Jan 3, 2010

Forex Crunch Forex Weekly Outlook – January 4-8 2010

Forex Crunch Forex Weekly Outlook – January 4-8 2010

Forex Weekly Outlook – January 4-8 2010

Posted: 02 Jan 2010 08:20 AM PST


The first week of 2010 is packed with important events. Starting as early as Sunday with Ben Bernanke and ending with the king of forex – Non-Farm Payrolls. In the middle, there’s a rate decision from Britain, European employment numbers and many important releases from Australia. The holidays are over, and the markets are ready for action. Here are the major events that are expected this week.

In the past holiday weeks we’ve seen false breaks. This week, everyone’s back on the scene, and such events are less likely. Let’s start:

Ben Bernanke

Arabic version of the weekly outlook

Sunday, January 3rd: Already on Sunday, an important event is expected: Ben Bernanke will speak about the housing bubble, and will probably set the tone for the opening of the year in forex.

Monday, January 4th: Australia’s Commodity Prices are due early on Monday. In Britain, Manufacturing PMI is predicted to rise and help the Pound.

European Sentix Investor Confidence is expected to tick up and push the Euro higher. The big event of the day is American ISM Manufacturing PMI which is predicted to tick up to 54.2 points, after dropping last time.

Tuesday, January 5th: German Unemployment Change surprised economists in previous releases but is expected to rise again, but looking at the past, it will probably drop. CPI Flash Estimate is expected to show that inflation is picking its head in Europe, with a rise of 0.9%.

After strong surprises from new and existing home sales (one good and one bad), American Pending Home Sales are predicted to drop this time by 2.9%. American Factory Orders are predicted to continue the steady positive trend and rise by 0.5% this time.

Wednesday, January 6th: Australian Building Approvals are predicted to leap up this time, after a drop last month that hurt the Euro.

In Britain, Services PMI is predicted to edge higher once again, up to 56.9 points. European Industrial New Orders, that posted a good surprise last month, is predicted to drop this time.

In the US, ADP Non-Farm Employment Change provide a hint towards the Non-Farm Payrolls on Friday. They’re expected to show a loss of 74K jobs, about half of last month’s number, and still in the negative zone.

ISM Non-Manufacturing PMI complements Monday’s similar number. After dropping below the critical 50 mark, it’s predicted to rise back up to 50.9 points this time.

Later in the US, the FOMC Meeting Minutes will shed some more light on the confusing FOMC Statement that eventually pushed the dollar higher.

Kiwi traders should note the Trade Balance release in New Zealand, which is predicted to show a smaller deficit.

Thursday, January 7th: Australian Trade Balance is predicted to show a smaller deficit this time. Retail Sales are predicted to continue the steady growth and show a rise of 0.4%.

Swiss CPI is expected to show another slow month, with a rise of 0.1% in prices.

European Retail Sales are predicted to remain unchanged for a second month in a row. German Factory Orders will probably turn positive, and rise by1.6%.

Mervyn King’s Bank of England will make a rate decision. The British Official Bank Rate is expected to remain unchanged and stay at 0.5%. Also the Quantitative Easing plan, also known as the Asset Purchase Facility isn’t expected to receive additional funding and stay at 200 billion. As the figures aren’t expected to change, the focus will shift to the MPC Rate Statement, which might lay out the policy for 2010. As of Q3, Britain is still in recession.

In Canada, Ivey PMI is predicted to drop from the high levels it reached. This might cool down the loonie.

American Unemployment Claims, which posted neat numbers in the past weeks, are predicted to rise back from 432K to 444K. This will supply another hint for the NFP on Friday.

Friday, January 8th: Swiss Unemployment Rate is expected to tick up once again, and rise to 4.2%. Only a big surprise will shake the Swissy.

German Retail Sales are expected to start rising again, after being unchanged last month. European Unemployment Rate is expected to tick up once again and rise to 9.9%. If it reaches the psychological number of 10%, this will certainly hurt the Euro.

European final GDP for Q3 is predicted to confirm the earlier reading of a 0.4% growth rate. Also note German Industrial Production is predicted to turn positive after dropping last month.

