Jan 24, 2010

Forex Crunch GBP/USD Outlook – January 25-29

Forex Crunch GBP/USD Outlook – January 25-29

GBP/USD Outlook – January 25-29

Posted: 23 Jan 2010 10:50 AM PST


The Pound had a volatile week which ended lower. The upcoming week should be positive with the release of Q4 GDP. It’s expected to show an end to recession. Here’s an outlook for the upcoming events in Britain and an updated technical analysis for GBP/USD.

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

British Pound Forecast

The past week saw another dip in unemployment, meaning that the turnaround in the job market wasn’t temporary, although the central bank isn’t impressed. Let’s start the review. The technical analysis will follow:

  1. Nationwide HPI: Publication time is unknown at the moment. The Nationwide Building Society has seen rises in house prices in the past 8 months. The pace has slowed down in recent months, and could fall now. Although not being the earliest house price report, it still has a strong impact.
  2. Prelim GDP: Published on Tuesday at 9:30. Britain is finally expected to exit the recession period. After a big disappointment in Q3 – a 0.2% contraction, the economy is now expected to grow by 0.4%. According to the unofficial NIESR GDP estimate, a growth rate of 0.3% is expected. These guys were right about the Q3 recession. An end to recession will boost the Pound. Most Western economies have exited recession in Q3, and some already in Q2 of 2009. The Pound will probably get out of its isolation.
  3. BBA Mortgage Approvals :P ublished on Tuesday at 9:30 GMT and overshadowed by the GDP. The British Bankers’ Association represents about two thirds of the total lending market. Since most deals of new homes are financed by mortgages, this number is of importance. Mortgage approvals reached 44.7K last month, continuing a steady rise. This trend is expected to continue, with 45.3K this time.
  4. Mervyn King talks: He will speak on Tuesday at 9:45 GMT. Just after the GDP release, Mervyn King will make a public appearance in parliament together with his deputy Paul Tucker. After dismissing the rise in inflation, King will have to address the improvement in the job market and probably the fresh growth figures. This is a volatile timing for the Pound.
  5. CBI Realized Sales: Published on Wednesday at 11:00 GMT. This survey of 160 companies usually has a good reflection of retail sales. This indexed made nice rises in the positive zone, indicating higher sales volume and rising optimism, though it stalled last month on 13 points. It’s predicted to rise to 15 points this time.
  6. GfK Consumer Confidence: Published on Friday at midnight GMT. Continuing the consumer data, GfK has a survey of 2000 consumers that has a good indication of the economic mood. This index has risen up to -13 in October, but fell down afterwards, scoring -19 points. Note that negative numbers indicate pessimism. A small rise is predicted now.

GBP/USD Technical Analysis

After trading in a range of almost 400 pips, the Pound ended lower against the US dollar, closing at 1.6109, at one of the minor support lines. The lines have slightly changed since last week’s outlook.

1.6110 remains a minor support line while 1.6270 is a minor resistance line. The Pound has been trading in these areas for quite some time.

Looking up, I’ve marked 1.6260 as the next resistance line for the Pound. It was this week’s high. Even higher, 1.6746 is a very important resistance line, which worked many times.

Below, 1.5720 is a major resistance line that held the Pound from falling and sent it to a comeback. A big dollar storm will sent the pair towards the 1.5350 line.

I continue staying neutral on the GBP/USD.

The recent employment numbers sure keep the Pound up, and with a return to official growth, the Pound can withstand the dollar’s strength. This isn’t enough for rises against the dollar, but it sure is good for gains against the Euro.

Further reading:

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

EUR/USD Outlook – January 25-29

Posted: 23 Jan 2010 07:06 AM PST


The Euro had a bad week, with continuing Greek problems. It slipped down to a lower range. The upcoming week consists of more important surveys and important employment and inflation figures. Here’s an outlook for the upcoming week in Europe, and an updated technical analysis for EUR/USD.

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

The Euro is falling across the board, also against the Japanese Yen and against the Pound. EUR/GBP began falling almost two weeks ago. Let’s start the review. The technical analysis (with a lower line) will follow:

