Jan 10, 2010

Forex Crunch Forex Weekly Outlook – January 11-15

Forex Crunch Forex Weekly Outlook – January 11-15

Forex Weekly Outlook – January 11-15

Posted: 09 Jan 2010 07:05 AM PST


After a turbulent start to the year, the second week also provides may important events: retail sales and inflation figures in the US, key employment figures in Australia and a rate decision in Europe are among the highlights this week. Let’s see what’s awaiting us in the wake of the NFP.

American Non-Farm Payrolls, the most important indicator, disappointed by posting 85,000 job losses. Still, there was one point of light – last month’s figure was revised to a gain jobs, the first in two years. All in all, the dollar, was hurt, but didn’t lose significant technical barriers. OK, let’s start with the new week:

Monday, January 11th: Swiss retail sales are the first major event of the day. French Industrial Production is expected to help the Euro.

In Canada, Housing Starts and Building Permits are to shake USD/CAD, after the employment report in Canada was weak. Most currencies will still trade by the Non-Farm Payrolls on this day.

Tuesday, January 12th: Australian Home Loans are an important release for Aussie traders. They’re expected to fall.

British Trade Balance is predicted to improve, but the Pound will need much more. Last week’s rate decision didn’t help the Pound.

Double feature Trade Balance in Canada and in the US is expected to show a higher American deficit and a higher Canadian surplus – pushing USD/CAD lower.

Wednesday, January 13th: British Manufacturing Production is expected to rise after a disappointment last time. The more interesting release in Britain is the NIESR GDP Estimate, which has proven accurate in the past. Did British recession finally end in Q4?

European Industrial Production is expected to rise after dropping last month. Also note French CPI.

The American Beige Book will give a broad look at the US economy. At the same time, the Federal Reserve Budget is expected to show a smaller deficit.

Japanese Core Machinery Orders are expected to recover from last month’s blow – a drop of 4.5%. Kiwi traders: notice the Building Consents published late in the evening.

Thursday, January 14th: Australian employment figures are predicted to be mixed – job gains on one hand and a rise in the Unemployment Rate to 5.8% on the other hand. Australia enjoyed good numbers last week.

Jean-Claude Trichet is expected to leave the interest rate unchanged. European Minimum Bid Rate is predicted to remain at 1%. Future prospects for a rate hike might be proposed: European inflation has picked finally picked up. On the other hand, European Unemployment Rate reached 10% – making a rate hike unlikely, at least until there’s improvement in the job market.

American Retail Sales posted nice gains last month, and pushed the US dollar higher. They’re now expected to rise but in a more moderate pace: 0.4% for Retail Sales and 0.3% for Core Retail Sales.

American Unemployment Claims are expected to remain almost unchanged after improving in recent weeks. Also note American Import Prices and Business Inventories. Both figures aren’t expected to move.

Friday, January 15th: Final European inflation numbers are due in Europe – where CPI and Core CPI are expected to reach a healthy 0.9% and 1% (respectively, annualized). These figures are based on the preliminary releases.

On the other side of the Atlantic, American CPI is predicted to edge up by 0.2% while Core CPI, no less important, is expected to rise by only 0.1%.

The preliminary Consumer Sentiment by the University of Michigan, a highly regarded survey, is expected to rise up to 73.9 points, pushing the dollar higher.

Also in the US: Empire State Manufacturing Index, Capacity Utilization Rate and Industrial Production are all predicted to rise.

That’s it for the major events this week. I’ll later post specific currency coverages.

Here they are:

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

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

EUR/USD Outlook – January 11-15

Posted: 09 Jan 2010 07:04 AM PST


Non-Farm Payrolls didn’t move EUR/USD out of its range. This week features a rate decision in Europe and important inflation figures. Here’s an outlook for the upcoming week in Euroland, and an updated technical analysis for EUR/USD.

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

EUR USD Outlook

Also European unemployment reached 10%, and this weighs heavily on the Euro. At least prices began rising, as seen in the preliminary release. This week should see a confirmation of the rise in prices. Let’s start the review for 7 events in Europe. The technical analysis will follow.

