Aug 22, 2010

Forex Crunch GBP/USD Outlook – August 23-27

Forex Crunch GBP/USD Outlook – August 23-27

GBP/USD Outlook – August 23-27

Posted: 21 Aug 2010 10:00 PM PDT


A relatively light week expects cable traders, yet the GDP release will definitely create waves for quite some time. 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:

british pound forecast

While inflation slides gradually back into target, there’s still one member that wants a rate hike. For now, he remains the only member. An upgrade of the GDP could change the minds of others. Let’s start:

  1. Nationwide HPI: Publication time unknown at the moment. The Nationwide House Prices are considered to be an accurate measure of house prices, even though they’re not the first to publish them. In the past two months, prices disappointed and even unexpectedly fell by 0.5% last month. As other indicators show the same trend, another fall is expected now – by 0.3%.
  2. BBA Mortgage Approvals: Published on Tuesday at 8:30 GMT. The British Bankers’ Association publishes this figure for approximately two thirds of British mortgages. The number of approvals has been stable around 35K in recent months, with last month’s figure standing at 34.8K. A small rise is expected now.
  3. CBI Realized Sales: Published on Thursday at 10:00 GMT. The Confederation of British Industry shocked the markets last months as the indicator exceeded expectations big time – 33 points instead of 2. This positive number, for the first time in years, means that retailers and wholesalers are expecting a higher sales volume in the upcoming months. This fueled the Pound’s gains. A small drop is expected now.
  4. Business Investment: Published on Friday at 8:30 GMT. The first release of Business Investment is expected to show a modest rise in Q2. Q1 was excellent – a 6% rise, but it was only a correction to the 4.3% fall in Q4 of 2009. This release always rocks the Pound.
  5. Revised GDP: Published on Friday at 8:30 GMT. The first release of GDP for the second quarter was very impressing – a growth rate of 1.1%, far better than expected. A repeat of this number in the second release will be positive for the Pound, but a small downwards revision is now predicted. Any result will rock the markets.

GBP/USD Technical Analysis

The British Pound performed impressive range trading during most of the week, trading between the major support line of 1.5520 and the minor resistance line of 1.5720, all mentioned in last week’s outlook. By the end of the week, the global weakness took over and GBP/USD dropped to test the 1.5472 line, but managed to escape it and to close just above 1.5520.

The Pound now trades between 1.5520, which served as tough resistance in April and as support line in February, to 1.5720, which supported GBP/USD back in 2009.

Above, 1.5833, which provided support when the year began and later worked as resistance, is the next resistance line. Higher, the round psychological number of 1.60 proved to be a tough barrier not so long ago and is a very strong resistance line.

Higher, 1.6080 is the next minor line of resistance, after serving as support in January. It's followed by 1.6270, but that's quite far at the moment.

Looking down below 1.5520, the next line of support is quite close – 1.5470 – it capped the pair in its recent ascent and supported the pair just this Friday. 1.5350 served as pivotal line in March and April and now provides minor support.

Lower, 1.5230 was a stubborn resistance line in July and is now a major support line. Even lower, 1.5120 will provide further support.

I turn bearish on GBP/USD.

The past week’s range trading is over with the Pound being more vulnerable now. A break under 1.5470 will trigger more weakness, especially as inflation softens and the excellent GDP in Q2 could be revised to the downside.

Further reading:

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NZD/USD Outlook – August 23-27

Posted: 21 Aug 2010 06:05 PM PDT


The release of inflation expectations is the highlight of this week’s kiwi indicators. Here’s an outlook for the kiwi in the upcoming week.