Canadian employment figures have been excellent last month. Good numbers are expected this time as well: Employment Change is predicted to show a rise of 20K and the Unemployment Rate is expected to move from 8.5%. USD/CAD will rock around this release, especially as American NFP is next.

Non-Farm Payrolls are predicted to show almost no job loss. The current consensus of economists shows a loss of 1000 jobs. If the number is a little bit better, and will show a rise in jobs, the dollar will leap. Job losses have been printed in the past two years and a gain in jobs will be excellent news. Here are some notes for Non-Farm Payrolls trading.

Also note the revised number for last month’s number – a loss of 11,000 jobs, which was an excellent surprise. American Unemployment Rate, which dropped from 10.2% to 10% last time, is predicted to tick up to 0.1%. Also here, a drop below 10% will be very meaningful, as this is another psychological barrier.

That’s it for the major events this week. I’ll later post in-depth coverages for specific currencies, in this busy week. In the meantime, check out the EUR/USD 2010 predictions.

Have a great weekend and a happy new year!

Further reading:

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.

British Pound Outlook- January 4-8 2010

Posted: 02 Jan 2010 08:18 AM PST


The Pound enjoyed the thin trading volume to rise. Now we’re back to normal. This week is packed with major British releases, with the rate decision being the most important one. Here’s an outlook for the events that will impact the British Pound, and an updated technical analysis for GBP/USD as 2010 begins.

GBP/USD chart with support and resistance lines marked on it. Click to enlarge:

GBP USD 2010 Forecast

At the wake of 2010, Britain is still in recession. The figures are updated only for Q3, but Britain is still far behind other economies. At least the unemployment situation is improving. Let’s start the review. The technical analysis will follow:

  1. Halifax HPI: Publishing time is unknown at the moment. The Halifax Bank of Scotland calculates the prices of homes by its internal mortgage figures, making it these numbers very meaningful. According to Halifax, prices of homes have risen in the past 5 months, usually at a rate higher than 1%. Last month’s rise of 1.4% is expected to be followed by a modest 0.6% rise.
  2. Manufacturing PMI: Published on Monday at 9:30 GMT. Britain’s manufacturing sector is expanding, but this is quite fragile according to purchasing managers. Manufacturing PMI is flirting with the 50 point mark that separates contraction and expansion. Last month’s number disappointed with a fall to 51.8 points. It’s predicted to edge up to 52.1 points this time.
  3. Net Lending to Individuals: Published on Monday at 9:30 and slightly overshadowed by the PMI release. Also here, the situation is fragile. Credit is expanding in the past 3 months, but the pace of lending growth, which is necessary for the economy’s growth, is stuck. After dropping to 0.3 billion pounds last time, it’s predicted to double to 0.6 billion.
  4. Mortgage Approvals: Published on Monday at 9:30 GMT, and will only move the Pound if it’s a big surprise. Other events overshadow it. Although the BBA already published its mortgage numbers, this official release also moves the Pound. 57K mortgages were approved last month, and the number is predicted to tick up to 58K this time.
  5. Construction PMI: Published on Tuesday at 9:30 GMT. The construction sector is important in Britain, where real estate has been an important part of the growth, and also the recession. Purchasing managers are rather pessimistic. This indicator has shown contraction (below 50) since March 2008. This isn’t expected to change now – Last month’s 47 points are expected to be followed by 47.6 this time – an improvement, but still under 50.
  6. Nationwide Consumer Confidence: Published on Wednesday at midnight GMT. This survey of 1000 consumers impacts the members of the Bank of England before they make their rate decision. After slow and cautious gains, this indicator is predicted to edge down from 73 to 72 points.
  7. Services PMI: Published on Wednesday at 9:30 GMT.  The British Services sector is doing better than the manufacturing sector. PMI for this sector has been above 50 for 7 straight months, and this trend is predicted to continue, but to calm down. After dropping from 56.9 to 56.6, it’s predicted to rise back to the same score again – 56.9.
  8. Rate decision: Published on Thursday at 12:00 GMT. British policymakers aren’t expected to move the interest rate. The Official Bank Rate is predicted to stay at 0.5%, the historic low. Also the Asset Purchase Facility, also known as the Quantitative Easing program, isn’t expected to be extended beyond 200 billion pounds. It could have been larger. So, the first rate decision of 2010 will probably be around the MPC Rate Statement. Mervyn King and his colleagues will lay out expectations for 2010, a year in which Brits elect a new government.
  9. PPI: Published on Friday at 9:30 GMT. PPI Input leaped two months ago by 2.9%, but this was a one-time event. Prices rose by 0.1% last time, and are back to normal. And now, a drop of 0.2% is predicted. PPI Output, which is less important, is expected to rise by 0.2%. This number hasn’t leaped earlier.

