Aug 15, 2010

Forex Crunch USD/CAD Outlook – August 16-20

Forex Crunch USD/CAD Outlook – August 16-20

USD/CAD Outlook – August 16-20

Posted: 15 Aug 2010 01:52 AM PDT


A busy week expects loonie traders, with inflation figures providing a strong finish. Here’s an outlook for the Canadian events and an updated technical analysis for USD/CAD.

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

canadian dollar forecast

The Canadian dollar retreated mostly on the FOMC Statement, and not on Canadian issues. This week, USD/CAD will be more dependent on Canadian events. Let’s start:

  1. Foreign Securities Purchases: Published on Tuesday at 12:30 GMT. The net difference between assets purchased and sold by foreigners is an indicator of confidence in the economy. In the past two months, this indicator came out far better than expected, topping 23 billion last month. This time, the positive figure is expected to squeeze to 10 billion.
  2. Manufacturing Sales: Published on Tuesday at 14:30 GMT. The volume of sales made by manufacturers is expected to drop for the first time in 10 months, with a drop of 0.4%, the same scale as the rise last month. This tends to shake the loonie.
  3. BOC Review: Published on Thursday at 12:30 GMT. This overview of the economy shows us how the Bank of Canada sees the economy, and might include hints about future rate moves.
  4. Leading Index: Published on Thursday at 12:30 GMT. Though somewhat overshadowed by wholesale sales, this composite index managed to boost the loonie in recent months, exceeding expectations time after time. Last month’s nice 1% rise will probably be followed by a rise of 0.7%.
  5. Wholesale Sales: Published on Thursday at 12:30 GMT. This important indicator disappointed as it dropped in the past two months. This time, the volume of sales by wholesalers is expected to rise by 0.4%, a healthy and steady rise.
  6. CPI: Published on Friday at 11:00  GMT. The best is kept for last. After two rate hikes, the key to more moves depends on inflation. Last month was quite weak, with 0.1% drops in both CPI and Core CPI. No big moves are expected this time, as consumer prices are expected to remain almost unchanged. Only a rise of 0.5% will force another rate hike soon.

USD/CAD Technical Analysis

The Canadian dollar struggled with the 1.0280 line, and eventually lost it. The rise above 1.04 led to resistance at 1.05 (a line added on last week’s outlook) before closing at 1.0414.

USD/CAD now trades between last week’s limit at 1.05 and 1.04, the veteran line that now switches its role once again to a support line. Looking down, 1.0280 remains a minor line of support after working in both directions in recent months.

Lower, 1.02, the 2009 low, provides further support. It’s followed by 1.01, which provided support both in May and recently in August. Even lower, the ultimate line of support is the parity line.

Looking up, 1.0680 was a stubborn line of resistance in June and in July and will cap a rise by USD/CAD if it breaks above 1.05.

Above, 1.0750 was swing top several times in the past year and works as a strong resistance line. Higher, 1.0850 was a swing high in May and also in back in November.

I remain bearish on USD/CAD.

As the storm from Bernanke’s move calms down, Canadian fundamentals should push the pair lower.

Further reading:

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NZD/USD Outlook – August 16-20

Posted: 14 Aug 2010 11:39 PM PDT


Producer prices are the highlight of this week’s kiwi trading. Here’s an outlook for the events in New Zealand, and an updated technical analysis for NZD/USD.

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

nzd usd forecast

NZD/USD suffered from Bernanke’s move and hardly managed to remain above 0.70. Will it stabilize this week?

  1. PPI: Published on Monday at 22:45 GMT. Producer prices are released only once per month in New Zealand, making this publication a big event. PPI Input, which follows the prices that the manufacturers buy, jumped by a whopping 1.3% in the first quarter. A more modest rise is predicted this time. PPI Output, the prices that leave the manufacturers’ gates, jumped by 1.8% last time. A negative number in both indicators will hurt the kiwi.
  2. Visitor Arrivals: Published on Thursday at 22:45 GMT. New Zealand’s economy enjoys lots of tourism, making this figure very important. A similar rise to last month’s 0.3% rise is expected now.
  3. Credit Card Spending: Published on Friday at 3:00 GMT. Consumers increased spending in credit cards by 4.5%, showing that despite the employment issues, consumers are still confident. A smaller rise is expected now.

