Forex Crunch Aussie Losing its Charm? |
| Posted: 31 Mar 2010 04:12 AM PDT
The Australian dollar dipped on bad fundamentals – something quite uncommon. Does this imply a long term change? An update on the Australian economy as well as AUD/USD technicals. At the beginning of the week, things looked good for the Aussie. Glenn Stevens, the governor of the RBA, said that house prices are too high – and this was interpreted as a signal that the rates will rise again next week. Australia already has a high interest rate of 4%. But then things changed: Retail sales, a very sensitive and up to date indicator of consumer spending, dropped by 1.4%. This was a big disappointment, as expectations were for a rise of 0.3%. Note that also last month’s figure was revised downwards to 1.1%. And also in the housing sector, were prices are “too high” according to Stevens, the situation isn’t so good: Building Approvals fell for a second month in a row – by 3.3% this time. Expectations stood on a rise of 2.1%. AUD/USD retreats As these two figures were released, AUD/USD fell from 0.9206 to 0.9145 and settled under 0.9170. Earlier in the week, the Aussie managed to climb above 0.9170 and aim towards 0.9252, which was a peak earlier in the month. So now, the Aussie is back down to the 0.9090 – 0.9170 range. If the pair loses 0.9090, the next support level is 0.8980, which was tested last week. A break upwards will send the pair to test 0.9250 once again. Also against the Euro, the Aussie retreated from the 13 year lows. After EUR/AUD reached 1.46, it’s now around 1.47 once again. How is Australia doing? Australia is unique among the G10 members: it is the only country that didn’t experience a recession – it’s economy shrank for only one quarter. It’s also unique with the interest rate – it’s the only country to raise the rates – 4 times since the crisis began. Australia enjoys prosperous trade with China and a well run country. In the vast majority of my Aussie outlooks, I’ve been bullish on the pair due to all these factors. But now, as the world slowly exits the crisis, Australia may be losing its charm. As we’ve seen in these fresh figures and also in the recent employment data, Australia is OK, but doesn’t outshine its Western peers anymore. A lot depends now on the upcoming rate decision next Tuesday – if the Reserve Bank of Australia makes a fifth rate hike from 4% to 4.25%, the Aussie bulls will get more energy and AUD/USD can rise. Another pause, as seen between the third and fourth hikes, can inflict more damage on the pair. The key line to watch on the upside is 0.9327. A break above this line will mean a long term rise. The key level on the downside is 0.8567, which is currently far away. I remain optimistic… Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
| Forex Daily Outlook – March 31st 2010 Posted: 30 Mar 2010 01:00 PM PDT
American ADP payrolls, factory orders, Canadian GDP and the important Japanese Tankan indicator are the highlights of a very busy day n forex trading. There are many more events from all over the world. Let’s see what’s up for today. Australia provides a strong start to the day with two major releases: Retail Sales, which rose by 1.2% last month, are expected to advance in a moderate pace this time – 0.3%. Building Approvals, which made a big dive of 7% last month, are expected to recover and rise 2.2%. Also note the Private Sector Credit, which is expected to rise by 0.4%, the same as last month. On the other side of the day, the AIG Manufacturing Index and the MI Inflation Gauge will both be released, and will move the Aussie. For more, read the AUD/USD forecast. In Japan, Average Cash Earnings will probably remain unchanged after an annual drop of 0.2% last time. Japanese Housing Starts are predicted to fall once again. The more interesting release in Japan is due at the end of the day: the Tankan Manufacturing Index is expected to rise from -24 to -14. Despite the advance, this very important quarterly gauge is expected to remain negative, showing that the economy is still struggling. In New Zealand, the NBNZ Business Confidence will probably shake NZD/USD. This is an important indicator for kiwi traders. In Europe, the German Unemployment Change will probably show another rise in unemployment – 10,000 people, more than last month’s 7,000. This will be a prelude for the all-European unemployment rate, which is predicted to rise from 9.9% to 10%. We also get an inflation figure from Europe – the CPI Flash Estimate is estimated to rise by an annual rate of 1.1%, more than last month’s 0.9%. For more on the Euro, read the EUR/USD forecast and Casey Stubbs’ latest analysis. In Switzerland, the KOF Economic Barometer, an important indicator for this small country, is expected to edge up from 1.87 to 1.91 points, helping the Swissy advance. In the US, ADP Non-Farm Employment Change will shake the markets towards the Non-Farm Payrolls on Friday. A gain of 38,000 jobs will probably be seen by ADP, after a drop of 20,000 last month. Later in the US, Chicago PMI is expected to edge down from 62.6 to 61.5 points, still quite high. Factory Orders, that rose by 1.7% last month, are expected to rise by 0.5% this time – a more moderate pace. Later in the US, FOMC member Elizabeth Duke and Treasury Secretary Timothy Geithner will make public appearances, and might shake the markets as well. In Canada, the monthly GDP is due: last month’s strong rise of 0.6% sent the loonie much higher, and the expected growth of 0.5% will probably do the same. For more on USD/CAD, read the Canadian dollar forecast. That’s it for today. Happy forex trading! Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
| Posted: 30 Mar 2010 06:44 AM PDT
The British Pound got some great news, managed to climb. While GBP/USD stopped at a resistance line, GBP/JPY managed to break higher. Update on both pairs. British Nationwide HPI rose by 0.7%, significantly higher than the early expectations for a 0.2%. This important house prices index showed that the dip in house prices last month was only temporary. A rise in house prices means that the economy is doing well, and prices continue to rise – this is necessary for a future rate hike. Three additional factors pushed the Pound higher: The final GDP for Q4 was revised to the upside – a growth rate of 0.4%. GDP was better than earlier reported – 0.3%. Although the growth rate leans heavily on a downwards revision of the figure for Q3, this revision was also positive for the Pound. The third positive indicator was the Current Account – Britain’s deficit was lower than expected – 1.7 billion. Expectations stood on a deficit of 4.6 billion. Alistair Darling hurt the Pound last week, but in his appearance today he made no damage. That’s another factor that allowed the Pound to rise. All these good news, together with the dollar’s weakness that continued from yesterday, sent the Pound higher. GBP/USD pushed above the round number of 1.50 and climbed steadily to 1.5110 -this was last week’s high. At this point, the Pound stopped. It doesn’t have the energy to continue higher. If GBP/USD crosses the 1.5110 line, the next line of resistance is already a very strong one -1.5350. The Pound was supported at this line before the big collapse, and afterwards this line served as a strong resistance line. Below, 1.50 is a very minor support line that can temporarily hold the pair if it drop from the area of 1.5100. Below, the 1.4780 line is the 2010 low and provides very strong support for the pair. GBP/JPY on the rise The Geppy was at crossroads last week – crossroads between a downtrend and an uptrend channel. It seems that the pair picked a direction – up. GBP/JPY enjoys the Japanese Yen’s weakness to march above 140. This is the highest level in 5 weeks and a return to the prices before the collapse. GBP/JPY will meet significant resistance at 143.70, a peak before the fall, and also a support line in December. Further above, 150 is a strong line of resistance – a round number and also a resistance line in January. Looking down, GBP/JPY can expect support at the area of 138, followed by a stronger line of support at 134. A break in this cross, also known as “The Dragon” can happen if USD/JPY breaks above the might line of 93.80. Japan’s Tankan Manufacturing Index, due tomorrow, will probably set the tone. All in all, the Pound is recovering, and this is strongly felt against the Yen. Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
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