Apr 23, 2010

Forex Crunch Britain Hardly Grows – Support Line at Risk

Forex Crunch Britain Hardly Grows – Support Line at Risk

Britain Hardly Grows – Support Line at Risk

Posted: 23 Apr 2010 01:34 AM PDT


British GDP rose by 0.2% in the first quarter of 2010, half the early expectations. GBP/USD reacts with a drop around the support line.

Economists expected a rise of 0.4% in Britain’s GDP, exactly as in Q4 of 2009. This is the first release of GDP for this period, and it may be revised. In the previous quarter, a growth rate of 0.1% was initially reported, and it finally climbed to 0.4%. This was partially done on the back of a downwards revision of data for Q3. Will they do this trick once again?

This was a very busy week in Britain. Inflation is picking up in Britain – consumer prices rose at an annual rate of 3.4%, higher than expected. While this isn’t too good for the economy, it puts the option of a British rate hike as a possible option. It isn’t a temporary rise in fuel prices but a more serious rise. This strengthened the Pound that pushed higher on this release.

Employment figures were superb – another big drop in the number of unemployed people and also a revision of last month’s figures (the best since 1997) are definitely a good sign for the economy. As the elections are drawing close, this figure isn’t necessarily good, as it complicates the political situation.

Retail sales didn’t follow the previous figures, and rose by only 0.4%, weaker than 0.7% that was predicted, although its important to note that last month’s figure was revised to the upside.

GBP/USD

After pushing higher, above 1.5350, the pair traded in a range from 1.5350, testing the support line and 1.5473. A downwards break of 1.5350 wasn’t confirmed. On the other hand, the 1.5520 line wasn’t approached. 1.5520 was last week’s high and also a support and resistance line in the past.

With the disappointing GDP, a drop towards 1.5120, which proved to be a strong support line, can happen at any time.

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EUR/USD Recovers on Ifo Business Climate – Will it hold?

Posted: 23 Apr 2010 01:18 AM PDT


German Ifo Business Climate came out better than expected, rising above 100 for the first time since May 2008, and helps the Euro temporarily recover from the Greek tragedies.

Similar to the ZEW index earlier in the week, Germany’s Ifo Business Climate was expected to rise from 98.1 to 98.9, but instead of edging up, it jumped to 101.6 points. This survey of 7,000 was always more positive than other European indicators, but this jump sure helps. This adds to previous European figures.

Te ZEW Economic Sentiment, that dropped in the past 6 months and hurt the Euro each time, finally rose, and did it in an impressing way – from 45. 2 to 53 points. This is an important indicator.

Apart from ZEW, also Europe’s Current Account came out better than expected, and also German PPI indicated a rise in prices. Earlier today, French consumer spending also rose more than expected – 1.2% – triple the early expectations.

Today’s indicators sent the Euro above 1.3267 once again, retracing the losses made earlier. The losses were heavy.

Greek problems

Greece suffered another downgrade – this time from Moody’s. There is more talk about contagion – spreading the Greek troubles to other vulnerable nations in Europe, and the talks about a Greek default are also becoming louder. This sent EUR/USD below 1.3267 during the Asian session, down to 1.3201 – a new year-to-date low.

I’ve asked if the good European indicators are enough for enough to counter the Greek troubles. Despite this recovery now, the answer, in general, is NO. The drops that EUR/USD suffers after any bit of bad Greek news are stronger than the recovery moves that the Euro enjoys after every good economic indicator.

The next level for EUR/USD is 1.3080, the jumping point for the the pair’s long term rally in 2009. Fresh worries will send the pair towards that line. Looking up, the next resistance line is at 1.3380, but after the recent drops, the Euro has a long way to go.

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Forex Daily Outlook – April 23rd 2010

Posted: 22 Apr 2010 02:00 PM PDT


American home sales on the rise, the international G20 meeting with a closing speech from US Treasury Secretary Timothy Geithner together with other encouraging news from around the world  sum up this week.  Let’s see what’s up for today.

In the US, New Home Sales, annualized number of new single-family homes that were sold during the previous month, a leading indicator of economic health, is expected to leap from 308K to 323K.

