Mar 29, 2010

Forex Crunch Full Recovery for EUR/USD? Not So Fast

Forex Crunch Full Recovery for EUR/USD? Not So Fast

Full Recovery for EUR/USD? Not So Fast

Posted: 29 Mar 2010 01:48 AM PDT


EUR/USD enjoyed an active Asian session to make very significant gains in the wake of the new week. With the back wind of the Greek plan, is the Euro changing directions? Not so fast.

During the Asian session, EUR/USD made a move above 1.3423. This was the previous support line. When the pair was trading higher, it fell towards this line several times, and bounced back up. When if made the breakdown last week – it was massive – EUR/USD went as low as 1.3267.

The hay that broke the Euro’s back was the credit downgrade of Portugal. As this came together with the ongoing Greek crisis, a dark shadow was cast over the Euro-zone’s ability to pay debt. And then, things changed:

The recovery

But since then, the leaders of the European Union managed to find a solution for Greece – a safety net. This safety net isn’t a full-proof solution, but sure is good news. The Euro, that already went half way towards the next support line, 1.3080, recovered and ended the week at 1.3409, close the previous support line – now a resistance line.

During a very active Asian session in the beginning of the new week, the dollar retreated. It’s important to notice that these drops in the dollar happened also last week at the exact same time. For many currencies, this was just a move within the range.

But for the Euro – this dollar retreat, on relatively thin volume, lifted EUR/USD above the hurdle. Most of the move happened as the market opened. EUR/USD reached 1.3502, not far from the 1.3530 resistance line. At the time of writing, it trades just under 1.35.

Short term? Long term?

EUR/USD bulls may analyze this as an extension to Friday’s move – traders are happy with the Greek accord and are pushing the currency higher. It’s now back in the wide range that we’ve seen before – 1.3423 to 1.3850 and has more room for rises. Perhaps a long term rally can be seen after months of decline.

On the other hand, the European troubles are far from over, and the resolution of the Greek crisis could merely be only weight off the Euro’s shoulders – one out of many.

Also when examining the technicals, the pictures is mixed. 1.3423 was a very convincing support line. It was an important line in the past, and sure worked as a support line in recent months. When the pair broke under the line, the move was strong – as expected from a break of a strong line.

But now that this support line was broken, is it that significant also as a resistance line? Does the break above this line mean a bullish move? It ain’t necessarily so. This line is still meaningful, but in a lesser grade than beforehand. EUR/USD can sure dip under it, encountering less resistance  - less stop orders.

What do you think? Given the Greek resolution and the break upwards, is the Euro going up? Or is this just a temporary rise, enjoying thin volume at the start of the week?

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

Forex Daily Outlook – March 29th 2010

Posted: 28 Mar 2010 12:00 PM PDT


The new week starts with American Personal Spending among other figures from all over the world. Will EUR/USD resume the downtrend? Let’s see what will move the markets today:

Japan starts the day with Retail Sales. Thy’re predicted to rise by 1.7% (annualized), slower than last month’s 2.3% figure. On the other side of the day, Japan’s Household Spending will probably rise by 1.5% (annually), slower than 1.7% last time.

Japan’s unemployment rate isn’t expected to move from 4.9% that was reported last month. The last release in Japan is somewhat more important – the preliminary industrial production figure. This is expected to dip by 0.4% after rising by 2.7% last time.

In Germany, the different states will release the preliminary version of CPI during the day. Germany’s prices are expected to rise by 0.3%, less than last month’s 0.4% rise. Also in Europe, Consumer Confidence is expected to remain unchanged, at -17, exactly as last month.

For more on the Euro, read the EUR/USD forecast, and Casey Stubbs’ latest analysis.

In Britain, Net Lending to Individuals will probably ease to 1.8 billion after last month’s surprising rise to 2 billion. This figure usually moves the Poud.

Later in Britain, MPC member Spencer Dale will make a public appearance and might give some hints on next week’s rate decision. For more on the Pound, read the GBP/USD forecast.

In the US, Personal Spending is expected to rise by 0.4%, slightly slower than last month’s 0.5% rise. The personal income is predicted to rise by 0.1%, exactly like the previous month.

Also in the US, Core PCE Price Index will probably edge up by 0.1%. Treasury Secretary Timothy Geithner in a conference in Washington and might say something about the economy.

Another speech is due in Canada -BOC Senior Deputy Governor Paul Jenkins will speak in Toronto and might relate to USD/CAD parity, a subject that many Canadian officials like to refer to.Read more about the loonie in the Canadian dollar forecast.

Near the end of the day, New Zealand’s Building Consents are released. After a drop of 2.8% last month, a small rise is predicted this time. This will probably push the kiwi higher.

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.

Will the Greenback Fly the Non-Farm Payrolls?

Posted: 28 Mar 2010 09:00 AM PDT


The upcoming Non-Farm Payrolls release on April 2nd should be significantly different than previous releases. The special timing and the a realization of the high expectations could send the dollar way up. Here’s a preview.

For newbies, and not only them, I recommend reading my 5 notes for Non-Farm Payrolls trading. This is always a very exciting, yet risky event. And this time, there’s an extra element:

As usual, the American Department of Labor releases the Non-Farm Payrolls figure on the first Friday of the month – April 2nd. This time is different – it’s Good Friday. Banks in all the other major countries in the Christian world are on holiday – Germany, France, Britain, Canada, Australia and New Zealand are all on holiday. Most traders in these countries as well as in the US are also on holiday.

So, the most important indicator for forex traders is released on very thin volume. On similar holidays, no figures are released, so the thin volume means that the currencies don’t move. This time is different – the small amount of participants on that will react to the NFP might cause extreme moves – moves that won’t respect technical barriers. Volatility can be much higher than usual – a wild west.

High Expectations

Economists are expecting a big gain in jobs – the consensus currently stands on about 180K. In recent months, there were hopes for a gain in jobs, and the figure disappointed. Since the beginning of global crisis, a gain in jobs was seen only once – in November 2009. This rise wasn’t celebrated, as the initial report for November showed a loss of jobs, and only the revision saw a gain.

So why is a rise expected this time? Last month’s drop of 36,000 was blamed on the harsh weather that the US encountered during February. Weather was better in March, so this excuse is off the table.

There are more meaningful signs that this time is going to be better – weekly jobless claims fell in the past few weeks, from a peak of 496K to 442K last week.A drop in unemployment claims means more people at work.

Another sign is that 23 US states reported a gain in jobs in February. Four states report a year-over-year drop in the unemployment rate. This improvement wasn’t seen in February’s  NFP, and may be reflected now.

The third indicator is the government’s census which is due in May. Workers were already hired for this big project during March – so here are more job gains.

Possible scenarios

Last month we’ve seen how low expectations led to a small positive surprise that led to gains for the greenback. Now this time, high expectations can be risky for the dollar – if expectations aren’t met, the dollar will dive, and it will drop through thin air.

But if expectations are finally met, and a rise in jobs is reported for the latest month, not a revision, the dollar could enjoy the thin volume to extend its gains.

One currency which is especially vulnerable is the British Pound. GBP/USD lost some ground, but didn’t lose an important technical level. GBP/USD didn’t lose 1.4780. In the last time that the Pound lost an important technical level, it collapsed quite badly. A good NFP will probably send it over the cliff.

Another vulnerable currency is the Euro. EUR/USD lost an important technical line, 1.3423, last week, and could extend its losses. This can sure happen before the NFP.

I’ll be following the Non-Farm Payrolls on this webinar. It begins on 12:00 GMT, half an hour before the release, and is free for Forex Crunch readers. I’ve enjoyed the previous sessions.

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