NZD/USD Technical Analysis

The kiwi failed to settle above 0.7325 at the beginning of the week, and started deteriorating quickly. After losing 0.72 and 0.7160 mentioned in last week’s outlook, NZD/USD closed at 0.7049, a weekly loss of about 250 pips.

The kiwi is now supported by the round important number of 0.70, which often supports the pair. Below, 0.69 is the next line of support. It worked as a line of resistance in May, after the pair collapsed.

Lower, 0.6790 that was a swing low in July and also supported the pair in February is the next support line. Below, 0.6685 provided support back in September and was a pivotal line in July. The final line is the year-to-date low of 0.6560.

Looking up, 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.

I turn 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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AUD/USD Outlook – August 16-20

Posted: 14 Aug 2010 06:00 PM PDT


Aussie traders expect 6 market moving events in the week after Bernanke’s blow. Here’s an outlook for the Australian events, and an updated technical analysis for AUD/USD.

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

aud usd forecast

Australia’s job data didn’t exceed expectations as it did in previous month, yet it was still good and helped in stabilizing the Aussie. We have another job-related figure this week. Let’s start:

  1. New Motor Vehicle Sales: Published on Monday at 1:30 GMT. Sales of automobiles are a good consumer gauge in Australia, and tend to rock the Aussie. After two monthly drops in sales (3.2% and 1.2%) , a modest rise is predicted now.
  2. MI Leading Index: Published on Wednesday at 00:30 GMT. The Melbourne Institute builds this indicator according to 9 economic indicators. After stalling in April, the indicator rose once again in May, by 0.2%. A similar rise is predicted now.
  3. Monetary Policy Meeting Minutes: Published on Tuesday at 1:30 GMT. Yet again, the RBA decided to leave the interest rates unchanged at 4.5%. The release of the minutes provides an interesting insight about the bankers’ views of the economy and usually contain hints for future rate policy – always rocking the Aussie.
  4. Glenn Stevens talks: Starts speaking on Tuesday at 8:00 GMT. In a speech in Crawley, the head of the RBA will talk about the role of finance. Following a few storms in markets that didn’t hurt Australia, it will be interesting to hear how he sees the economy, and if he joins Bernanke with modest expectations for the future.
  5. Wage Price Index: Published on Wednesday at 1:30 GMT. This quarterly indicator combines both inflation and employment, and is closely watched by central bankers. The price of employment has risen by a strong rate of 0.9% in Q1 and is expected to show the same rise now.
  6. Ric Battellino talks: Starts speaking on Friday at 2:45 GMT. Speaking in Redcliffe, the deputy governor of the RBA might relate to recent developments in the markets and future rate decisions. Battellino tends to release interesting statements.

AUD/USD Technical Analysis

After holding above 0.9135 at the beginning of the week, AUD/USD gradually dropped, temporarily fighting on the 0.9135, 0.9070 and 0.90 lines mentioned in last week’s outlook.

The Aussie currently ranges between the round psychological 0.90 level, and 0.89 – the bottom line it reached in the past week, which is now a minor line of support.

Below, 0.8870 is already a strong support line, being a double top in June and July. Lower, 0.8710 was a swing low in May and later played a role as a pivotal point.

It’s followed by the veteran line of 0.8567 which was a double bottom in October and in February and later also worked as a resistance line. Lower, 0.8316 was the bottom line in July and serves as another support line.

Looking up, the support levels are now resistance – 0.9070 capped the pair a few weeks ago. 0.9135 worked as support last week and also in April.

Higher, 0.9220 was the peak it repeatedly failed to break in the previous week and now serves as strong resistance. Even higher, the long lasting 0.9327 is still waiting.

