Sep 12, 2010

Forex Crunch GBP/USD Outlook – September 13-17

Forex Crunch GBP/USD Outlook – September 13-17

GBP/USD Outlook – September 13-17

Posted: 12 Sep 2010 02:10 AM PDT


Employment data, inflation figures and a public appearance by Mervyn King are the highlights of this busy week in the weak Pound. Here’s an outlook for the British events and an updated technical analysis for GBP/USD.

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

British Pound Forecast September 13-17

The rate decision in the past week didn’t provide any excitement. We’ll now get to see if there is any justification for any moves on the rate in the near future. Probably no need for hikes:

  1. Nationwide Consumer Confidence: Publication time unknown at the moment. This important survey of consumers always rocks the Pound, despite the strange release time. After reaching a peak of 81 points, this indicator gradually dropped, going down to 56 points last month. A small rise to 59 points is expected now.
  2. RICS House Price Balance: Published Monday, 23:00. This indicator shows the balance between areas that are reporting rises in real estate prices and areas which are showing drops. After many positive months, with a peak of +35%, the figure deteriorated and fell to a negative number last month, -8%. This means that house prices are falling in most areas. Another drop is expected now to -11%.
  3. CPI: Published Tuesday, 8:30. British inflation has been above the government’s target  during most of the year. Andrew Sentance, a member of the MPC, wanted to raise the interest rates to tackle this issue, but Mervyn King, the head of the BoE, dismissed it, and saw inflation sliding back into the 1-3% target. After CPI dropped to an annualized figure of 3.1% last month, it might fully return into range now. Expectations stand on 2.9%. Core CPI is already at 2.6% as of last month and will probably remain unchanged. Retail Price Index (RPI) still high and stands at 4.8%, also lower than the months beforehand. Any figure in the CPI will rock the Pound.
  4. Employment data: Published Wednesday, 8:30. After a few great months, the Claimant Count Change, which measures the change in the number of unemployed people, dropped by only 3800 people, sending the Pound down. The fresh figure, for the month of August, will probably be better, -5800. The unemployment rate is expected to remain at 7.8% for a third month in a row. Note that the figure is for July, thus having less impact. The Average Earnings Index will complete the picture with an expected 1.6% gain.
  5. Inflation Report Hearings: Begins Wednesday, 9:00. Mervyn King, head of the BoE and some of his colleagues, will appear before the Treasury Committee in the British parliament. This public event takes a few hours – a long time in which the Pound shakes. Apart from talking about inflation (released one day earlier), the members of the BoE will also discuss the state of the economy and the prospects for the future.
  6. Retail Sales: Published Thursday, 8:30. This major consumer report has shown neat growth in the past 6 months, usually exceeding expectations. Last month’s excellent 1.1% rise will probably followed by a more modest rise this time, only 0.3%.
  7. Consumer Inflation Expectations: Published Thursday, 8:30. This report by the Bank of England is based on a survey of 2000 consumers. Despite being slightly overshadowed by the retail sales figure released at the same time, this indicator tends to have a strong impact. The drop in annual CPI wasn’t felt in this survey – last month’s figure showed a strong rise in inflation expectations – from 2.5% to 3.3%. A drop is predicted this time.
  8. CBI Industrial Order Expectations: Published Thursday, 10:00. Closing the week for the Pound, this survey of 550 manufacturers will probably remain in negative territory once again. A negative score means that manufacturers expect a lower sales volume in the future. The figure has been negative for ages, but it has been improving, reaching -14. It’s expected to remain at a similar level now, but it might post a small improvement.

All times are GMT.

GBP/USD Technical Analysis

After a failed attempt to break the 1.5470 line, GBP/USD dropped sharply and eventuall fell below the strong 1.5350 line (mentioned in last week’s outlook) and dipped under 1.53. This was very temporary. The Pound rose back up and peaked around 1.5520 before falling and being supported by 1.5350 once again.

After closing at 1.5355, the immediate and strong support line remains 1.5350, which is a critical line once again. It was also a support line in February and a resistance line in March.

Looking down,  1.5230 was a significant resistance line in July and is now a major line of support. Below, 1.5120 will provide further support after having this same role in July.

