Aug 14, 2010

Forex Crunch EUR/USD Outlook – August 16-20

Forex Crunch EUR/USD Outlook – August 16-20

EUR/USD Outlook – August 16-20

Posted: 14 Aug 2010 05:00 AM PDT


After a terrible week for the Euro, it now expects a relatively calm week, with the ZEW Economic Sentiment being the highlight. Here’s an outlook for the European events, and an updated technical analysis for EUR/USD, now at much lower ground.

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

eur usd forecast

Excellent GDP figures on Friday failed to help the Euro – the gloomy mood in the markets, triggered by Ben Bernanke sent it lower. Will the Euro stabilize this week? Let’s start:

  1. CPI: Published on Monday at 9:00 GMT. European inflation is on the rise, but still within the target levels. The initial release for consumer prices showed an annual rate of 1.7%. This is expected to be confirmed now. Core CPI, which is more closely watched by the ECB, is expected to be confirmed at 1% for the month of July.
  2. Current Account: Published on Tuesday at 8:00 GMT. This figure, that sums up the trade balance figure as well as the net difference in services and cash flows, disappointed with a deeper deficit last month – 5.8 billion euros. This deficit is expected to squeeze to 3.7 this time.
  3. ZEW Economic Sentiment: Published on Tuesday at 9:00 GMT. This major indicator dropped sharply in recent months. 350 German investors and analysts sent the indicator down from 53 points in April to 21.2 in July. This survey’s score is expected to slide down from 21.2 to 20.9. It will be interesting to see the mood of investors. Note that the indicator is also published for the whole continent, with the score expected to remain at around 10.7 points. The German figure has a stronger impact, and tends to hurt the Euro.
  4. German PPI: Published on Tuesday at 6:00 GMT. Producer prices in Europe’s largest economy have been stronger than expected in recent months, but don’t threaten price stability. Last month’s rise of 0.6% will probably be followed by a 0.2% rise this time.

EUR/USD Technical Analysis

The jump above 1.3267 that happened after the Non-Farm Payrolls was quickly erased at the beginning of the week as EUR/USD fell below 1.3267 and violated the uptrend channel. After some flirting with the 1.3114 line, the Fed decision eventually sent the pair sharply down, with only a temporary rise,  to 1.2750, over 500 pips this week.

EUR/USD now trades between 1.2722, that worked as resistance when the Euro was moving upwards a few weeks ago, and 1.2880, which served as support in 2009 and is now a minor line of support.

Higher, 1.2930 capped the Euro in the past week, and is a new line of resistance (it didn’t appear in last week’s outlook). Above, the round psychological number of 1.30 provides minor resistance, and is quoted many times.

Above, 1.3114, which was a significant line of support and resistance in the past two weeks, continues to be of importance, despite being violated several times. Even higher, 1.3267, is the next resistance line, followed by 1.3435. Both were support lines in the past.

Looking down below 1.2722, the next minor support line is 1.2610, which worked as a resistance line in May and July. Further down the road, 1.2460 is already a stronger line, working as strong resistance line in June.

Even lower, 1.2250 is the next minor support line, and its followed by a very strong line: 1.2150. This clear line of support held the Euro 4 times, and after it broke below this line, it needed a weekend gap to return back up.

I am bearish on EUR/USD.

Despite excellent numbers for the second quarter, there are 3 fundamental reasons why the party is over. And with the break of the uptrend channel, also technical point to one direction – down.

This pair receives excellent reviews on the web. Here are my favorites:

  • Casey Stubbs is looking to short EUR/USD.
  • Mohammed Isah sees consolidation to downside weakness.
  • James Chen focuses on a less steep uptrend channel, which the pair now touched its bottom.
  • Andrei posts technical levels for the Euro and other pairs on a weekly basis.
  • TheGeekKnows provides a review of the past week and a look forward.