I am neutral on the Aussie.

The Australian economy is still doing well and after Bernanke’s initial blow, I expect it to stabilize. This week’s key is the important data about future policy regarding Australia’s high interest rate.

Further reading:

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GBP/USD Outlook – August 16-20

Posted: 14 Aug 2010 01:45 PM PDT


After the Pound got bad news in the past week and fell, another busy week expects cable traders. Inflation data and retail sales being the highlights. Here’s an outlook for the British events and an updated technical analysis for GBP/USD.

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

GBP USD Forecast

Apart from the disappointing employment figures, the Pound was also severely hit by the groundbreaking statement from the Federal Reserve, that sent “risky” currencies way down. The focus returns to British figures now. Let’s start:

  1. Rightmove HPI: Published on Sunday at 23:00 GMT. The earliest report on prices of homes isn’t the most accurate one, but tends to shake the Pound early in the week. After a few months of rises, prices dropped by 0.6% last month. Another drop will probably be seen now.
  2. Inflation data: Published on Tuesday at 8:30 GMT. Inflation continues to be a hot issue in Britain. Mervyn King returned to dismissing the high CPI, stating it’s only due to higher taxation, and seeing it plunge later on. Consumer prices are expected to ease from 3.2% to 3.1% (annualized), still above the 1-3% target. In such a case, King is obliged to write a letter to the Chancellor of the Exchequer, explaining the reasons for this and the measures taken to curb it. The publication of the letter will make the impact on the Pound longer than usual. Core CPI is predicted to slip down from 3.1% to 3%. RPI (Retail Price Index) will probably remain at the high level of 5%, showing that consumers feel the inflation.
  3. MPC Meeting Minutes: Published on Wednesday at 8:30 GMT. Yet again, Britain’s interest rate remained at the historic low of 0.5%. We’ll get to see what the members talked about in the last meeting, and how they voted. It’s expected that only one member out of 9, Andrew Sentance, voted for raising the rates. This event always shakes the Pound.
  4. CBI Industrial Order Expectations: Published on Thursday at 10:00 GMT. This survey of 550 manufacturers has been pessimistic for quite a long time. The score improved from -23 to -16 last month, and is now expected to edge up to minus 14, still showing a lower order volume.
  5. Retail Sales: Published on Friday at 8:30 GMT. This major consumer related figure showed strong growth in the past two months – rising by 0.7% and 0.8%. Retail sales are expected to grow once again in the month of July – by 0.4%.
  6. Public Sector Net Borrowing: Published on Thursday at 8:30 GMT. After hitting high levels of 17 and 14 billion, the government is now expected to show a squeeze in lending – meaning less public spending as well. If the deficit indeed drops to 5.1 billion, it will help the Pound.
  7. Mortgage Approvals: Published on Thursday at 8:30 GMT. Though slightly overshadowed by the other figures, this preliminary release from the BOE is expected to show approvals slide from 48K to 47K – a small pause in Britain’s real estate market. Any rise above 50K will help the Pound, while a bigger drop will hurt it.

GBP/USD Technical Analysis

After another failed attempt to break above 1.60, GBP/USD began falling. After trading between the 1.57 and 1.5833 lines, it found support only above 1.5530, closing at 1.5586, losing nearly 400 pips.

The Pound now trades between 1.5530, which served as tough resistance in April and as support in February, to 1.5720, which held the pair back in 2009, and also temporarily in the past week. Note that most lines haven’t changed since last week’s outlook.

Above, 1.5833, which provided support at the beginning of the year and later worked as resistance, is the next line. Higher, the round psychological number of 1.60 proved to be a tough barrier recently 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 1.5530, the next line of support is quite close – 1.5470 – it capped the pair in its recent ascent. 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 am neutral on GBP/USD.

Despite the pause in employment and King’s dovish statements, Britain is in a much better state than the Euro-zone, and should be able to stabilize in the week after Bernanke’s earthquake.

Further reading:

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