| EUR/USD Outlook – January 18-22 Posted: 16 Jan 2010 07:04 AM PST 
The Euro enjoyed higher ground in the past week, but it proved only temporary, as it fell across the board on Greek troubles. The upcoming week provides the all-important ZEW Economic Sentiment among many other indicators. Here is an outlook for the key events in Europe and an updated technical analysis for EUR/USD. EUR/USD chart with support and resistance lines marked on it. Click to enlarge: 
The last time that the ZEW released their figure – the Euro dropped. Will it happen again? Let’s start the review. The technical analysis will follow: - ZEW Economic Sentiment: Published on Tuesday at 10:00 GMT. The German version of this important survey has made a sharp decline last month, and fell to 50.4 points. It’s expected to stay almost unchanged at 50.3 this time. Also the all-European version fell to 48 points last month, indicating that investors and analysts are worried. The Euro reacted with a big fall on this news last month.
- German PPI: Published on Wednesday at 7:00 GMT. Contrary to consumer prices, producer prices are not really moving. Last month saw a nice tiny rise of 0.1%, which is expected to be followed by a 0.2% rise this time. Prices must rise before Trichet starts thinking of a rate hike.
- French Flash PMI: Published on Friday at 8:00 GMT. France starts the monthly influx of purchasing managers’ indices. The French manufacturing sector is expanding in the past 5 months, scoring 54.7 last month. A figure above 50 means expansion while under 50 means contraction. It’s predicted to rise to 55.1, almost the peak since the crisis. The services sector is doing even better there, and currently stands on 58.7 points. It’s expected to edge up to 59.3 points in Europe’s second largest economy.
- German Flash PMI: Published on Friday at 8:30 GMT. Europe’s biggest economy has seen an expanding manufacturing sector in the past 3 months. PMI is expected to rise from 52.7 to 53 this time. The services sector is expanding for a longer time, but is currently at the same levels of activity -52.7. It’s predicted to rise to 53.1.
- All-European Flash PMI: Published on Friday at 9:00 GMT. Europe isn’t only Germany and France. It’s also Greece and Spain. The manufacturing sector is expected to show a rise from 51.6 to 52.1 in PMI, while the services sector is predicted to edge up from 53.6 to 54.1. During these releases, EUR/USD will shake.
- ECB Monthly Bulletin: Published on Friday at 10:00 GMT. The European Central Bank has been busy with the Greek debt problems. In its monthly bulletin, articles and internal statistics will expose what the bankers are thinking about. The general picture looks gloomy at the moment.
- Industrial New Orders: Published on Friday at 10:00 GMT. After four months of neat rises, the value of purchase orders dropped by 2.2% last month, falling short of early expectations. This important indicator is predicted to rise by 0.6% this time push the Euro slightly higher.
EUR/USD Technical Analysis The Euro had a good start to the week, opening with a Sunday gap above the 1.4480 resistance line which it previously failed to break. It traded mostly above this line, peaking at 1.4579 before falling below the line, and closing at 1.4367. So, EUR/USD returned to the range. Above, I’ve modified the region and now made just one round resistance line at 1.4450. This is a change from last week’s outlook. Below, 1.42 continues to serve as support. It worked as a support line for the recent range trading, and also worked as resistance line in the past. Looking above the range, 1.4626 was a low when the pair was trading higher. Above that, 1.48 is a significant line – it was the lower border of the previous range. Even higher, 1.5144 was the 2009 high, and is far away. Below the range, 1.40 is a round number and also worked as temporary bottom. It’s a minor resistance line. Lower, 1.3750 is a very important support line – it was both a significant support and resistance line in the past. The bearish sentiment on EUR/USD continues. The Greek crisis continues to trouble the continent and might become a Greek tragedy. Add German political problems and a high unemployment rate and you get a weak Euro. This popular pair receives excellent articles on the web. Here are a few: - Casey Stubbs brings a fresh analysis with his 4 hour charts.
- TheLFB show bullish expectations for the US dollar index.
- The Geek Knows reviews the Euro and looks forward with an interesting technical analysis.