Further reading:

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Forex Weekly Outlook – August 16-20

Posted: 14 Aug 2010 02:00 AM PDT


GDP from Japan, an important German survey and the Philly Manufacturing Index are among the highlights of this week. Here’s an outlook for the major market-moving events this week.

The echoes from the ground-breaking Fed decision still rock the markets. Fear has returned, big time. Risk aversion dominates trading, with the dollar storming the board. Will this continue or will we see signs of optimism? Let’s start:

  1. Japanese GDP: Published on Sunday at 23:50 GMT. After reaching a 15 year high against the US, we’ll see if there was a justification for a stronger yen. The last quarter of 2009 and the first quarter of 2010 were great – growth rates of 1% and 1.2%. This will supply a strong start for the week.
  2. US TIC Long-Term Purchases: Published on Monday at 13:00 GMT. This figure shows foreign flow of cash into the US, and serves as a gauge of confidence. After peaking at 140 billion in March, this figure eased to about 35 billion last month, and is expected to be similar now.
  3. British inflation data: Published on Tuesday at 8:30 GMT. Inflation is a sensitive issue in Britain. Mervyn King, the head of the BoE, returned to dismissing inflation in an report last week. British CPI currently stands at an annual rate of 3.2%, above the target. A return to the target, under 3%, will damage the Pound, while a rise will renew talks of a rate hike.
  4. German ZEW Economic Sentiment: Published on Tuesday at 9:00 GMT. This all-important gauge has been on the fall in the past 3 months, dipping rapidly from 53 to 21.2 points. German investors and analysts fear the situation following the turmoil that surrounded the European debt crisis. It will be interesting to see if they become more optimistic on German numbers or less, after the Fed statement. This indicator tends to hurt the Euro.
  5. US Housing data: Published on Tuesday at 12:30 GMT. With home sellers reducing prices of existing homes, the situation of the housing sector is deteriorating again. Both Building permits, which stand at 580K, and Housing Starts, that stand on 550K, are important indicators for this sector. Stagnation is expected in both numbers.
  6. US PPI: Published on Tuesday at 12:30 GMT. Producer prices dropped by 0.5% – a serious drop that provides further evidence of a slowdown. Core CPI rose by an insignificant 0.1%. Both numbers are expected to remain almost unchanged. A significant rise will ignite some optimism.
  7. US Unemployment Claims: Published on Thursday at 12:30 GMT. After topping 480K last week and reaching 484K, the highest in 5 months, and after the bad Non-Farm Payrolls, there is some hope for correction. Only a drop under 430K will be a good sign. A rise above 500K will be very bad.
  8. US Philly Fed Manufacturing Index: Published on Thursday at 14:00 GMT. This important manufacturing gauge rose steadily at the beginning of the year, but then deteriorated quickly from 21.4 to 5.1 points. Another squeeze is expected now, but the number is predicted to be above 0, showing that manufacturing is still growing. A drop to a negative number will be alarming, as it means contraction.

That’s it for the major events this week. Stay tuned for the coverages on specific currencies. Further reading:

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Forex Links for the Weekend

Posted: 13 Aug 2010 02:00 PM PDT


After a turbulent week that saw a major shift in the trend, the markets are closed and its time to relax with some long-term forex-related articles. Here are my favorites:

  1. Adam Kritzer shows the rle of the SNB in the Euro’s fall. I believe that EUR/USD will continue falling.
  2. Kathy Lien analyzes the FOMC Statement, word by word, highlighting the negativity.
  3. Larry Greenberg checks out cases of double-dip recessions, which are quite rare. Will we see one now?
  4. Andrei discusses one of the biggest forex scams.
  5. Michael Greenberg reports about a new portal for novice traders. One of the biggest forex portals, Forex Factory, just added an interesting liquidity gauge.
  6. Francesc Riverola triggers an interesting discussion about how the Dodd-Frank act will affect the forex market.
  7. Casey Stubbs asks traders a serious question: Can you follow your own rules, just once?
  8. James Chen holds a poll about the most effective toll for trading. The results are interesting.

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