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

nzd usd forecast

On one hand, producer prices rose more than expected, boosting the kiwi on expectations for fresh rate hikes. On the other hand, the global slowdown, led by Ben Bernanke, reduced the demand for “high risk” currencies such as the New Zealand dollar. The result – NZD/USD eventually closed the week very closed to where it ended the previous one. Let’ see what’s up now:

  1. Inflation Expectations: Published on Tuesday at 3:00 GMT. Expectations for inflation often turn into real inflation. This is an indicator for future rate moves, and is of high importance due to the frequency of the release – only once a quarter. Expectations have risen gradually in the past year, from 2.3% to 2.8% in Q1. Q2 will probably see stability.

NZD/USD Technical Analysis

The kiwi enjoyed the risk rally at the beginning of the week and it made move from the support line of 0.70 (mentioned in last week’s outlook) through the 0.7160 and up to 0.72 before bouncing back down all the way.

Like last week, the pair is bound between the round number of 0.70 and 0.7160 which temporarily held the pair in the past week, and also beforehand.

Below, 0.69 is the next support line. It previously worked as a line of resistance in May, after the pair fell down sharply.

Lower, 0.6790 that was a swing low in mid-July and also held NZD/USD in February is the next support line. Below, 0.6685 worked as support back in September and was a pivotal line in July. The final line for now is the year-to-date low of 0.6560.

Above, 0.7160 provides minor resistance, and its followed by 0.72 that worked as support quite recently. Higher, 0.7325 that was an area of struggle and also a peak in May is the next line of resistance, followed by the 0.7440 region, which capped the pair when it traded higher.

I remain bearish on NZD/USD.

After the disappointing quarterly employment data, the kiwi is more vulnerable than others to the gloomy market mood.

Further reading:

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USD/CAD Outlook – August 23-27

Posted: 21 Aug 2010 01:59 PM PDT


Loonie traders expect a calm week in terms of Canadian events. Here’s an outlook for these events and an updated technical analysis for USD/CAD.

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

Canadian dollar forecast

Most indicators were weak last week – foreign cash flows squeezed significantly, wholesale sales shrunk, and Core CPI unexpected dropped, reducing the chance of a rate hike in the near term. All this hurt the Canadian dollar. Will the loonie recover now? Let’s start:

  1. Retail Sales: Published on Tuesday at 12:30 GMT. The volume of sales has been very disappointing in the past two months. They fell below expectations and squeezed. After sales dropped by 0.2% and core retail sales fell by 0.1% last month, rises are expected this time – 0.4% in retail sales and 0.1% in core retail sales.
  2. John Murray talks: Starts speaking on Tuesday at 16:30 GMT. The BOC Deputy Governor will be talking about the core issue – monetary policy. This is an excellent opportunity to hear what this senior figure can say about future rate moves, after the Bank of Canada already lifted the rate twice.
  3. Corporate Profits: Published on Wednesday at 12:30 GMT. This quarterly figure has been superb in the past three quarters. The strength of corporates has gone hand in hand with the improvement in the economy. Q2 is expected to show a similar rise to Q1′s 4.8% growth rate.

USD/CAD Technical Analysis

The Canadian dollar had a good start to the week, with USD/CAD dropping towards the 1.0280 support line. It later went up, struggling around the 1.04 line, and almost breaching the 1.05 line – all were mentioned in last week’s outlook.

At 1.0453, USD/CAD is now in a range between 1.04, which worked as a long-term support line and also as a line of resistance in the past year, and 1.05, which became a strong resistance line after capping the pair in the past week.

Looking down, the 1.0280 is the next strong line of support, holding the pair from falling int he past week, repeating this role from a few months ago. It’s followed by the 2009 low of 1.02 which also worked in both directions, also after the pair reached parity.

Lower, 1.01 worked as a support line at the beginning of August and is a minor line of support. The last line is the ultimate parity line – 1.01.

Looking up, 1.0680 was a stubborn line of resistance for four days at the beginning of July. Higher, 1.0750 was the top border of a long-term range, and was also tested in the month of May.

Above, 1.0850 provided the last line of resistance when the pair leaped in May, and was also a swing high in 2009. Above this line, there’s only the far line of 1.1130.