Below, 1.5050 line capped the pair on a recovery attempt back in May, and now works as a minor support line. Even lower, 1.4950 provided support in July and is the final line for now.

1.5470 is the immediate resistance on the upside. It also stopped the pair in July. 1.5520, which was a peak in April became a strong line once again.

Higher, the veteran 1.5720 line that provided support in 2009 is the next line of resistance. Above, 1.5833, which worked as  support at the beginning of the year and later worked as resistance, is the next line. Higher, the psychological round number of 1.60 proved to be a tough barrier and is the highest level in 6 months, and is the last line for now.

I remain bearish on GBP/USD.

This very busy week, with inflation and Mervyn King’s appearance, could provide the data to send the Pound out of range – downwards.

Further reading:

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AUD/USD Outlook – September 13-17

Posted: 11 Sep 2010 10:00 PM PDT


After a very busy week in the Australian calendar, the upcoming week has mostly second tier releases. Will the Aussie continue pushing forward? Here’s an outlook for the Australian events, and an updated technical analysis for AUD/USD.

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

aud usd forecast September 13-17

While the pause in the rate hike was widely expected, Australian employment figures gave a significant boost the Aussie, signalling a possible renewal or rate hike. This also depends on the inflation. We’ll get some hints about prices this week.

  1. NAB Business Confidence: Published Tuesday, 1:30. The National Australia Bank has shown that economic confidence has deteriorated in the past 5 months, yet still remained optimistic – a positive score. This time, a rise is expected from last month’s 2 point figure.
  2. Westpac Consumer Sentiment: Published Wednesday, 00:30. The second survey from a big bank looks at consumers. 1200 consumers that were surveyed showed a better sentiment om the past two months, with rises of 11.1% and 5.4%. Another small rise is expected now.
  3. New Motor Vehicle Sales: Published Wednesday, 1:30. Sales of cars and trucks serve as a good gauge for consumption and the whole economy. The past three months were disappointing with squeezes in sales. A recovery is expected this time.
  4. MI Inflation Expectations: Published Thursday, 1:00. The Melbourne Institute fills in the gap for the government by publishing monthly estimations of inflation expectations for the next 12 months. Last month, a drop in expectations was recorded – 2.8% compared with 3.3% beforehand. This indicated yet another pause in rate hikes, as seen last week. A similar figure is expected now.
  5. RBA Bulletin: Published Thursday, 1:00. This quarterly release provides an insight into the economic conditions as seen from inside the central bank. Most of the data has already been released, yet this economic overview still has an impact. A positive outlook is expected.
  6. Philip Lowe talks: Begins talking Friday, 3:45. The RBA Assistant Governor will speak in a conference in Sydney and might possibly hint on further steps from the central bank, such as more moves on the interest rate. His words tend to move the Aussie.

All times are GMT.

AUD/USD Technical Analysis

The Australian dollar struggled with the 0.9135 line at the beginning of the week, but then finally climbed above the 0.9220 level (mentioned in last week’s outlook) and closed at 0.9263.

The Aussie is now supported by the 0.9220 line which was the peak in August. April low of 0.9135 is now a minor support line, and it’s followed by 0.9080 which provided strong resistance in July and August.

Further below, the round 0.90 line is a minor support line, followed by 0.8870, which was a double top in recent months, and now serves as support.

Looking up, the 0.9327 line accompanies us since October and worked as a strong resistance lines many times since then. A break above this veteran line will send the pair to resistance at 0.9366 which was a stubborn peak during April.

The 2009 peak of 0.9405 is the last visible resistance line on the graph. A break above this line be capped around 0.95, which was last seen in 2008.

I remain bullish on AUD/USD.

This week’s fresh and great employment figures continues the momentum from the  strong second quarter. It seems that everything is going Australia’s way. Only gloomy risk aversive trading can provide headwinds in the near future.

Further reading:

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USD/CAD Outlook – September 13-17

Posted: 11 Sep 2010 06:10 PM PDT


The Canadian dollar had a busy and positive week, and will now have a lighter one – a week in which technicals will have more impact. Here’s an outlook for the Canadian events and an updated technical analysis for USD/CAD, now at lower ground.

