May 23, 2010

Forex Crunch GBP/USD Outlook – May 24-28

Forex Crunch GBP/USD Outlook – May 24-28

GBP/USD Outlook – May 24-28

Posted: 22 May 2010 10:35 PM PDT


A revised version on the GDP and 5 other events will shake the Pound, now at lower ground. Here’s an outlook for the British events and an updated technical analysis for GBP/USD.

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

Sterling forecast

While the political uncertainty didn’t stay too long, the Pound’s situation is still dire. It’s fate cannot be detached from the fate of the Euro. Contagion also reached Britain. OK, let’s start:

  1. Adam Posen talks: Starts speaking on Monday at 17:30 GMT. External BOE MPC Member Adam Posen already moved the Pound several times in the past, and he’ll have a chance to do so in his speech early in the week. Any hints about future rate hikes or the situation of the economy are likely to impact trading.
  2. Revised GDP: Published on Tuesday at 8:30 GMT. Britain’s economy is still struggling. According to the initial release, Britain grew by only 0.2% in Q1. This was half of early expectations. The second release is expected to show a better picture – a growth rate of 0.3%. Any result will rock the Pound.
  3. BBA Mortgage Approvals: Published on Tuesday at 8:30 GMT, and overshadowed by the GDP release. The British Bankers Association covers two thirds of all British mortgages, and releases this housing figure quite early. After losing the highs of 46K, the figure fell under 34K. It’s now expected to recover and rise to 38.3K.
  4. CBI Realized Sales: Published on Thursday at 10:00 GMT. 160 retailers and wholesalers are surveyed for CBI’s important indicator. In the past three months, this number was positive, indicators higher sales volume. A small rise from 13 to 14 is predicted this time.
  5. GfK Consumer Confidence: Published on Thursday at 23:00 GMT (midnight UK). Consumers’ pessimism worsened last month, with an unexpected drop to -16 points. 2,000 consumers are expected to show a bit less pessimism this time, with a rise to -15 points.
  6. Nationwide HPI: Publication time unknown at the moment. Two straight months of rises have proved that the drop seen in January was a one time glitch. The UK’s second earliest house price report always rocks the markets. Another small rise of 0.5% is expected this time.

GBP/USD Technical Analysis

The British Pound reached fresh lows very early in the week, breaking the technical level of 1.44 and bottomed out only at 1.4230. It then recovered and closed at 1.4450.

The Pound’s range is now between 1.44, the previous major support line, and 1.45, which proved to be a new line of resistance. Note that some lines were added on last week’s outlook.

Looking up, the next line of resistance is at 1.4780, which held GBP/USD for several months. This is a strong line. Above, 1.4975 is a minor resistance line, followed by 1.5130, which worked as support just a few weeks ago. It’s followed by 1.5350, which worked as both support and resistance, and by 1.5520 which wasn’t broken in three months.

Looking down, the fresh 2010 low of 1.4230 is the next immediate support. Stronger support is found at 1.4130, which was a support line in April 2009. Further below, 1.38 also stopped the pair at the beginning of 2009, and is the next line of support. The ultimate support line is 1.35, which is the lowest level seen in over 20 years.

I remain bearish on the Pound.

A serious revision in GDP is necessary for the Pound to recover from the recent blows, but the European troubles will probably continue bringing it down.

Further reading:

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AUD/USD Outlook – May 24-28

Posted: 22 May 2010 01:59 PM PDT


Everything turned against the Aussie, and it closed a terrible week with a loss of about 550 pips. The upcoming week consists of 5 events that will move the Aussie, and an updated technical analysis for AUD/USD, now at lower ground.

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

AUD/USD Forecast

Indications for a pause in rate hikes, lower inflation expectations, a drop in consumer confidence and the European debt issues (risk aversion), all hurt the Aussie, which needed (rumored) intervention to stabilize. Let’s start:

  1. New Motor Vehicle Sales: Published on Monday at 1:30 GMT. The automotive industry is a strong one in Australia and moves the currency, especially as it comes on a rather empty calendar on Monday. Sales fell in the past three months after many months of rises. They’re expected to rise now.
  2. MI Leading Index: Published on Wednesday at 00:30 GMT. This composite index from the Melbourne Institute, based on 9 indicators that most of them have already been released, rose by 0.5% last time, similar to previous months. A rise above 1% this time will push the Aussie higher.
  3. Construction Work Done: Published on Wednesday at 1:30 GMT. This important quarterly indicator from the housing sector exceeded expectations in the past 3 quarters, with great leaps. Q4’s 2.6% rise will probably be followed by a 4.1% rise this time.
  4. CB Leading Index: Published on Thursday at midnight GMT. Contrary to MI’s indicator, the leading index from the Conference Board dropped in the past two months. A rise is predicted this time. Note that this index is based on 7 indicators, rather than 9 in the previous one.
  5. Private Capital Expenditure: Published on Thursday at 1:30 GMT. The amount of new capital / investments in Australia is a very important indicator, as it’s a quarterly one. After a drop of 5.2% in Q3, expenditure jumped by 5.5% in Q4. A milder rise of 2.6% is predicted this time.