GBP/USD Technical Analysis

GBP/USD traded in a wide range in the past holiday week, from the lows of 1.5830 to the highs of 1.6230. It closed a positive week at 1.6160.

Immediate support for the Pound is at 1.6110. This is a line that it struggled to break after starting the comeback, but its importance is now smaller, after being broken too many times.

Further below, 1.5720 is a huge support line. This is the bottom border of a wide range that the Pound has been trading in in the past 6 months. It was already successfully tested.

Looking up, 1.6260 served as support line, and is now a resistance line for the Pound. Further above, 1.65 is a round number and another minor resistance line.

Looking higher, I’ve added a resistance line that didn’t appear in last week’s outlook. 1.6746 worked as a resistance line 3 times in past months, although the pair traded above this line twice in this period.

My sentiment is still bearish on the Pound.

There are too many weights on the British recovery, such as the huge deficit. Add the dollar’s strength to that, and you see it going down. I see last week’s rise as insignificant, as it came during thin-volume trading.

Further reading:

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.

AUD/USD Forecast – January 4-8 2010

Posted: 02 Jan 2010 08:12 AM PST


The Aussie starts the new year around an important technical line. There are many indicators this week, with retail sales and building approvals standing out. Here’s an outlook for the events that will shake the Aussie, and an updated technical analysis for AUD/USD in the first week of 2010.

AUD/USD chart with support and resistance lines marked on it. Click to enlarge:

AUD USD 2010 forecast

In various roundups for the year and the decade, the Aussie was noted for being a popular carry trade. This carry trade hasn’t always worked. It will be interesting to see how the high Australian rate will impact the currency’s strength in 2010.

  1. AIG Manufacturing Index: Published on Sunday at 22:30 GMT. This indicator, by the Australian Industry Group, is similar to other countries’ manufacturing PMI. AIG has shown expansion in Australia’s manufacturing sector in the past 4 months. The score, at 51.2 points, is predicted to be repeated with a similar number.
  2. Commodity Prices: Published on Monday at 5:30 GMT. Australia’s commodity based economy moves by commodity prices. The year-over-year number has been negative in recent months, due to fall of prices last year. The drop from December 2008 should be smaller.
  3. HIA New Home Sales: Published on Tuesday, but the exact timing is unknown at the moment. Australia’s Housing Industry Association has posted tow months of significant drops in new home sales. An improvement is expected after last month’s big drop of 6%.
  4. AIG Services Index: Published on Tuesday at 22:30 GMT. According to AIG, the services sector didn’t enjoy many straight months of expansion.  It has been above 50 only in the past two months. The score of 52.5 points is predicted to be followed with a similar score this time.
  5. Building Approvals: Published on Wednesday at 00:30 GMT. This indicator hasn’t been stable in recent months, but the changes are becoming smaller. Last month saw a drop of 0.6%. A rise of 3.1% is predicted this time. A higher score will lift the Aussie.
  6. Retail Sales: Published on Thursday at 00:30 GMT.  This major consumer indicator disappointed in the past two months: once by dropping instead of rising, and later by rising less than expected. The volume of sales is predicted to rise by 0.4% this time, following last month’s 0.3% rise.
  7. Trade Balance: Published on Thursday at 00:30 and overshadowed by retail sales. Australia suffers from a deficit in its trade balance in the past 7 months. The deficit is growing, peaking at 2.38 billion last month. This deficit is predicted to squeeze to 1.8 billion this time, as the price of gold was higher in the measured period.
  8. AIG Construction Index: Published on Thursday at 22:30 GMT. The last of the indicators from AIG is different in being on negative last month: under 50 points. It’s expected to rise back above 50 and indicate expansion.