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

Canadian dollar forecast - September 13-17

The third rate hike in Canada wasn’t fully priced, and the release boosted the Canadian dollar. Employment data was also better than predicted and helped push USD/CAD lower. This week, quarterly figures will provide a long term view.

  1. Labor Productivity: Published on Tuesday 12:30. This quarterly release comes rather late. Nevertheless, it’s of high importance and rocks the loonie. In Q1, productivity rose by only 0.7%, half of early expectations. This was good for the Canadian dollar, as low productivity means higher salaries – higher inflation. A similar rise in productivity is expected now – 0.9%.
  2. Capacity Utilization Rate: Published on Tuesday, 12:30. Utilizing more of the available resources means a stronger economy and a chance of a rate hike to cool it down. In Q1, the utilization rate climbed to 74.2%. A similar rate is expected now.
  3. Manufacturing Sales: Published on Wednesday, 12:30. Sales at the gates of manufacturers serve as a good gauge. This stable indicator rose by 0.1% last month, weaker than previous months but exceeding expectations of a drop. Another modest rise is predicted now.

All times are GMT.

USD/CAD Technical Analysis

The Canadian dollar’s week didn’t start of well – An initial drop lower failed and USD/CAD rose to test the 1.05 line (mentioned in last week’s outlook). It then made a sharp drop under 1.04 and tested 1.0280 before closing at 1.0366.

The 1.04 line was the bottom border of a long-term wide range between 1.04 and 1.0750, and now serves as a minor resistance line. Above, 1.05 capped the pair in the past week and also a few weeks ago – it’s now a strong resistance line.

Higher, 1.0680 is a double and stubborn top – it capped USD/CAD at the end of August and also at the beginning of July. Above this line, the pair will meet resistance at 1.0750 which was a resistance line in May last time, and then 1.0850, a swing high in May that also provided resistance back in 2009.

Looking down, 1.0280 supported the pair in July and was also tested in the past week – making it a strong support line. Lower, 1.02 was the 2009 low and also worked as a resistance line after the pair hit parity. It’s now a minor support line.

Lower, the 1.01 line provided support in May and in August and is a strong support line before the ultimate line – parity.

I remain bearish on USD/CAD.

This week’s excellent job figures, among other figures, showed that Canada is on the right track, and will outshine other countries.

Further reading:

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NZD/USD Outlook – September 13-17

Posted: 11 Sep 2010 02:00 PM PDT


A busy week expects kiwi traders, with the interest rate decision being the highlight. Here’s an outlook for events in New Zealand and an updated technical analysis for NZD/USD.

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

NZD USD Forecast September 13-17 2010

The kiwi enjoyed risk appetite to make some gains. This week, it depends on its own indicators. Let’s start:

  1. FPI: Published on Sunday, 22:45. New Zealand exports a lot of agricultural goods, making the price of food important of its economy. The past two months have seen nice rises in prices – 1.3% and 1.6%. A more modest rise is expected this time.
  2. Retail Sales: Published on Monday, 22:45. This major consumer gauge showed strength last month by a big 0.9% jump, almost double the expectations and double the previous month’s rise. Also core retail sales shot up by 1.5%, far better than expected. An unchanged result is expected this time in retail sales, and core retail sales will probably rise by 0.1%. Retail sales tend to have a strong impact on the kiwi.
  3. Rate decision: Published on Wednesday, 21:00. Alan Bollard and his colleagues at the RBNZ are expected to leave the interest Official Cash Rate unchanged at 3% this time. After two rate hikes, there’s a notion that inflation isn’t a threat that needs to be handled by a higher rate. In addition, the unemployment rate leaped above 7% once again, showing that New Zealand still needs to support the economic recovery. It’s important to note the accompanying rate statement and the wording at the press conference that follows the rate decision.
  4. Business NZ Manufacturing Index: Published on Wednesday, 22:30. This figure is similar to purchasing managers’ indices, with 50 being the critical line between expansion and contraction. Last month’s score of 49.9 points, just under the bar, was worrying for the kiwi. It’s now expected to rise back up above 50.
  5. Westpac Consumer Sentiment: Published on Friday. This quarterly survey of 1500 consumers usually rocks the kiwi. After dropping in the first quarter, this indicator made a comeback in Q2 with a score of 119.3 points. Any figure above 100 points means economic optimism. Another rise is expected now.