AUD/USD Technical Analysis

The Aussie began the week by losing the 0.88 support line, that held it in recent weeks. It then lost the all-important 0.8567 line that was the lowest point since October and also the 2010 low, until this week. Trouble continued as the pair broke under the important 0.8240 line, which worked as a resistance and as a support line before AUD/USD went to higher ground. After bottoming out at 0.8071, it closed at 0.8308. A very exciting and awful week for the Aussie.

Many lines have been added on last week’s outlook. The current range for the pair is between the important support line of 0.8240 and the minor resistance line of 0.8477, which worked as a strong resistance line before the pair broke higher.

Lower, 0.8040 is the next line of support, serving as such long ago. Significant support can be found at 0.77, which was the place that the Aussie dropped from in the height of the financial crisis, back in October 2008. It also worked as a support line last summer.

Even lower, 0.7450, the place where the Aussie fell to during the crisis is another significant support line. It’s followed by 0.71.

Looking up, 0.8567 continues to be an important line. A break above this line will mean a strong correction. Above this line, 0.88 is the next resistance line, followed by 0.90, 0.9135 and the almighty 0.9327 resistance line. Note that most lines worked as support lines just a few weeks ago.

I’m neutral on the Aussie.

It’s drop last week was the biggest move since October 2008. On one hand, the loss of 0.8567 means bearish momentum, but on the other hand, it’s in oversold territory. The rate hikes worked so well, that the economy cooled down. It will take at least another week before the pair stabilizes and a new direction will be seen.

Further reading:

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USD/CAD Outlook – May 24-28

Posted: 22 May 2010 12:55 PM PDT


The Canadian dollar managed to correct some of its losses on positive data on Friday, but is already far from parity. Here’s an outlook for Canadian events and an updated technical analysis for USD/CAD. The focus is on the technicals this week.

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

The higher-than-expected rise in prices raises expectations for a rate hike in the upcoming meeting on June 1st. This event will create tension. Let’s start:

  1. Corporate Profits: Published on Thursday at 12:30 GMT. After terrible falls during the financial crisis, the past two quarters put a smile on Canadian firms, with rises of 7.9% in profits each time. A smaller rise is predicted now.
  2. Current Account: Published on Friday at 12:30 GMT. Contrary to its trade balance which shows a surplus in goods balance, the overall figure, the current account, showed a deficit in the past 5 quarters. This time, the deficit is expected to squeeze from 9.8 to 9 billion, but a smaller deficit won’t be a big surprise.

USD/CAD Technical Analysis

At the beginning of the week, the loonie made an attempt to break the 1.02 level. After this attempt failed, USD/CAD rose towards above 1.04 but found fresh resistance around 1.0550. Yet again, the strong resistance line of 1.0780 continued to hold back the pair, as it closed just under 1.06.

Note that some lines were added on last week’s outlook, especially higher lines. The current range is between 1.0550, which provided temporary resistance in the past week, to 1.0780, which proved to be a very strong resistance line, surviving five breakout attempts in the past 6 months.

Higher, 1.0850 was a line of resistance before the pair dropped, and is a minor line of resistance. Above this line, 1.1130, which worked twice as a resistance line in September 2009, is a very strong line of resistance. 1.1470 is the next significant line, but it’s far now.

Looking down, 1.04, which worked as a successful line of resistance and support, is the next barrier. It’s followed by the minor support line of 1.03, which worked as a temporary line of resistance during recent weeks.

Below, 1.02, which was the 2009 low, provided strong support. This line also worked as a resistance line after the USD/CAD reached parity during April. And parity, 1, is the last line for today. There are lines of support below, but they’re far in the distance.

I am bearish on USD/CAD.

The Canadian dollar suffered from the European crisis, but after the German parliament approved the bailout package, the dust will settle, at least temporarily, and allow the loonie to enjoy its good fundamentals and recover.

Further reading:

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