Further reading on Forex Crunch: Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
| GBP/USD Outlook – January 18-22 Posted: 16 Jan 2010 07:03 AM PST 
After moving up across the board, the Pound expects a very busy week: inflation, employment and retail sales are amongst the events that will move the Pound. Here’s an outlook and an updated technical analysis for GBP/USD. GBP/USD chart with support and resistance lines marked on it. Click to enlarge: 
The unofficial NIESR GDP estimate showed growth of 0.3% in Q4 – an end to British recession. This was one of the main drivers of the Pound. For a rate hike, prices need to rise and jobs need to show that the turnaround wasn’t temporary. All these are supplied this week. Let’s start the review. The technical analysis will follow:
- Rightmove HPI: Published on Monday at midnight GMT. This early bird report of housing prices isn’t always accurate, but tends to have an impact, especially as it’s published early. Two months of rises were followed by two months of drops, with a rather sharp 2.2% fall last month. Prices are expected to remain rather stable this time.
- CPI: Published on Tuesday at 9:30 GMT. Britain almost fell to deflation, but prices began rising two months ago and continued last month with an annualized rate of 1.9%. This is helping the Pound bulls. CPI is expected to accelerate to 2.6% this time. Core CPI is also on the rise and is predicted to rise from 1.9% to 2.3% this time. Also note the Retail Price Index (RPI) which was negative for many months and turned positive last month.
- BOE Inflation Letter: Published after the CPI, only if necessary. Rising inflation could get out of control – out of the government’s target of 1-3%. If the target is missed, BOE governor Mervyn King will need to send a public letter to explain the reasons and the measures. Such a letter will impact the markets as it exposes future actions such as a rate hike. A letter will only be issued if the target is missed – if the expected 2.6% number is significantly exceeded.
- Mervyn King talks: Due at 19:00 GMT. With or without hitting the inflation target, King will make a public appearance. He might speak of Q4 growth, now that the unofficial NIESR GDP estimate showed growth, and both PM Gordon Brown and Alistair Darling expressed optimism.
- Claimant Count Change: Published on Wednesday at 9:30 GMT, together with other events. This is the earliest and most important employment figure that is released in Britain. The number of unemployed people has finally dropped last month. This was very good news. After the drop of 6,300 unemployed people last month, another positive drop is expected – of 3,300.
- Unemployment Rate: Published on Wednesday at 9:30 GMT. Although this is a late figure, it has a strong impact. Economists’ expectations are for a rise to 8%, but such predictions haven’t been realized in the past, and the unemployment rate is currently at 7.9%, being at 7.8% to 7.9% in recent months.
- MPC Meeting Minutes: Published on Wednesday at 9:30 GMT. Together with employment figures, the minutes from the last rate decision are published. There are 7 billion pounds left in the Quantitative Easing program. The statement around the decision wasn’t exciting, and maybe the minutes will reveal the sentiment of the central bank.
- Adam Posen talks: Due on Wednesday at 15:40 GMT. The external member of the MPC has made pessimistic comments in the past, and he may hurt the Pound again, when he speaks at a conference in Prague.
- Public Sector Net Borrowing: Published on Thursday at 9:30 GMT. Britain’s heavy government deficit is frequently cited and is a burden on the Pound. Lending grew to over 20 billion pounds last month, the highest in years. It’s predicted to ease to 18.6 billion and help the Pound this time.
- CBI Industrial Order Expectations: Published on Thursday at 11:00 GMT. The Confederation of British Industry shows a negative, pessimistic figure for quite some time. This number has been improving in the past two months, reaching -42 last time. It’s predicted to take another step upwards and reach -39, still in the negative zone.
- Retail Sales: Published on Friday at 9:30 GMT. This important consumer figure closes the busy week for the Pound. Retail sales disappointed with a drop of 0.3% last month, falling short of expectations again and again. This time, a big correction is predicted – a rise of 1.3%. Such a result will help the Pound near the close of the week.