  1. French Industrial Production: Published on Tuesday at 7:45 GMT. The continent’s second largest economy suffered from two disappointing drop in its industry’s output. Economists usually expected small changes, but the actual results were rather strong. A rise of 0.4% is predicted this time.
  2. French CPI: Published on Wednesday at 7:45 GMT. In the past three months, French prices have disappointed with slow advances of 0.1% or drops in prices. Contrary to Germany, inflation is still quite asleep in France. A modest rise of 0.3% is expected.
  3. German Final CPI: Published on Thursday at 7:00 GMT, a few hours before the rate decision. While this is a late figure, the timing makes it important. Germany’s prices picked up in December, according to the preliminary release – 0.7%. A confirmation of this number will probably be seen, and might put a rate hike in European policymakers’ horizon.
  4. Industrial Production: Published on Wednesday at 10:00 GMT. The all-European figure is preceded with numbers from Germany and France. This makes this figure more predictable. Two months of rise were followed by a drop of 0.6% last time. A rise this time is important for the Euro. A rise of 0.6% is predicted.
  5. Rate decision: Published on Thursday at 12:45 GMT. Jean-Claude Trichet isn’t expected to move the interest rate. Yet again, for the 8th month in a row, the European Minimum Bid Rate is predicted to remain at 1%. As in previous cases, the focus will shift to the ECB Press Conference, where Mr. Trichet may lay out the policy for 2010, and may hint a possible timing for a rate hike, now that prices stopped falling in the Euro-zone. The press conference will take place at 13:30 GMT.
  6. German WPI: Published on Friday at 7:00 GMT. This is the first inflation indicator in a week full with such figures. The continent’s largest economy has printed a leap in wholesale prices after two months of drops. This is one of the signs that Europe is pulling out of deflation. A 0.4% rise is predicted this time.
  7. CPI: Published on Friday at 10:00 GMT. The last inflation release is the official and final one for the whole continent. The Consumer Price Index rose by an annualized rate of 0.5% in November and rose by 0.9% in December according to the initial print last week. This is expected to be confirmed this time. Core CPI is different: prices have been slowing down according to this figure, to an annualized rate of 1% last month, continuing a gradual drop throughout 2009.

EUR/USD Technical Analysis

The range of 1.42 to 1.4480 continues to dominate the pair. No change from last week. A failed attempt to breach 1.4480 was made at the beginning of the week. The low for this week was at 1.4257.

Looking up, the upper border of the range consists of two line: 1.4444 which was the resistance line in the summer, and 1.4480, which is now more important: EUR/USD didn’t go below this line after breaking upwards in September, and tested this line just now.

Above this range, 1.466 is a line that served as a support line when the Euro was trading higher. During November, EUR/USD was stuck in a different range, and 1.48 was the bottom border of it. Even higher, 1.5144 was the peak for 2009, and looks far at the moment.

Below, 1.42 serves as the bottom border of the current range, and will continue to serve as an important support line. Lower, 1.40 is a round number and worked as a stepping stone for the Euro as it went up.

Strongest support is found at 1.3750: this was an important support and resistance line during 2009.

I am bearish on EUR/USD

With American and European unemployment rates equal at 10%, Europe has no advantage, and a European rate hike seems unlikely in the near future. I see the range broken to the downside.

This popular pair receives many interesting reviews on the web. Here are some that I like:

  • Casey Stubbs analyzes the range and asks when it will break.
  • Mohammed Isah sees consolidation to the downside in force for this pair.
  • James Chen sees a potential inverted flag pattern.
  • The Geek Knows brings and in-depth review of EUR/USD and looks towards the new week.

Further reading:

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

GBP/USD Outlook – January 11-15

Posted: 09 Jan 2010 07:03 AM PST


The Pound didn’t enjoy the American NFP, and finished lower once again. The upcoming week provides 6 events that will impact the Pound, with the unofficial Q4 GDP being the highlight. Here’s an outlook for the upcoming week in Britain, and an updated technical analysis for GBP/USD.

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

GBP/USD Forecast

The rate decision turned into a non-event, and didn’t move the Pound. Next month’s decision will be more interesting, as the money allocated for the QE program will run out. So, let’s the review for the upcoming week. The technical analysis will follow:

  1. BRC Retail Sales Monitor: Published on Tuesday at midnight GMT. The British Retail Consortium beats the government’s official retail sales release by about 10 days. Although this data isn’t official, it gives a good indication on the volume of consumer spending and the whole economy. In the past 3 months, this indicator showed strong growth in sales volume. Last month’s 1.8% rise is expected to be followed by a modest rise this time.
  2. RICS House Price Balance: Published on Tuesday at midnight GMT. This measure of price trend in housing showed a rise in home prices in the past 4 months. A positive percentage means more regions are reporting a rise in prices. At 35%, this number is the highest in two years. It’s predicted to edge up once again to 38%.
  3. Trade Balance: Published on Tuesday at 9:30 GMT. Britain has a trade deficit of 7.1 billion according to last month’s release, which is about the first 10 years in 2009. The upcoming release is for November, and it’s expected to remain almost unchanged and drop to 6.9 billion.
  4. Manufacturing Production: Published on Wednesday at 9:30 GMT. This major economic indicator disappointed by remaining unchanged. It also a downwards revision of the previous month’s release. British production was rather unstable through 2009. A small rise is predicted this time – 0.3%.
  5. NIESR GDP Estimate: Published on Wednesday, probably at 15:00 GMT. This unofficial release of the GDP, has proved correct in the past. It’s published every month and supplies up to date GDP for the past three months. In last month’s release, it showed that the British economy grew by 0.2% in the three months ending in November. This gives some hope for seeing growth in Q4. This month’s release concludes Q4 and will be very interesting to watch.
  6. CB Leading Index: Published on Friday at 10:00 GMT. This composite index is based on many indicators that have already been released, but still has some impact. In the past 7 months, this index rose, usually by 1%. This was the exact scale of the past two months’ rise. A somewhat weaker result is predicted this time.

GBP/USD Technical Analysis

The British Pound began the week with attempt on the 1.6260 resistance line, but fell back down. It bottomed at 1.59 and then made another push up, bouncing off the 1.6110 resistance line this time.

So, looking up, we have the minor resistance line at 1.6110. Apart from Friday’s attempt, it worked in the past as a place where the Pound stopped during the big comeback. Higher, the 1.6260 line was also a support line in the past, and is stronger now.

Higher, I’ve added the 1.64 line on last week’s outlook. This was a peak in a few weeks ago, and also worked as a support line before that. Looking up, 1.6746 continues to be high point that the Pound failed to break several times, and is now a strong resistance line.

Looking down, 1.5720 remains the almighty support line for the Pound. It hasn’t traded below this line since May 2009. If the Pound loses this line, 1.5350 is out there in the distance.

My sentiment is bearish on GBP/USD

The future doesn’t look too bright. Even if the unofficial estimate shows that the British economy grew in Q4, it’s probably too little and too late. With the heavy deficit weighing on the Pound, the direction continues to be down.

Further reading:

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

USD/CAD Outlook – January 11-15

Posted: 09 Jan 2010 07:02 AM PST


The Canadian dollar enjoyed the American NFP, and USD/CAD traded lower. The upcoming week is mostly about housing sector numbers that helped the loonie in the past. Here’s an outlook for the upcoming events in Canada, and an updated technical analysis for USD/CAD, now that’s it out of the range.

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

USD/CAD Forecast

Canadian employment figures were a disappointment but not too bad. Canada saw a small loss of jobs last month. This hurt the loonie but only temporarily. Let’s start:

  1. Housing Starts: Published on Monday at 13:15 GMT. The first of two important housing sector figures has posted steady and expected growth in recent months, reaching 159K, the highest in almost a year. It’s expected to rise a bit higher this time to 161K.
  2. Building Permits: Published on Monday at 13:30 GMT. Only 15 minutes later, the second housing figure is published. Here it’s a different story. Canadian building permits shot up by 18% (!) last month, pushing the Canadian dollar higher. After three months of rises, a drop in permits is predicted – 1.1%, and probably won’t hurt the loonie after the huge leap last month.
  3. BOC Business Outlook Survey: Published on Monday at 15:30 GMT. The Bank of Canada surveys 100 leading businesses and asks them about the current economic conditions. There is no bottom-line score for this report, but rather a general notion. The report comes ahead of the rate decision next week. If the report is good, a possible change in policy can be predicted, now that inflation is somewhat higher.
  4. Timothy Lane speaks: BOC Deputy Governor Timothy Lane will begin speaking at 19:20 GMT. As inflation is rising in Canada, the central bank might adjust its schedule. Lane is Mark Carney’s deputy, and he can indicate a tighter schedule for tightening the rates – earlier than the end of Q2, which is the timing proposed in the recent rate decisions. In his speech, he’ll probably also speak about the housing sector.
  5. Trade Balance: Published on Tuesday at 13:30 GMT. Last month marked a change for Canada: the deficit that Canada was in for 6 months was replaced with a surplus. Although 0.4 billion is a small surplus, it stands out against the American deficit, which is growing. Also this week, a double-feature release is expected: American trade balance will be released at the exact same time. The Canadian surplus is predicted to rise to 0.9 billion.
  6. NHPI: Published on Tuesday at 13:30 GMT, and overshadowed by the trade balance release at the same time. The last housing sector figure for this week relates to prices. The New Housing Price Index posted steady rises in the past four months, with a 0.3% rise last month. A similar rise is predicted this time.