  1. German GfK Consumer Climate:Published on Monday at 7:00 GMT. 2000 consumers are asked about their economic mood in this survey. After reaching a peak in September, at 4.3 points, this number has been falling and disappointing, reaching 3.3 points last month.
  2. French Consumer Spending: Published on Tuesday at 7:45 GMT. The continent’s second largest economy saw a disappointing dip in consumer spending after two strong months of rises. This index has been shaky throughout most of 2009.
  3. German Ifo Business Climate: Published on Tuesday at 9:00 GMT. This is the main event in Euroland this week. Similar to the ZEW economic sentiment (that hurt the Euro last week), this highly respected survey has a strong impact. 7,000 businesses are asked about the sentiment. But contrary to the ZEW, this index has been on a steady rise for many months, reaching 94.7 last month within expectations.
  4. Current Account: Published on Tuesday at 9:00 GMT and overshadowed by the business climate figure. After one surprising month of surplus in September, Europe’s current account has shown a deficit. In the past three months, the deficit in the number of goods, services and money has been larger than expected, weighing on the Euro. It reached 4.6 billion last month.
  5. German Prelim CPI: Published on Wednesday. Germany’s prices are off the ground, but not to far away. After many months around 0, prices have risen by 0.8% last month. This early figure is collected from the various states during the day. A big leap in prices is necessary for thinking about a rate hike.
  6. German Unemployment Change: Published on Thursday at 8:55 GMT. Europe’s largest economy has seen a resilient job market, with a drop in the number of unemployed people for 6 straight months. Economists expected a rise each time. Last time, Germany saw only a small drop in unemployed people, only 3,000, something that seems to align with the rest of the continent.
  7. Consumer Confidence: Published on Thursday at 10:00 GMT. This survey of 2,000 people is an official release by Eurostat. In the past 8 months, this survey improved but continued to print a negative number, showing that pessimism still rules. The latest advance has been from -17 to -16.
  8. M3 Money Supply: Published on Friday at 9:00 GMT. The amount of money in circulation has printed a rare drop last month, weakening the Euro. The growth rate of money has slowed down gradually during the crisis, turning into a drop last month and disappointing economists again and again.
  9. CPI Flash Estimate: Published on Friday at 10:00 GMT. Following the German Flash CPI, an initial release is also made for the whole continent. In the past two months, inflation is significantly above 0, with annual rises of 0.5% and 0.9%. These numbers aren’t deflationary anymore, but still aren’t enough for a rate hike.
  10. Unemployment Rate: Published on Friday at 10:00 GMT. After ticking up 0.1% every month, the Euro-zone’s unemployment rate rose by 0.2% and reached the alarming number of 10%. This hurt the Euro, as the rate is no better than the American one. Although it’s not the earliest indicator in the continent, it tends to capture the headlines and impact policymakers. A drop is necessary for the Euro to rise.

EUR/USD Technical Analysis

EUR/USD dived thus week into a lower range. The new range is marked by 1.42 that was the support line for the previous range and 1.40 which is a round number and also worked as stepping stone for the Euro on its way up.

After losing 1.42, EUR/USD traded between 1.4029 and 1.4182, keeping some distance from the range borders.

Above, 1.42, 1.4450, the previous border of the range is another resistance line. 1.4626 is another resistance line above that, followed by a major point at 1.48, which was the border of the high range.

Looking lower, 1.3750  is a very strong area of support for the Euro. It served as both a clear support line and resistance line in the past. Even lower, I’ve added a new line on last week’s outlook – 1.3420 is the next support line, quite far for now.

I remain bearish on the Euro.

The bearish sentiment proved correct, and it’s pushed by weak economic sentiment, a high unemployment rate and the Greek debt problems that refuse to leave us. The upcoming week will probably show more growth in other countries. While Germany is out of recession since Q2 and continues foward, the rest of the continent, especially the PIGS countries, are weighing on the continent.

This pair receives excellent analysis on the net. Here are some of my favorites:

  • Casey Stubbs discusses the new bottom and analyzes the graphs with his 4-hour charts.
  • James Chen talks about the flag consolidation breakdown and the Fibonacci retracement.
  • The Geek Knows reviews the bearish week and looks ahead with his Koala system.
  • TheLFB discuss the impact of Obama’s plan on the dollar.
  • Mohammed Isah sees a rejection candle and say it will trigger corrective recovery.

Further reading on Forex Crunch:

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

AUD/USD Outlook – January 25-29

Posted: 23 Jan 2010 07:02 AM PST


The Aussie had a bad week, suffering mostly from the Chinese tightening policy. The upcoming week features 6 events that will impact the Aussie. Here’s an outlook for the upcoming week in Australia, and a technical analysis for AUD/USD.

