Feb 21, 2010

Forex Crunch EUR/USD Outlook – February 22-26

Forex Crunch EUR/USD Outlook – February 22-26

EUR/USD Outlook – February 22-26

Posted: 20 Feb 2010 07:04 AM PST


A sixth negative week brings the Euro close to another major support line. The upcoming week is quite eventful in the Euro-zone, with the IFO survey, inflation numbers and final German GDP standing out among the many events. Here’s an outlook for this week’s European events, and an updated technical analysis for EUR/USD on its lower ground.

EUR/USD graph with support and resistance lines marked. Click to enlarge:

EUR/USD forecast

The ongoing trouble in Europe also brought it to a decade low against the Aussie. This pair is also on the fall. Let’s start reviewing the 11 events that await us:

  1. French Consumer Spending: Published on Tuesday at 7:45 GMT. The continent’s second largest economy enjoyed a big rise in consumer spending last month, and is doing well, all in all. This time, consumers are predicted to cut their spending by 0.6%.
  2. German Ifo Business Climate: Published on Tuesday at 9:00 GMT. This major survey of 7000 businesses is rising steadily, contrary to other European surveys. Last month’s 95.8 score is expected to be followed by 96.3, continuing the steady rise of this index month by month.
  3. NBB Business Climate: Published on Tuesday at 14:00 GMT. This survey from the small country of Belgium reflects the situation quite well – steady improvement, but still negative. It’s predicted to edge up from -7 to -5 this time, after disappointing last month. A positive number will boost the Euro.
  4. German Final GDP: Published on Wednesday at 7:0 GMT. The zone’s largest economy has been the locomotive for growth in the middle of 2009, but failed to grow in Q4. The stagnant economy hurts the Euro. This 0% growth is predicted to be confirmed. IF the German economy contracted in Q4, this will be a blow to the Euro.
  5. GfK German Consumer Climate: Published on Wednesday at 7:00 GMT and overshadowed by the GDP release. 2000 German consumers have reached the peak of their optimism in September, but have lost confidence since then. The score of 3.2 is expected to remain unchanged this time.
  6. Industrial New Orders: Published on Wednesday at 10:00 GMT. New orders by manufacturers made a great surprise last time by rising in a scale of 2.7%. This indicator is usually volatile, so this month will probably see a drop of 1.2% in the sales volume.
  7. German Unemployment Change: Published on Thursday at 8:55 GMT. After 6 straight months of drop in unemployment, a rise of 6000 people was seen last month. This negative will probably be continued with another rise – 18,000 this time. Yet another weak figure from this big country, which nicely fits into the double-digit European unemployment rate.
  8. M3 Money Supply: Published on Thursday at 9:00 GMT. The amount of money in circulation fell in the past two months. This is a rare event. Less money means less inflation and a weak currency. A rise of 0.2% is expected this time – some stability.
  9. Consumer Confidence: Published on Thursday at 10:00 GMT. This consumer survey is run by the official Eurostat institute. 2,300 consumers have showed less pessimism during the past months, with the score reaching -16 last month – in the negative zone. A retreat to 017 is predicted this time.
  10. German Prelim CPI: Published during Friday. A significant rise in prices two months ago was erased last month. Europe is still suffering from deflation. The see-saw is expected to continue this month, with a rise of 0.5% in prices. Note that th figure is compiled from the reports of the different German states.
  11. CPI: Published on Friday at 10:00 GMT. Together with Germany’s release, the all-European inflation numbers will also come out. They are reported in an annual format. Consumer prices are expected to be steady with an annual rise of 1%. Core CPI is predicted to edge up from 1.1% to 1.2%.

EUR/USD Technical Analysis

EUR/USD had a good start to the week, peaking at 1.3788. It later fell sharply. At first it tested last week’s bottom of 1.3530 and then continued to test the important 1.3423 support line before closing above 1.3531.

Immediate support can be found at 1.3531, a new line that didn’t appear in last week’s outlook. Below, 1.3423 was successfully tested and provides very strong support.

If 1.3423 is broken, there are no significant support lines up to 1.3080, the area where the Euro began the long rally.

Looking up, 1.3790 provides immediate resistance. Further above, 1.3850 worked well as both a support and resistance line, and is already more significant.

Further above, the round number of 1.40 provides strong resistance followed by 1.42. Lines above that are too far to mention.

I continue my bearish sentiment on EUR/USD.

Bernanke’s mini rate hike joined the long list of factors that hurt the Euro. Remember that the Greek crisis isn’t really over. It’s on the sidelines. With this week’s GDP updates, we’ll probably see continued weakness.

This popular pair receives excellent technical reviews all over the web. Here are my favorites:

  • Casey Stubbs asks if the recent moves are a consolidation or a rebound using his charts.
  • The Geek Knows brings his weekly review and outlook.
  • TheLFB trade team discuss the impact of the Bernanke’s move and focus on the big picture
  • James Chen sees renewed bearish momentum after a correction.

