the aforementioned 1.48 is another point of resistance, which was a support line, but was already tested last week as a resistance line. Far above, the upper border of the previous range is now another resistance line – 1.5060, and even higher, the year-to-date high of 1.5144 is next. Looking down, I’ve marked two lines as a range – EUR/USD struggled to break 1.4444, a major resistance line. After the break in September, it didn’t go below 1.4480 – so the 1.4444 to 1.4480 range supports the pair now. Even further below, 1.42 worked as support / resistance in the past, but the focus is on the serious barrier of 1.4444-1.4480. My sentiment is now bearish on EUR/USD. The break broke two resistance lines. Europe isn’t only Germany and France, and the far flanks of the continent are weighing on the currency. Now that the US recovery is seen in more and more indicators, Europe’s growth doesn’t have an advantage anymore. There are always interesting reads about this pair on the web: - Casey Stubbs talked about the upcoming breakout and the bearish sentiment.
- Mohammed Isah sees further downside after the uptrend was broken.
- The Geek Knows brings an interesting technical review.
I’ll add more link later on. Suggestions are welcome! Further reading on Forex Crunch: Trade together with Currensee |
| Australian Dollar Forecast – December 14-18 Posted: 12 Dec 2009 07:12 AM PST 
The Australian dollar puts up a fight to the recent greenback’s strength. The upcoming week contains two major events: GDP for the third quarter and the meeting minutes of the last rate decision, that will give us a hint about another possible rate hike. Here’s an outlook for the Australian dollar, and an updated technical analysis for AUD/USD. AUD/USD chart with support and resistance lines marked on it. Click to enlarge: 
Australia’s employment numbers exceed expectations over and over again. Australia enjoys China’s strength, which was also seen recently. We don’t have too many figures this week, but they are all quite significant. Le’ts review the events. The technical analysis will follow: - Monetary Policy Meeting Minutes: The Reserve Bank of Australia raised the interest rate to 3.75% in their last meeting. This was the third consecutive rate hike, and probably not the last. The meeting minutes from this meeting are published on Tuesday at 00:30 GMT, and are expected to hint about another rate hike. The aforementioned employment figures support this.
- Housing Starts: This is a quarterly figure that gives a big picture of the housing sector. In Q2, housing starts disappointed by falling in a scale of 3.7%. This time, in Q3, housing starts are expected to align with the rest of the economy, and rise by 6.1%. Published on Tuesday at 00:30 GMT, and somewhat overshadowed by the meeting minutes.
- MI Leading Index: The Melbourne Institute publishes this composite index on Tuesday at 23:30 GMT. Most of the nine indicators that consist of this number have already been published, but is still important. After neat rises in previous months, this index edged up by only 0.4% last time. A stronger rise is expected this time.
- GDP: Australia has avoided an official recession in the current global crisis. The economy contracted in only one quarter, Q4 of 2008. Since then, it posted growth. After growing by 0.4%, the Australian Gross Domestic Product is expected to rise by 0.4% this time. This major release is due on Wednesday at 00:30 GMT.
- Ric Battellino talks: RBA Deputy Governor Ric Battellino makes many public appearances and impacts the Aussie. His general attitude is optimistic – expressing confidence of long term growth. He’ll make a public appearance on Wednesday at 1:15 in Sydney, and can shake the Aussie as well.
- RBA Monthly Bulletin: The RBA completes its current round of official releases with this collection of articles and statistics. This could give more information about the central bank’s view towards the economy and future policy. Published on Thursday at 00:30 GMT.