GBP/USD Technical Analysis GBP/USD made all the way from the low 1.60s jumping easily above the 1.6110 resistance line and made a strong breakout above the important 1.6260 resistance line. After peaking at 1.6355 it fell and closed at 1.6261 – in a critical point. So, the critical line is at 1.6260 – this pivotal spot will impact trading. Looking below, 1.6110 is a minor line of support, being broken too many times. All in all, the lines haven’t changed from last week’s outlook. A more serious line of support is at 1.5720. The Pound traded above this important line in the past 8 months, and it began the comeback from this spot. Looking even lower, 1.5350 was a clear line of support and resistance in the past and will cushion a fall below 1.5720. Looking up, 1.64 is the next resistance line, being a peak in mid-December, before a dollar rally began. Further above, 1.6746 served as a resistance line a few times in the past and is the serious line. If the Pound breaks this line, the 2009 high of 1.7040 is above, but such a move probably won’t happen this week. I became neutral on GBP/USD. There’s a bit of light at the end of the tunnel. The signs of the end of the recession, rising prices and the turnaround of the economy are all fragile, but are better than figures of previous months. This is enough to hold the Pound from falling. Further reading: Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
| USD/CAD Outlook – January 18-22 Posted: 16 Jan 2010 07:02 AM PST 
The Canadian dollar tested new ground but closed the week almost unchanged. The upcoming week is quite busy, with a rate decision being the highlight. Here’s an outlook for the 8 events that await the Canadian dollar, and an updated technical analysis for USD/CAD. USD/CAD chart with support and resistance lines marked on it. Click to enlarge: 
Carney disappointed in the past by leaving the schedule for a rate hike unchanged. An acceleration will boost the loonie, but also an acceleration in prices is necessary for this to happen. We have all of it this week. Let’s start the review. The technical analysis will follow: - Foreign Securities Purchases: Published on Monday at 13:30 GMT. This figure represents the flow of cash into Canada – the trust in the economy. After a leap to 13.5 billion, last month saw a drop to 5.8 billion. Securities purchases are predicted to ease once again, but moderately -to 5.2 billion.
- Leading Index
 ublished on Tuesday at 13:30 GMT. Although this compound index is mainly based on figures that are already release, it still surprises from time to time – last month’s rise of 1.3% was double the expectations. All in all, this index is positive. The trend is expected to continue with a rise of 1.1% this time. It comes just before the rate decision. - Rate decision ublished on Tuesday at 14:00 GMT. Mark Carney’s team is expected to leave the Overnight Rate unchanged at 0.25% for the seventh time in a row. The big question is the timing of the rate hike. Contrary to his American counterpart, Carney has been very clear about the predicted timing – the end of Q2. Well, now Canada has stronger inflation, and a rather healthy job market. Will he hint about a faster schedule? The BOC Rate Statement might supply answers.
- CPI: Published on Wednesday at 12:00 GMT. As aforementioned, inflation is picking up in Canada. This helped the loonie last month. Economists are expecting a small rise once again: 0.2% after last month’s 0.5% rise. Also Core CPI picked up with a 0.5% rise, and is now also expected to edge up by only 0.2%.
- Manufacturing Sales: Published on Wednesday at 13:30 GMT. This indicator of the industry isn’t very stable, and usually moves strongly. The rise of 2% last month is expected to be followed by a similar rise of 1.6%.
- Wholesale Sales: Published on Thursday at 13:30 GMT. This indicator is far from the consumers, but has an impact as well, and is usually moderate. In the past two months, the value of sales rose by 0.2% and 0.3%. It’s now predicted to rise by 0.4%, continuing the trend.
- BOC Monetary Policy Report: Published on Thursday at 15:30 GMT. Three days after the rate decision, the central bank shows it’s view of the economic situation, with prospects for future policy. 45 minutes after the release, Carney will hold a press conference to discuss the data.
- Retail Sales: Published on Friday at 13:30 GMT. This important figure has posted nice gains in the past three months, with a 0.8% rise last time. It’s expected to take a break from rising and drop by 0.3%. Core Retails Sales haven’t seen such strong gains – only 0.2% last month. This rise is expected to be repeated this time. This figure is important for USD/CAD as no other numbers are published on Friday.