Later in the US, Durable Goods Orders Ex Transportation, a leading indicator of production, released monthly, is expected to drop down from 1.4% to 0.7%

Finally in the US, US Treasury Secretary Timothy Geithner speaks at the conclusion of the G20 meeting, in Washington DC, may indicate policy shifts to the public and to foreign governments. The G20 Meetings are attended by finance ministers and central bankers from 20 industrialized nations including the G7 nations the G20 is an influential global policy-making body operating at the highest level.

In Canada, Bank of Canada Core Consumer Price Index exemplifies the change in the price of goods and services purchased by consumers. It is the most important inflation-related release due to it’s earliness and broad scope, foreseen to drop from 0.7% to 0.1% and Core Retail Sales is expected to follow

For more on USD/CAD, read the Canadian dollar forecast.

In Europe, German Ifo Business Climate, Survey of about 7,000 businesses, tends to create a hefty market impact upon release, is expected to rise from 98.1 to 98.8. The Italian Retail Sales is also expected to go up from -0.5% to 0.3%.

Also in Europe, Belgium NBB Business Climate, leading indicator of economic health, is predicted to rise from -3.6 to -2.5 and French Consumer Spending, the primary gauge of consumer spending, is expected to go up from -1.2 $ to 0.4%.

More from Europe, Industrial New Orders released monthly indicator of production is about to rise from -1.6% to 0.9%.

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

In Great Britain, Preliminary Gross Domestic Product, The indicator of change in the inflation-adjusted value of all goods and services. Due to its preliminary release, it tends to have the most impact. The forecast remains unchanged -  0.4% and also the Index of Services is expected to follow and will remain 0.6%.

Read more about the Pound in the GBP/USD forecast.

In Australia, Governor of the Reserve Bank of Australia Glenn Stevens delivers a speech titled “Economic Conditions” at the University of Southern Queensland. As head of the central bank, which controls short term interest rates, he has more influence over the nation’s currency.

More in Australia, Import Prices are foreseen a rise from -4.3% to -1.4%, this will contribute to inflation for businesses and consumers.

For more on the Aussie, read the AUD/USD forecast.

In New Zeeland Credit Card Spending is expected to go unchanged.

International Monetary Fund (IMF) Meetingst provides policy advice and can agree funding support when countries face severe difficulties, can impact the currency markets

That’s it for today. Happy forex trading!

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Dollar Index Shooting Up

Posted: 22 Apr 2010 09:30 AM PDT


Many signs of recovery seen in the US send the dollar higher across the board. With a little help from Greece as well. A look at the big picture.

After an alarming rise in unemployment claims last week, they dropped back down – from 480K to 456K, getting back in the zone. This breaks the bad trend and also gives hope for another break of the 430K line that this indicator failed to break. Jobless claims are the best indicator for the all-important Non-Farm Payrolls figure. But other indicators supported this as well:

The housing sector is also enjoying a recovery. Existing home sales went up from 5.01 to 5.35 million, exceeding expectations. This 6.8% rise shows that consumers are becoming more active in economic decisions.

The producer price index (PPI) jumped by 0.7%, much more than 0.4% that was predicted. This rise erased last month’s 0.6% drop. This still isn’t a trend that can lead to a rate hike, but it’s another sign of economic activity.

The last factor that moved the dollar today was bad news elsewhere – yet again, the Greek crisis took another bad turn. A workers’ strike in Greece and growing worries about German help sent the Euro down. EUR/USD reached the year-to-date low of 1.3267 and bounced back. It’ already a triple bottom. At the time of writing, there is still a chance of the pair breaking down towards 1.3080.

The Greek problem isn’t limited to Greece – debt worries trigger risk aversive trading, boosting the dollar and the yen across the board.

Dollar index rising

All these events, on a very busy day, lead the dollar index to move from 81.20 to 81.65, after already reaching 81.80. Since the big weekend gaps almost two weeks ago, the greenback has been recovering slowly. Today’s move was a rather strong one.

The next target is 81.97, which was the peak on April 8th.The next target, 82.24, isn’t too far. This was the peak on March 25th, and is the highest level since May 2009. Breaking above this level will be a significant step.

The dollar bottomed out at the end of November 2009, with the index touching 74. It has been on the rise since then, but struggled to make stronger moves after going above 81.

The big picture for the long term is that the US economy is recovering steadily and it’s taking the dollar with it.

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