AUD/USD Technical Analysis The Aussie traded lower during most of the week, bottoming out above 0.90. It later rose and touched 0.92 before closing at 0.9125. Initial and minor support exists at 0.9090, a line that has returned to the chart after being absent from last week’s outlook. This line was strongly broken on Thursday. The Aussie didn’t go below since then. More significant support is at 0.98950, a line that was tested from both directions. Even lower, 0.85 is an area that the Aussie had a hard to to breach during August, and serves as a far support line. Looking up, 0.9210 was tested this week once again, making it stronger. Further above, 0.9322 was tested 3 times in the past and also serves as major resistance. Even higher, the YTD high of 0.94 is the next line of resistance. I remain bullish on the Aussie. My bulls were fueled by the employment improvement, and I believe that they’ll get a boost from the GDP and a growing consensus of another rate hike. Further reading: Trade together with Currensee |
| USD/CAD Forecast – December 14-18 Posted: 12 Dec 2009 07:11 AM PST 
The Canadian dollar managed to remain stable in another week of greenback strength. The upcoming week contains important inflation figures and 7 more events that will shape the loonie’s direction. Here’s an outlook for the upcoming week, and an updated technical analysis for USD/CAD. USD/CAD chart with support and resistance lines marked on it. Click to enlarge: 
Excellent housing figures, especially building permits, that were far better than expectations, helped the loonie rise. Let’s see the events that will shape this week. The technical analysis will follow: - Capacity Utilization Rate: Canada suffered from drops in the utilization rate of resources since Q4 of 2007. It reached a bottom of 67.4% in the last quarter and is finally expected to rise to 67.7% this time. A stronger rise will help the loonie. Published on Monday at 13:30 GMT.
- Labor Productivity: Productivity surprised last quarter by remaining unchanged. Higher productivity isn’t good for the currency, as it translates into lower wages. The report that will be published on Tuesday at 13:30 reflects Q3. A drop of 0.4% is expected.
- Leading Index: This composite index is built from 10 economic indicators – some already released. Even so, this figure has surprised in recent months, usually to the upside. After a rise of 0.7% last month, it’s expected to post a similar 0.6% rise this time. Note that most initial reads have been revised to the upside as well. Published on Tuesday at 13:30 GMT, together with the Labor Productivity.
- Manufacturing Sales: This indicator is quite unstable. Sales by manufacturers can rise or fall by 6%. Last month’s release showed a nice 1.4% growth, after a larger drop of 2.1% in the previous month. A modest 0.4% rise is predicted, but learning from the past, the scale will probably be different. Published on Wednesday at 13:30 GMT.
- Mark Carney talks: The governor of the central bank made a rather uninteresting rate decision last week, after disappointing last month. He’ll make a public appearance on Wednesday at 18:05 in Toronto and might elaborate on the current economic conditions and the prospects for the future. He tends to move the loonie.
- CPI: In the past four months, Canadian prices haven’t risen. This fact makes a rate hike impossible. After another disappointing drop of 0.1% last month, prices are expected to rise by 0.4% this time for a change. Core CPI, which excludes volatile items, did rise in the past 3 months. The 0.1% rise last month is expected to be followed by a rise in the same scale this time. Published on Thursday at 12:00 GMT.
- Foreign Securities Purchases: This is the net value of stocks and other financial instruments that were purchased by foreigners in the past month. Foreigners believe in Canada: in the past two months, they invested much more than was predicted, passing 13 billion last month. This number is expected to ease this time to 13.59 billion. Published on Thursday at 13:30.
- Wholesale Sales: This figure is similar to the retail sales, but takes one step backwards – looking at the wholesalers. Sales have only risen slightly in Canada last month – by 0.2%. This followed a dip. Another rise of 0.2% is expected this time. Published on Friday at 13:30 GMT.
USD/CAD Technical Analysis USD/CAD traded between 1.04 and 1.0670, closing slightly higher this week, at 1.06. The 1.06 resistance line, which was important in last week’s outlook, was breached this week, and its importance is smaller. Looking up, 1.0750 was the peak in recent weeks, and serves as the first resistance line. Above that, 1.0850 was a peak in November and is the next line of resistance. Beyond this line, 1.1130 was tested during August more than once, and serves as a major resistance line. Below, 1.04 was successfully tested and now serves as a major support line. Below this, 1.02 was the year-to-date bottom, and serves as another support line. Parity lies below, but it isn’t close. I remain neutral on USD/CAD. Canada has a strong arsenal to withhold the greenback’s strength: excellent employment numbers and impressing housing figures. This is good for stability, but not for gains. Further reading: Trade together with Currensee |
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