USD/CAD Technical Analysis USD/CAD began with a retreat to the 1.04 resistance line before dropping and reaching new lows at 1.024, bouncing off the support line of 1.02. It finally roe and closed at 1.0290, not far from last week’s close. The loonie is range-trading between 1.02 and 1.04. 1.02 was the low in 2009 and has been tested during this week as well. 1.04 was the support line of the previous range, and serves as an excellent resistance line as well. The lines haven’t changed since last week. Above 1.04, the previous resistance line of the range, 1.0750, is the next line. Further above, 1.0850 was a peak before the pair entered the range. Even higher, 1.1130 was tested several times during 2009 and is another important line of resistance far in the distance. Looking below, the ultimate line of support is parity: 1:1. USD/CAD parity was last seen in 2008, and is quite close once again. A break of 1.02 would lead to a test of parity which is not only a round number but also worked as support and resistance in the past. I continue the bearish sentiment for USD/CAD. Things are looking fine in Canada. The loonie depends a lot on the rate decision for more fuel. Further reading: Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
| AUD/USD Outlook – January 18-22 Posted: 16 Jan 2010 07:01 AM PST 
The Aussie enjoyed strong job numbers but didn’t make a breakthrough, but the Aussie remains strong. This week has some Australian figures, but Aussie traders will focus on China. Here’s an outlook for the upcoming week and an updated technical analysis for AUD/USD. AUD/USD chart with support and resistance lines marked on it. Click to enlarge: 
Australia’s high interest rate has a bigger change of rising, now that employment has shown strength. We’ll have to wait about two weeks for that. Let’s start the review. The technical analysis will follow: - NAB Business Confidence: This index was expected to be released last week and was delayed. The exact time isn’t known at the moment. The National Australia Bank surveys about 350 business about their expectations for the near future. This index has been on the rise in the past three months, reaching a high of 19 positive points.
- MI Inflation Gauge: Published on Sunday at 23:30 GMT (Delayed from last week). The Melbourne Institute independently measures inflation. Last month it showed a rise of 0.3% in prices, after slower months beforehand. A small acceleration is predicted now.
- MI Inflation Expectations: Published on Thursday at midnight. This, second inflation figure from the Melbourne Institute, measures prices from the consumers’ perspective. Expectations have risen from 3.2% to 3.6% and are expected to edge higher this time.
- Westpac Consumer Sentiment: Published on Tuesday at 23:30 GMT. The Westpac Banking Corporation issues a survey of 1200 consumers which measures their confidence. This index fell in the past two months after 5 strong months of rising. A modest rise is predicted this time.
- Chinese GDP and Industrial Production: Published on Thursday at 2:00 GMT. . The Chinese economy, third largest in the world, has a strong impact on Australia. Many Chinese numbers are published at this time. GDP is the most important. It’s expected to rise from an annual rate of 8.9% to a double-digit 10.5% growth rate – this already caused Chinese policymakers to begin tightening measures. The second most important figure is Industrial Production. This annual number is expected to rise from 19.2% to 19.6%. Note that not only the Aussie feels the Chinese releases.
- Import Prices: Published on Friday at 00:30 GMT. Speaking of import and export, the quarterly import prices figure reflects this well. In the first three quarters of 2009, prices fell, expressing the global crisis. A positive number isn’t expected in Q4, but a smaller drop of 1.7% will help after bigger drops last time.
AUD/USD Technical Analysis The Aussie began the week with a leap above last week’s highs and tested the important 0.9328 resistance line. It failed to breach this stronghold and later traded between 0.92 to to 0.9328, closing at 0.9222. Initial support lies at 0.92, a line that I’ve modified from last week’s outlook. Looking lower, 0.9090 provides minor support. Below, 0.8950 is an important support line which served as a support and resistance line in the past. Look lower, 0.8735 was the bottom in December began, before the current rally and provides support. Below the area of 0.8477 to 0.8520 held the Aussie back in the past, and is now a a major and far resistance line. Looking up, if the 0.9328 line is broken, 0.9405 is the next line of resistance. It was the peak of 2009. Higher, 0.95 is a round number and played a role a long time ago. I remain bullish on AUD/USD. The recent employment figures strengthened the Aussie bulls. This week’s Chinese figures should help the Aussie break the current resistance line. Further reading: Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
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