All times are GMT.

NZD/USD Technical Analysis

The kiwi drifted in between 0.7160 and 0.7250 (a resistance line that didn’t appear in last week’s outlook). It later managed to rise above this level and test the 0.73 resistance line before closing at 0.7279.

This week’s high of 0.73 was also a peak in mid July, and is now a strong resistance line. Higher, the stubborn peak of 0.7356 in August provides further resistance.

Moving higher, the 0.7440 area capped the pair for a few consecutive days in January and is a strong resistance line. The next resistance line is 0.7523, the swing high back in November. It’s followed by 0.7634, another swing high back in October.

Looking down, 0.7250 was a stepping stone for the kiwi on its way up and also in April, and provides minor support. Lower, 0.7160 provided support recently and worked as a resistance line in June – it’s now a significant support line.

Below, 0.71 had a role  in July and also back in November as a support line. More serious support appears at 0.70, the round number that is closely eyed by many traders. The last support line for now is at 0.69, which capped the kiwi after the downfall in May.

I am bearish on the kiwi.

Despite the recent gains, New Zealand doesn’t enjoy the strong fundamentals of its neighbor. I believe that the pause in rate hikes will take its toll on the currency.

Further reading:

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USD/JPY Outlook – September 13-17

Posted: 11 Sep 2010 10:00 AM PDT


The internal elections in Japan’s ruling party are the main theme this week, among other events. Here’s an outlook for the Japanese events and an updated technical analysis for the falling USD/JPY.

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

usd jpy forecast September 13-17

There has been a lot of talk about an intervention to weaken the yen. Only a coordinated intervention can have a long term effect. Will it happen this week? Or will the talk continue? Let’s start:

  1. Revised Industrial Production: Published Tuesday, 4:30. Japanese industrial output showed a modest rise of 0.3% according to the initial release. This came after a drop of 1.1% drop in the previous month. The rise will probably be confirmed now.
  2. Leadership elections: Tuesday. The Japanese prime minister, Naoto Kan, has been in office only for a few months, and is now challenged by Ichiro Ozawa,  a veteran politician. Mr. Ozawa raised the issue of the strong yen many times during his election campaign and put it high on the agenda. A victory by Ozawa means yet another prime minister for Japan, the third this year. Political uncertainty and the vow to fight the strong yen may hurt the yen. A victory by current PM Kan will boost the yen.
  3. Tertiary Industry Activity: Published Wednesday, 23:50. This services sector indicator is a good gauge for the Japaneses economy. The past two months shows a decline of 0.9% and 0.1%. A rise of 0.7% is expected this time.
  4. Masaaki Shirakawa talks: Begins speaking on Thursday, 6:00. The governor of the BOJ will speak at a conference in Tokyo and is likely to mention the high level of the yen. If he reiterates the words from previous appearances, the market will dismiss it. Only firmer talk can move the currency.

All times are GMT.

USD/JPY Technical Analysis

USD/JPY began the week by dropping lower, setting a fresh 15-year low at 83.34. It didn’t stay there too long and gradually climbed higher, to close at 84.16.

84.80, which was a support line in August and also a swing low in November, now serves a strong resistance line. Above this line, the next line that will cap the dollar in case of surge is the 86.30 line which was a support line twice in July.

Higher, 88 was a cushioned the pair in October, March and May. Higher, there are two lines close to each other – 89.15 was a resistance line in July and a support line in May, and 89.75, a weaker line, which provided support in March.

Downtrend channel – the recent descent of USD/JPY is characterized in an imperfect downtrend channel – the downtrend resistance was formed from the 89.15 line and continued with two perfect touches. The downtrend support that was formed earlier (in June) served as perfect support three times since then, but was also violated briefly once.

I am bullish on USD/JPY.

The talks about intervention are mounting – while they have proved fruitless up to now, there’s a chance of an intervention due to the depth this pair reached, and the internal political tensions that the currency is causing in Japan. Only a globally coordinated intervention will have a big long term impact.