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

aud usd forecast

After 3 consecutive rate hikes, there’s no certainty that a fourth one will follow. A high interest rate was one of the reasons for the Aussie’s ride in 2009. PPI and CPI due this week should clarify the upcoming rate decision. Let’s start the outlook. The technical analysis will follow:

  1. PPI: Published on Monday at 00:30 GMT. Australian producer prices are released quarterly. In the first half of 2009, prices fell. They printed a small rise in Q3 with a rise of 0.1%. A similar rise is predicted this time. The importance of this release comes from its quarterly scope, rather than monthly in most countries.
  2. NAB Quarterly Business Confidence: Publication time is unknown. In addition to the monthly release, National Bank Australia publishes a quarterly number as well. After 6 consecutive quarters of negative numbers, meaning worsening conditions, this survey of 1000 businesses was positive last quarter, scoring 16 points. A similar number is expected now.
  3. MI Leading Index: Published on Tuesday at 23:30 GMT. The Melbourne Institute indicated that inflation is stable, and now it looks at the whole economy. Although most of the components of this index are already out, it still has an impact trading. 5 months of expansion are probably going to be followed by a sixth one, though last month saw a modest rise of only 0.4%.
  4. CPI: Published on Wednesday at 00:30 GMT. This inflation figure is very important. Apart from being a quarterly figure, it’s released close the rate decision. The last consumer price index for 2009 is expected to show a modest rise of 0.4% in prices. This comes after a rise of 1% in Q3. A bigger rise than 0.4% is needed for being sure that the RBA will raise the rates. AUD/USD will rock around the release. Also note the Trimmed Mean CPI (like the Core CPI) which is predicted to rise by 0.6% after a 0.8% rise last quarter.
  5. CB Leading Index: Published on Thursday at 23:00 GMT. Contrary to the MI indicator earlier in the week, this compound index fell last month by 0.3%, breaking 5 months of expansion. A small rise is expected this time.
  6. Private Sector Credit: Published on Friday at 00:30 GMT. The RBA has shown an almost unchanged number in this indicator since March 2009. This number rises or drops by no more than 0.2%. Last month’s rise of 0.1% is expected to be followed by another rise of the same scale.

AUD/USD Technical Analysis

The Aussie lost more than 200 pips in the last week, and is now close to the important 0.8950 line. I’ve modified many of the lines from last week’s outlook. I’ve added one of the new lines with the help of Mohammed Isah of FXTechstrategy. Thanks!

So, 0.8950 supports the Aussie. This was an important pivotal line in the past. Below this line, 0.8735 was the bottom in December and is another support line. Even lower, 0.8567 held the Aussie after the breakout of 0.8477 and before making the next move.

Looking up, 0.9170 was tested twice from above in recent weeks, before being broken this week. It now serves as the first resistance line. Above this, 0.9327 worked successfully as a resistance line in the past – 4 times. It’s a major resistance line. In the one time it did break, AUD/USD reached 0.94, the 2009 high, which is another resistance line.

I am neutral on AUD/USD

The tightening measures from China are a blow to the Aussie. The strong economy, including a healthy job market, is dependent on the Chinese giant. A slower China means a slower Australia. A big rise in inflation needs to be seen this week for getting the bulls back.

Further reading:

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

USD/CAD Outlook – January 25-29

Posted: 23 Jan 2010 07:01 AM PST


A busy week left the Canadian dollar weaker, returning to its previous range. The upcoming week is more light, and consists mostly of the Canadian GDP. Here’s a quick outlook for the events in Canada and an updated technical analysis for USD/CAD.

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

Mark Carney disappointed by leaving the current policy unchanged. A rate hike can be expected only around June. He probably needs a weaker C$ for helping the recovery. Let’s start the outlook:

  1. GDP: Published on Friday at 13:30 GMT. Canada is special with its monthly GDP release. This release is for the month of November 2009, in the fourth quarter. Canada exited recession in Q3, and continued to show growth in Q4, with a growth of 0.2% in October. A growth rate of 0.3% is expected now, continuing the steady and healthy recovery of Canada from the global crisis, as also reflected in the Canadian job market. USD/CAD will shake around this release also due to the American Advance GDP due at the same time.
  2. RMPI: Published on Friday at 13:30 GMT. Overshadowed by other events, the Raw Materials Price Index is important after Canada’s inflation fell. In the past two months, RMPI rose by 2.5% and 2.2%. A more modest rise is predicted this time.

USD/CAD Technical Analysis

The Canadian dollar lost the lower trading range of the recent period by jumping above 1.04. It now returns to the previous trading range of 1.04 to 1.0750, mentioned in the previous outlook.

1.04 proved to be a significant and clear support and resistance line. It now returns to its role as a support line. 1.0750 was tested more than once as a resistance line last time USD/CAD was in this range.

Above, 1.0850 was the previous peak for the pair and is a minor resistance line. Even higher, a strengthening greenback will meet the 1.1130 line which was a successful resistance line many times in the past.

Looking down, 1.02 remains the next support line, serving as the bottom line for the range and the 2009 low. Parity is below, and isn’t expected to be tested soon.

I’m back to neutral on USD/CAD.

The dovish rate decision followed by weak inflation badly hurt the loonie, and it has no advantage over other currencies in the near future. Strong GDP is necessary for returning to the USD/CAD bearish sentiment.

Further reading:

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