I am bearish on USD/CAD.

Canadian fundamentals are still strong enough to weather the global storm caused by Ben Bernanke. The pair should stabilize this week and prepare for another assault on parity later on.

Further reading:

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AUD/USD Outlook – August 23-27

Posted: 21 Aug 2010 10:37 AM PDT


The upcoming week consists of three market moving events in Australia, as well as political echoes after the elections ended in a hung parliament. Here’s an outlook for these events and an updated technical analysis for AUD/USD.

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

aud usd forecast

The meeting minutes and RBA governor Glenn Stevens in particular, hinted that there’s still lots of time for more rate hikes. This, together with the echoes from Ben Bernanke’s statement, hurt the Aussie. Now, the elections and other events will rock the currency. Let’s start:

  1. Construction Work Done: Published on Wednesday at 1:30 GMT. This housing sector indicator has been doing better than other ones, rising, posting neat growth rates. After the last quarter saw a weaker than expected growth rate of 1.9%, there’s hope for a better growth rate this time – 3.1%.
  2. CB Leading Index: Published on Thursday at 1:00 GMT. The Conference Board builds this indicator from 7 economic indicators . Most of these indicators have already been released, yet the publication still moves the currency. Three months of rises in this index will probably be followed by a fourth one, at a rate of about 0.3%.
  3. Private Capital Expenditure: Published on Thursday at 1:30 GMT. This quarterly indicator always rocks the Aussie, as it’s a good gauge for the whole economy. After a superb Q4, expenditure dropped in Q1 by 0.2%, disappointing the Aussie. A recovery is expected this time, with a 2.4% rise.

AUD/USD Technical Analysis

The Aussie started the week with a ounce off the 0.8870 level mentioned in last week’s outlook. It later struggled with the 0.90 line, managed to cross it, but couldn’t breach the 0.9080 line. The fall was strong and almost ended in losing 0.8870, but the pair finally closed at 0.8938.

AUD/USD now ranges between 0.8870, which served as a clear line in both directions, and the round number of 0.90, which provides minor resistance.

Above, 0.9080 proved itself once more in the past week, and is now a major line of resistance. Higher, 0.9135 supported the pair when it was trading higher, and recently worked as resistance.

Above, 0.9220 capped the Australian dollar at the beginning of the month and also supported it in April – it’s a strong resistance line. The veteran 0.9327 line is still far in the distance.

Looking down below 0.8870, the next line of support is at 0.8710, which was a swing low in May and also provided support later on. It’s followed by 0.8567, which worked as support in May and as a resistance line back in 2009.

Even lower, 0.8316 was a double bottom in July, and provides major resistance. Lower, the year-to-date low of 0.8066 is the ultimate support line.

I am bearish on the Aussie this week.

There are no major fundamentals that can lift the pair this week (such as employment figures), and the global gloomy mood also play against the Australian dollar. Add the federal elections in Australia that left the country with a hung parliament and you get the bears on the move. This political uncertainty will hurt the Aussie, at least at the beginning of the week.

Further reading:

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EUR/USD Outlook – August 23-27

Posted: 21 Aug 2010 06:00 AM PDT


After losing the uptrend support line, another busy week expects Euro traders, with many important surveys due this week. Here’s an outlook for the 9 events that will shape the Euro’s trading, and an updated technical analysis for EUR/USD, now at lower ground.