Further reading:

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EUR/USD Outlook – September 13-17

Posted: 11 Sep 2010 06:00 AM PDT


The important German ZEW Economic Sentiment is the highlight among 6 events that will shape the Euro’s trading this week, in addition to fresh news about the continent’s debt problems. Here’s an outlook for these events, and an updated technical analysis for EUR/USD.

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

eur usd September 13 17

The European debt issues made a comeback in the past week, with new articles that recycled old news, and also fresh headlines from Ireland and from the Basel III decision. Will the downfall continue? Let’s start:

  1. Industrial Production: Published on Tuesday, 9:00.The release of industrial output for the whole continent is released after Germany and France release their own figures. Nevertheless, surprises in this publication are quite common, and they have a strong impact on the Euro. After 5 months of rises, industrial production dropped by 0.1% last month. A small rise of 0.2% is expected this time.
  2. German ZEW Economic Sentiment: Published Tuesday, 9:00. This survey of 350 analysts and investors always rocks the Euro. In the past four months, it has shown significant drops, short of expectations, reaching 14 points last month, still in positive territory, meaning small economic optimism. Another drop is expected now. Note that there is also a score for the whole continent, but it’s considered less accurate than the German survey. It’s also expected to fall from 15.8 points printed last month.
  3. CPI: Published Wednesday, 9:00. The initial CPI release showed that inflation slowed from an annual rate of 1.7% last month to 1.6% this month. Needless to say, this means that no pressure for a rate hike exists. This figure will probably be confirmed now. Core CPI will probably be confirmed at weaker annual rate of 1%.
  4. Trade Balance: Published Thursday, 9:00. The number for the whole continent is released after the publications from Germany and France. Nevertheless, it still has an impact on the Euro. The Euro-zone got into a deficit in the trade balance two months ago, but it halved last month to 1.6 billion. A smaller deficit is predicted now – 0.7 billion.
  5. German PPI: Published Friday, 6:00. Producer prices have been significantly stronger than consumer prices in the past few months, and exceeded expectations. Currently this doesn’t turn into consumer inflation. After rises of 0.5% and 0.6% in recent months, a smaller rise is expected now – 0.3%.
  6. Current Account: Published Friday, 9:00. Complementing on the trade balance figure, Europe’s current account will probably show a deficit as well. This deficit has also squeezed from 7.4 to 4.6 billion last time, and is likely to squeeze once again to 3.7 billion.

All times are GMT.

EUR/USD Technical Analysis

The Euro began the week by challenging the 1.2930 line (mentioned in last week’s outlook). After failing to break higher, a sharp drop sent it quickly down, and it continued the week by ranging between 1.2770 and 1.2660, and finally closed at 1.2679.

EUR/USD is now between 1.2660 which held it in the past week and also in the previous week, and 1.2770, that worked as a resistance line at the end of August as well.

Looking up,  the 1.2840 line continues to provide minor resistance after capping the Euro in August. Higher, 1.2930 strengthened its position in the past week, and also successfully held the pair a few weeks ago.

Higher, 1.30 is a round psychological number that is closely watched, and it’s followed by 1.3110, which supported the pair back in May and later worked as resistance. There are more lines above, but they’re too far now.

Looking down below 1.2660, the next line of support is quite close and quite strong – 1.2610 was a resistance line in July, and recently worked as support. Below, 1.2460 stopped the rise back in June and is now a support line.

Lower, 1.2330, the 2008 “Lehman” low is the next minor line of support, and it’s followed by 1.2150, which worked as a strong support line in May through July. The round number of 1.20 is the last significant line.

I remain bearish on the Euro.

As mentioned in previous weeks, the Euro-zone’s problems didn’t really go away. The burden of debt isn’t the problem of “Club-Med” countries alone – it impacts other countries as well via bank lending.

This pair receives excellent reviews on the web:

  • James Chen’s strength / weakness meter puts the Euro in the bottom of the list.
  • Kathy Lien discusses the big theme of the past week – the stress tests’ backfire.
  • Jamie Coleman reports that traders are only willing to push EUR/USD so far.
  • Casey Stubbs follows the Euro quite closely.
  • Andriy posts technical levels for the EUR/USD and other pairs on a weekly basis.
  • TheGeekKnows writes a review of the past week looks forward.

Further reading:

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