Further reading:

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

GBP/USD Outlook – February 22-26

Posted: 20 Feb 2010 07:03 AM PST


GBP/USD was significantly hit by Bernanke’s move and tested an important support line. The upcoming week has a revised version of GDP among other events. Did Britain really exit the recession? Here’s an outlook for this week in the Pound, and an updated technical analysis for GBP/USD.

GBP/USD graph with support and resistance lines marked. Click to enlarge:

GBP USD forecast

Mervyn King continues to play a strong role in the Pound’s trading. He continued his refusal to admit the rising inflation, and hurt the Pound. He’ll have his chance to move the markets this week as well. Let’s start the review:

  1. Inflation Report Hearings: Start on Tuesday at 9:15 GMT. Mervyn King, and possibly other members of the BOE, will come to parliament and talk about inflation as well as other matters. This lengthly session that discusses also growth and employment will probably contain a few headlines from Mr. King – headlines that will move the Pound.
  2. BBA Mortgage Approvals: Published on Tuesday at 9:30 GMT. The British Bankers’ Association represents roughly two thirds of Britain’s mortgages, thus supplying a significant indicator that precedes the government’s release. The number of mortgages is rising steadily and it reached 45.9K last time. Another tick up is predicted.
  3. Paul Tucker talks: Start speaking on Tuesday at 12:10 GMT. As Deputy governor of the BOE, Tucker is an influential member that already moved the market before. He’ll talk about the state of the economy in London.
  4. Adam Posen talks: Begins on Wednesday at 9:25 GMT. Although he’s an external member of the MPC, Posen also had his share of shaking the Pound. He’ll be speaking in another conference in London.
  5. Business Investment: Published on Thursday at 9:30 GMT. This is the preliminary release of this important quarterly indicator. It represents both public and private sectors. Investment is squeezing in Britain. In the previous quarter, it squeezed by “only” 3%, after huge drop of 7.6% and 10.2% beforehand.
  6. Mervyn King talks: Starts on Thursday at 9:30 GMT. This appearance in parliament is about the banking system rather than the economy, but King is the King – and he probably won’t miss a chance to shake the Pound once again.
  7. David Miles talks: Starts speaking on Thursday at 18:00 GMT. The last British speech for this week comes from a member that has different policy opinions. It will be interesting to follow his words after he realigned with his colleagues in the last rate decision.
  8. CBI Realized Sales: Published on Thursday at 11:00 GMT. 160 wholesalers and retails are surveyed for this important indicator. After four positive months of expectations for growing sales volume, a big disappointment was seen last month as the result was -8 points instead of 11 positive points that were expected.
  9. GfK Consumer Confidence: Published on Friday at midnight GMT. This barometer measures the consumers directly – 2000 of them. Consumers are pessimistic for quite some time according to this indicator that scores below zero for quite some time. After reaching -13 a few months ago, it fell back down to -17. A similar outcome is expected now.
  10. Nationwide HPI: Published on Friday at 9:30 GMT. According to the Nationwide Building Society, British house prices are rising in the past 9 months. This is probably one of the reasons for the rising inflation. This is the earliest housing sector report and it usually has a strong impact on the Pound. Last month saw a surprise – a rise of 1.2% in prices, an accelerated pace.
  11. Revised GDP: Published on Friday at 9:30 GMT. This is the key event of the week, kept for the end. According to the preliminary release for Q4, the British economy only barely got out of recession. The growth rate of 0.1% was also reported in the revised NIESR GDP estimate, and is expected to be confirmed at the revised version as well. In Q3, the contraction rate was revised in a positive manner so there’s hope. But a small downwards revision this time means that Britain is still in a very long recession.

GBP/USD Technical Analysis

The Pound got close to the 1.5833 resistance line, but that was short lived. It was supported at the 1.5530 line, but that was broken as well. After bouncing at the strong 1.5350 line, it manages to close above it. Most lines haven’t changed from last week’s outlook.

Close resistance is found at 1.5530, last week’s low. This proved as a clear line this week. Above, 1.5720 was a support line for quite some time, but is now a weak resistance line.

Above, 1.5833 is already an important resistance line that the Pound failed to breach. It also was a support line beforehand. Further above, 1.6110 is worth mentioning. Higher lines are just too high.

Looking down, 1.5230, which was a peak quite some time ago, proved to be a strong support line this week. Below this significant support line, the next number is a strong round number: 1.50.

Below the round number, 1.4780 is another support line, but it can be attacked only if Britain continues the recession.

I am bearish on GBP/USD.

The negative sentiment hasn’t changed. This week’s rise in unemployment was a setback to the Pound, and this was also felt in price action. The direction is down.

Further reading:

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

USD/CAD Outlook – February 22-26

Posted: 20 Feb 2010 07:01 AM PST


The Canadian dollar showed strength and made gains on a week with many events that met expectations. The Canadian calendar is rather light in the upcoming week, so the outlook will be mostly technical, for USD/CAD.