USD/CAD Technical Analysis

The Canadian dollar began the week by securing the break below 1.04. It later continued lower and traded between 1.0292 and 1.0383, closing the week at 1.0297 – which is a strong sign.

The range of 1.04 to 1.0750 was finally broken – to the downside. The lines haven’t been changed from last week’s outlook, only the role of 1.04: 1.04 changes its role from a support line to a resistance line. Further above, 1.0750 continues to serve as a resistance line – the upper border of the range.

Further above, 1.0850 was a peak before the loonie got into the range. Even higher, 1.1130 was tested several times as a resistance line.

Looking down, 1.0205 was the 2009 low and now serves as a strong support line. The ultimate support line is parity. USD/CAD was last seen in July 2008, and isn’t far anymore.

My sentiment turned bearish on USD/CAD

After a long time of neutral sentiment, the solid Canadian figures, high price of oil and the break of the 1.04 line convince me that the direction is down – despite the small loss in jobs.

Further reading:

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

AUD/USD Outlook – January 11-15

Posted: 09 Jan 2010 07:01 AM PST


The Aussie had an excellent week, riding on good figures. The upcoming week contains important Australian employment numbers, as well as 4 other indicators. Here’s an outlook for the events in Australia and an updated technical analysis for AUD/USD, with a look upwards.

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

Aussie Forecast

Building Approvals and Retail Sales were excellent surprises, that took the Aussie beyond resistance lines. For a rate hike, jobs and prices need to rise. We’ll know more this week:

  1. MI Inflation Gauge: Published on Sunday at 23:30 GMT. The Melbourne Institute has a good measure of inflation, and it precedes the government’s release: the figure is published monthly rather than quarterly. After dipping in October, this indicator rose by 0.3% last month. A stable rise in prices is expected this time as well.
  2. ANZ Job Advertisements: Published on Monday at 00:30 GMT. This unofficial measure of the number of advertised jobs will have a significant impact, as it serves as a warm-up towards the official employment numbers later in the week. This figure goes up and down. Two months ago, this indicator fell by 1.7%, only to leap by 5.2% last month. A more steady growth is predicted this time.
  3. Home Loans: Published on Tuesday at 00:30 GMT. Most purchases of homes are made through loans. Similar to other indicators this week, this one hasn’t been two stable. Last month’s fall of 1.4% was better than expected, but it also saw a downwards revision of the previous month’s rise. Despite the good Building Approvals last week, home loans aren’t expected to return to growth – a drop of 0.4% is predicted.
  4. NAB Business Confidence: Published on Tuesday at 00:30 GMT, and somewhat overshadowed by the home loans. National Bank Australia has shown improving business conditions in the past 6 months, reaching a score of 19 last month, the highest in 3 years. The strong score in this survey of 350 businesses is expected to stay almost unchanged this month.
  5. Employment data: Published on Thursday at 00:30 GMT. This is by far the most important event of the week. Australia saw three strong months of growth in jobs: 40,600, 24,500 and 31,200 last month. These results exceeded expectations each time, and psuhed the Aussie higher. Strong Australian employment is one of the key drivers towards an additional rate hike. Together with the Employment Change, Australia’s Unemployment Rate will be released. In the past 7 months, the Australian rate has been either 5.7% or 5.8%. In most cases, economists expected it to rise higher, as high as 6%. Last month saw a drop to 5.7%. The unemployment rate is predicted to rise to 5.8% and Employment Change to show a rise of 10.2K jobs.

AUD/USD Technical Analysis

After settling above the important 0.8950 line, the Aussie was quick to break the 0.9090 as well and used this as a support line. It eventually broke the 0.9210 line and even managed to close above it, at 0.9246.

0.9210 changed its role and is now a minor support line. Below, 0.9090 is a more significant line that the Aussie floated above. Further below, 0.8950 is an important support line, which worked as both support and resistance many times.

Further below, I’ve added 0.8735 on last week’s lines. This was the bottom during the holidays. Looking even lower, the area of 0.8477 to 0.8520 is important. After struggling to break 0.8477 on the way up, the Aussie settled above 0.8520 before continuing upwards.

Looking up, the next resistance line is major: 0.9322 was tested many times in the past, and only breached once. The peak for 2009 was at 0.9405, which is only a minor resistance line.

Even higher, the round number of 0.95 is the next resistance line – it served as such in 2008. Parity is still too far…

I remain neutral on Aussie for another week.

Australia’s high interest rate is a significant advantage, now that the risk factor doesn’t dominate the markets anymore. The reason for being neutral is the disappointing Q3 GDP. Strong employment figures, as seen last month, are necessary for the bulls to rage.

Further reading:

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

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)