AUD/USD Technical Analysis

AUD/USD went above the important resistance line of 0.8950, and managed to close above it. This move enjoyed thin holiday trading and should be taken with a grain of salt. AUD/USD closed at 0.8976. This doesn’t change the lines from last week’s outlook.

The first and most important support line is at 0.8950. This was a support and resistance line many times in the past. Further below, 0.88 is a minor support line.

Looking lower, the region of 0.8477 to 0.8520 is very important. AUD/USD struggled to go above 0.8477 during many months in the summer, and after it broke this line, 0.8520 was the the bottom.

Looking above the current close, 0.9090 supports immediate resistance, but a minor one. Higher, 0.9210 is another resistance line that worked as such a few time.

The most significant resistance line appears at 0.9322. It was tested more than once. Check out Casey Stubbs’ monthly setup for AUD/USD for another technical analysis.

I remain neutral on AUD/USD.

Australia is still doing great, having a good job market and a high interest rate. But a few factors weigh on the Aussie: a possible halt in rate hikes, slower-than-expected Q3 growth, and a raging dollar bulls.

Further reading:

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.

USD/CAD Outlook – January 4-8 2010

Posted: 02 Jan 2010 07:02 AM PST


After a holiday week without any events, the Canadian dollar expects all0important employment figures among other indicators. Will the Canadian dollar continue to hold strong against the greenback? Will it break out of range? Here’s an outlook for the major events in Canada this week, and an updated technical analysis for USD/CAD for the first week of 2010.

USD/CAD chart with support and resistance lines marked on it. Click to enlarge:

Canadian dollar forecast 2010

Traders of USD/CAD had a false break during the thin volume of the holiday week, but the pair is back into the range as traders return to the markets. Let’s start:

  1. RMPI: Published on Tuesday at 13:30 GMT. Canada’s Raw Materials Price Index impacts the economy, as it relies on commodities. Prices have been rather unstable in Canada. A drop of 1.1% was followed by a strong rise of 2.5% last month. Another rise is predicted this time – by 1.2%. A higher move will help the loonie.
  2. Ivey PMI: Published on Tuesday at 15:00 GMT. The Richard Ivey School of Business has show a serious drop in activity last month. This highly regarded indicator has risen nicely up to 61.7 but then fell to 55.9, lower than expectations. The downfall is expected to continue with 52.3 pints this time. Note that this still is in the expansion zone – above 50 points.
  3. Employment data: Published on Friday at 12:00 GMT. This is the major release of the week. Canada’s employment numbers moved strongly in the past three months. Last month, almost 80,000 jobs were added and the unemployment rate fell to 8.5%. This helped the loonie weather the storm of the greenback. One month earlier, 43.3K jobs were lost, hurting the Canadian dollar. This also erased the gains that helped the loonie one month before that. As you see, it’s not boring… This time, a gain of 20,000 jobs is predicted in the Employment Change number. Unemployment Rate is expected to remain unchanged at 8.5%. A surprise to both directions sure is possible. Note that this release comes 90 minutes before the American Non-Farm Payrolls. This makes these hours very volatile for USD/CAD.

USD/CAD Technical Analysis

USD/CAD made a false break in the past holiday week, dipping under 1.04. It then returned to the range mentioned in last week’s outlook, closing in the middle – at 1.0512.

USD/CAD trading continues to be characterized by the 1.04 – 1.0750 range that has been with us from the beginning of November. The Canadian dollar didn’t go above 1.0750, even when the dollar was sweeping the board.

Looking above, 1.0850 is the next resistance line, serving as such just before the pair entered this range. A more serious resistance line appears at 1.1130, a line which USD/CAD tested more than once in 2009.

Below 1.04, 1.0205 is the next support line. This was the bottom line in 2009. Even lower, USD/CAD parity is the ultimate support line. Apart from being a huge psychological barrier, it served as a support and resistance line in 2008.

I remain neutral on USD/CAD.

Canada has many reasons to enjoy a strong currency. Inflation and housing are picking up and employment numbers published this week can also help the pair. The reason for not being bearish (pro-Canadian dollar) is that the US dollar shows great strength in the last month.

Further reading:

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.
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