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

eur usd forecast

The economic sentiment in Europe continues to deteriorate, but there are also good signs that show the end of the debt crisis. The gloomy mood took over at the end of the week, as EUR/USD lost a long term uptrend support line. Which mood will take control this week? Let’s start:

  1. Flash PMI: Published on Monday morning – at 7:00 GMT in France, 7:30 in Germany and 8:00 for the whole continent. All these purchasing managers’ indices have been above the critical 50 point mark for quite some time, with services in France and German manufacturing standing above 60 points last months. All the numbers are expected to remain above 50 this time as well, and to create high volatility, though no long term changes.
  2. Consumer Confidence: Published on Monday at 14:00 GMT.  This official survey of 2300 consumers is also in the negative zone for many months. The score unexpectedly improved from -17 to -14 last month and is expected to edge up once again.
  3. German Final GDP: Published on Tuesday at 6:00 GMT. Germany stunned the world with a whopping 2.2% growth rate in Q2 – the best since Germany’s reunification. This is expected to be confirmed now, showing that Germany carries the whole Euro-zone by itself.
  4. Industrial New Orders: Published on Tuesday at 9:00 GMT. The total value of new orders from manufacturers has been on the rise. Last month’s rise of 3.8% was really great for the Euro, but now, a correction is expected, with a small drop.
  5. NBB Business Climate: Published on Tuesday at 13:00 GMT. This wide survey of 6,000 businesses is of high importance, despite coming from a small country – Belgium. After already reaching -2.4 points, this index deteriorated back to -7.9 and last month recovered to -6.5. These negative numbers mean worsening economic conditions. A small improvement is expected this time.
  6. German Ifo Business Climate: Published on Wednesday at 8:00 GMT. This important survey of 7000 businesses has always been more positive than other indicators, yet its surprise jump from 101.8 to 106.2 last month gave a big boost to the Euro. It’s expected to remain unchanged now. Any result will rock the common currency. The ZEW Economic survey was quite bad last week.
  7. German GfK Consumer Climate: Published on Thursday at 6:00 GMT. Gfk surveys around 2300 consumers for its important survey. After reaching 3.2 points in September, the score eased to 3.2 and climbed back up, with a nice 3.9 figure last month. A similar result is expected now.
  8. M3 Money Supply: Published on 8:00 GMT. After 4 months of decreases in the amount of money in circulation, a surprising rise was finally seen last month with a 0.2% rise. Another small rise is expected now. More money in circulation means more inflationary pressures and a bigger chance for a rate hike.
  9. German CPI: Published on Friday. This figure is composed from each of the different German states that release their figures. The past few months saw very small rises in prices – nothing that will trigger a thought of a rate hike. Last month’s rise of 0.2% will probably be followed by a 0.1% rise this time.

EUR/USD Technical Analysis

The Euro touched base with the 1.2722 support line at the beginning of the week, and then stayed away from it, ranging between 1.2770 and 1.2930 during most of the week. And then, on Friday, a sharp fall sent the pair below the long term uptrend support and below the 1.2722 support line. After bottoming out at 1.2663, EUR/USD closed at 1.2707.

EUR/USD now trades between the aforementioned 1.2722 line and 1.2610, which was a minor resistance line in May and in July. Note that some lines have changed since last week’s outlook.

Looking down, the next line of support is already more significant – 1.2460 served as a resistance line and later as a support line in several occasions. Below, the “Lehman levels” of 1.2330 provide further minor support.

Lower, 1.2150 is a very strong line of support – it held the pair firmly in May and later in July. Even lower, the round psychological number of 1.20 provides further support.

Looking up, the 1.2880 provides weak immediate resistance above 1.2722. Higher, the past week’s highs of 1.2930 provide more serious support.

Higher, the round number of 1.30 is the next line of support, and it’s followed by 1.3110, which worked as a clear line of support and later as resistance, and is a strong hurdle. The last resistance line is 1.3267, which also worked in both directions.

It’s important to stress that the long term uptrend support line extending from June 7th up to August 20th has been clearly broken.

I remain bearish on EUR/USD.

Bernanke’s groundbreaking statement about global slowdown, the notion that the Euro-party is over and the clear break of the last long term uptrend support, draw a conclusion that more drops are awaiting down the road.

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

  • James Chen sees a break of multiple support levels on EUR/USD, and marks the next milestones.
  • Casey Stubbs sees more losses ahead, after the pair broke the support line.
  • 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:

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