Jan 15, 2010

Forex Crunch EUR/GBP Breaking Below

Forex Crunch EUR/GBP Breaking Below

EUR/GBP Breaking Below

Posted: 15 Jan 2010 03:02 AM PST


EUR/GBP has made a significant downwards breakout, reaching a 4-month low. Here are some of the reasons and the technical levels to watch.

EUR/GBP broke under the 0.8852 line that was the low on December 17th. It also went below the November 17th low of 0.8834.

At 0.8820 (at the time of writing), it’s at its lowest level since September 15th. The area of 0.8840, which was a bottom so many times, was finally broken. EUR/GBP is high on my list of predictable currency pairs.

European problems, British cautious hopes

The reasons lie mainly in the Euro-zone: Greece’s debt problems are from over, now under scrutiny also from Jean-Claude Trichet, the president of the European Central Bank. Portugal and Spain also continue to have debt problems.

German politics are also weighing on the Euro: troubles in Merkel’s coalition have spurred a rumor that she would resign took the Euro down. While this rumor has been officially denied, the Euro is still hurt, with EUR/USD going below 1.444 and also below 1.4400.

In Britain, there are some reasons for cautious optimism: like last month, the NIESR GDP estimate showed that Britain’s economy grew by 0.3% in the fourth quarter, meaning an end to recession after struggling.

GBP/USD managed to settle above the 0.6270 line that blocked it during recent weeks. Also other British indicators were OK.

EUR/GBP Technical Analysis

So, these British improvements, and especially the Euroland problems took the pair down. The 0.8840 line is critical. Apart from the bottoms mentioned beforehand, 0.8840 was also peak in August.

Further down, 0.87 is a clear line of support. It served as a peak in July and a bottom in September. Even lower, 0.8570 is a minor line of resistance, 0.8450 is stronger and 0.84 is huge – it wasn’t breached in over a year.

If the break isn’t confirmed, EUR/GBP may bounce back to the previous range – 0.8840 to 0.9067. Further up, 0.9157 is a significant point of resistance, followed by 0.9420 and 0.95 in the far distance.

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Forex Daily Outlook – January 15th 2010

Posted: 14 Jan 2010 11:47 PM PST


On the last day of the week, there are two major US releases: CPI and Consumer Sentiment, among other figures. Let’s see what’s up for today:

German WPI started the day with a disappointing rise of only 0.2%. Yesterday’s final CPI figure compensates for it. The more interesting inflation release is later: CPI for the whole continent is expected to rise by 0.9%, confirming the initial read. Core CPI is expected to rise by 1%. The numbers are annualized.

For more on the Euro, read the EUR/USD forecast.

British CB Leading Index is due later. Britain probably got out of recession, at least according to the unofficial NIESR GDP estimate. This helps the Pound rise nicely. Read the British Pound forecast for more.

In the US, CPI is expected to show that prices continue to rise slowly: a rise of only 0.2% is predicted. Core CPI, which is no less important, is expected to rise by 0.1%.

The more interesting American release comes from the University of Michigan: Consumer Sentiment is predicted to edge up from 72.5 to 73.8 points, showing that Americans are more optimistic about the future.

Also in the US, the Empire State Manufacturing Index is predicted to rise from 2.6 to 11.2 points, Capacity Utilization Rate from 71.3% to 71.9% and Industrial Production is predicted to rise by 0.7%, similar to last month’s rise.

That’s it for this week. Happy forex trading!

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Aussie – Great Employment Numbers Aren’t Enough for a Break

Posted: 14 Jan 2010 09:11 AM PST


Australian employment numbers were excellent, but weren’t enough for the Aussie – it failed to break the important resistance line for the second time this week. Double top? Or just a matter of time?

Australia’s employment change figure showed a rise of 35,200 jobs. This was better than last month’s Aussie job figures and also exceeded early expectations by a three fold. The market was expecting a 10K job gain.

The second employment figure was also superb: Australian unemployment rate fell to 5.5%, the lowest in 8 months. Also last month’s unemployment rate was positively revised to 5.6%.

This shows, again and again, the strength of the Australian economy. After the Aussie was hurt from a relatively low GDP for Q3, this figure raises the chances for a fourth consecutive rate hike in Australia, which already has an interest rate of 3.75%.

Forex recation

AUD/USD reacted with a leap: The Aussie jumped from 0.9240 to 0.9300 instantly and later peaked at 0.9328. This is at the all-important resistance line. This level served as a resistance line several times towards the end of 2009, and just on Monday.

Yes, AUD/USD failed to breach the line twice in the same week.

What does this mean? A double-top could mean that the Aussie doesn’t have the strength to conquer higher ground, and that the dollar is still strong.

I continue to be bullish on the Aussie, and I see these figures as another proof of the Australian economy’s strength. The chance will come to breach this line.

In the meantime, AUD/USD retreated to 0.9310. No Australian figures are published until the end of the week. The upcoming American CPI and especially the UoM Consumer Sentiment in the US might trigger the next moves.

Further reading:

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