USD/CAD graph with support and resistance lines marked. Click to enlarge:

Canadian Dollar Forecast

The loonie enjoyed the unwinding Greek crisis to receive the correct attention it deserves and make gains, despite no acceleration in inflation. The next barrier is very close. Let’s start:

  1. Paul Jenkins talks: He begins his speech on Monday at 19:30 GMT. BOC Senior Deputy Governor Paul Jenkins is an influential member of the BOC, and he might say something about the rate policy. If so, the loonie will shake.
  2. Corporate Profits: Published on Wednesday at 13:30 GMT. This indicator doesn’t always impact the loonie, but it might empower it this time. Canadian corporate profits returned to growth in Q3 after 3 quarters of contraction. The rise of 7.6% in the previous quarter is expected to followed by a smaller rise, but will still indicate the stable nature of the economy.
  3. Current Account: Published on Friday at 13:30 GMT. Canada’s trade balance is almost fully balanced, but the wider figure, current account, has been negative in the past year. The deficit expanded to 13 billion in Q3, and is expected to squeeze under 10 billion this time.

USD/CAD Technical Analysis

After ending the previous week under 1.0530, USD/CAD continued south and flirted with the major support line of 1.04 near the end of the week.

This 1.04 line, mentioned in last week’s outlook and also beforehand, continues to play a big role. With a close barely above this line, USD/CAD could break it early next week.

Below 1.04, the 2009 low of 1.02 is the next support line. It was tested again just a few weeks ago. Ultimate support appears at 1.0000 – USD/CAD parity. It probably won’t be seen this week.

Looking up, 1.0530 is a minor resistance line. More significant support appears at 1.0780, the top border of USD/CAD’s extended range.

Further above, 1.0850 was the peak before the pair entered this range. Even higher, 1.1130 was a significant resistance line more than once, but it’s now far away.

I remain bearish on USD/CAD.

The Canadian fundamentals continue to support the loonie, especially the great job market. A breach of 1.04 should lead to further drops, despite Bernanke’s moves.

Further reading:

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

AUD/USD Outlook – February 22-26

Posted: 20 Feb 2010 07:00 AM PST


The Aussie enjoyed talks about future rate hikes to make gains this week, despite Bernanke’s mini-rate hike. The upcoming week contains a few quarterly releases that will move the Australian dollar. Here’s an outlook for the Aussie and an updated technical analysis for AUD/USD.

AUD/USD graph with support and resistance lines marked. Click to enlarge:

AUD USD Forecast

Another reason for the Aussie’s rise comes from a land far away from Australia – Greece. Less talk about the debt crisis triggered risk appetite which helped the Aussie, with its healthy economy and high interest rate. OK, let’s begin:

  1. New Motor Vehicle Sales: Published on Monday at 00:30 GMT. Australian auto sales reflect the whole economy. In the past 5 months, they have risen nicely. Last month’s 3.3% rise is expected to be followed by a more modest rise this time.
  2. Ric Battellino talks: Starts his speech on Tuesday at 7:00 GMT. As deputy governor of the RBA, Ric Battellino has influence on the RBA’s moves. Comments about the next rate decision will move the Aussie.
  3. CB Leading Index: Published on Tuesday at 23:00 GMT. This composite index is somewhat shaky – it isn’t consistent, and revisions are normal. In the past two months, this index disappointed by dropping at a rate of 0.3% each time. A small rise is expected this time.
  4. Wage Price Index: Published on Wednesday at 00:30 GMT. While consumer prices are rather stable, the improvement in employment will probably be seen in salaries as seen in previous months. During 2009, wages grew by less than 1%. This release for Q4 of 2009 is predicted to show a rise of over 1%, justifying an upcoming rate hike.
  5. Construction Work Done: Published on Wednesday at 00:30 GMT and overshadowed by the previous release. This is an important gauge of the whole economy, as construction is a major sector that has a long term effect. After posting neat rises of 2.2% and 4.5% in previous quarters, another strong rise is expected. This will impact the GDP expectations.
  6. Private Capital Expenditure: Published on Thursday at 00:30 GMT. This is also a quarterly release and it’s probably the most important one this week. Private businesses dropped their investments in Q3 by 3.9%. This negative figure stands out against all of Australia’s positive figures. Also here, a nice rise in Q4’s expenditure will mean that GDP probably rose nicely in that period. Note that expenditure changes are stronger than the changes in GDP.
  7. Private Sector Credit: Published on Friday at 00:30 GMT. This monthly report complements the previous private sector indicator, but this one tends to show small changes. More credit means more spending and is good for the economy. Last month’s rise of 0.3% was a pleasant surprise after many months around zero. A smaller rise is predicted this time.

AUD/USD Technical Analysis

AUD/USD gained ground and traded between 0.8880 to 0.9040 during this week. I’ve slightly modified the lines from last week’s outlook.

Looking down, 0.8880 provides immediate support, being the bottom line in the past week. Further below, 0.8735 was the bottom in December and is now a support line.

The strongest support comes at 0.8567, a line which provided support in October and also at the beginning of this month.

Looking up, 0.9090 is a minor resistance line that worked in both directions in the past. Further above, 0.9170 is another resistance line.

A major resistance line is at 0.9328, a line which the Aussie failed to break many times in recent months.

I am bullish on AUD/USD.

It looks like the fundamentals are kicking in – in favor of the Aussie. The high interest rate and a great job market seem to win over Bernanke’s moves.

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)