Forex Crunch GBP/USD Outlook – June 7-11

Forex Crunch GBP/USD Outlook – June 7-11

GBP/USD Outlook – June 7-11

Posted: 06 Jun 2010 03:10 AM PDT


A very busy week awaits the British Pound, with the rate decision being the highlight. Will Mervyn King tackle inflation? Here’s an outlook for the events that will rock the Pound, and an updated technical analysis for GBP/USD.

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

British Pound Forecast

The Pound enjoyed the failure of the Prudential -AIG Asia deal. This deal would have sent billions of pounds overseas, and its failure strengthened the Pound. That wasn’t enough to hold the Pound after Friday’s Non-Farm Payrolls though. Let’s see the British events:

  1. BRC Retail Sales Monitor: Published on Monday at 23:00 GMT (midnight UK). This figure is a great indicator for the official retail sales release. The British Retail Consortium showed a drop of 2.3% in the retailers that belong to its organization. This came after two months of neat rises. Another drop is predicted this time.
  2. Nationwide Consumer Confidence: Published on Tuesday at 23:00 GMT. This survey of 1,000 consumers is a highly regarded barometer for the mood of consumers and of MPC members that meet later in the week. After steadily climbing to 81, this indicator dropped and now stands on 74 points. This is the first survey for the new government and also the first one after the escalation of the European troubles. Economists expected a rise to 78 points, but given the worries, a drop under 70 won’t be very surprising.
  3. Trade Balance: Published on Wednesday at 8:30 GMT. After making a surprise drop two months ago and boosting the British Pound, the trade deficit jumped once again to 7.5 billion pounds, weakening the currency. It’s expected to squeeze down to 7 billion this time.
  4. Rate decision: Published on Thursday at 11:00 GMT. The BoE is trapped between the desire to stimulate the economy by leaving the interest rate unchanged, and by the rising inflation. Mervyn King dismissed the rising inflation and said it’s only oil prices, but the new Prime Minister, David Cameron, doesn’t buy this, and made it clear that he wants the issue to be tackled. The consensus is for an unchanged Official Bank Rate – at 0.5%. If there isn’t a rate hike, traders will watch the MPC Rate Statement – if they express worries about inflation, the Pound will rise. If they focus on economic troubles, it will weaken.
  5. Manufacturing Production: Published on Friday at 8:30 GMT. This major indicator always rocks the Pound. Last month’s release was a big surprise – output grew by 2.3%, far better than expected.The forecast for this release is more modest – 0.6% growth. Note that manufacturing is part of the overall industrial production, which is predicted to rise by 0.5% after a 2% rise last time. Manufacturing is more closely watched.
  6. PPI: Published on Friday at 8:30 GMT. Following a leap of 3.8% in producer prices two months ago (3.8%), prices grew by only 0.6% last month, and they;re expected to drop by 0.1% this time, showing that inflation is still under control, at least with the PPI Input figure. The complementary number, PPI Output, is expected to rise by 0.6% after rising by 1.4% last time.
  7. NIESR GDP Estimate: Published on Friday at 14:00 GMT. Last but not least, the NIESR institute usually provides accurate estimations about the GDP, and they release it on a monthly basis. ast month’s figure was positive – it showed a growth rate of 0.5% in the three months ending in April. A weaker growth rate is expected now, when May is added and February omitted from the calculation.

GBP/USD Technical Analysis

After some range trading between 1.44 and 1.4610, the Pound made a breakout and reached 1.4770, just 10 pips below the 1.4780 resistance line. Friday’s mess sent the pair back down to 1.4450.

Note that many lines have changed since last week’s outlook. The pair is bound by 1.44 and 1.4610 once again. Both lines aren’t very strong.

Looking down below 1.44, the next line is the year-to-date low of 1.4230. This was also a line of support last year. Below, 1.4130 was a swing low and now provides minor support.

Even lower, 1.38 is a strong line, working as a support line at the beginning of 2009. It’s followed by 1.3660, and by the ultimate multi-decade support line of 1.35.

Looking up above 11.4610, strong resistance is found at 1.4780. This is the line that the Pound collapsed to a few months ago, and it was tested successfully just this week.

A break above this line will send the pair to 1.5065, followed by 1.5130, which was a strong support line. There are more resistance lines higher above, but they are too far now.

I am neutral on the GBP/USD.

On one hand, the British economy is still growing slowly and it suffers from the debt issues in continental Europe. But on the other hand, rising inflation can trigger a rate hike, that will probably come sooner than later.

Further reading:

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NZD/USD Outlook – June 7-11

Posted: 06 Jun 2010 01:20 AM PDT


This week is critical for the kiwi – a rate hike is expected from the central bank. Here’s an outlook for the events in New Zealand and an updated technical analysis for NZD/USD.

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

nzd usd forecast

The kiwi suffered from the American Non-Farm Payrolls, like all the other currencies, and lost the higher range it traded earlier. This week, local events will be of high importance. Let’s start:

  1. Manufacturing Sales: Published on Monday at 22:45 GMT. The total value of manufacturing sales in New Zealand rose by 0.7% in Q4 of 2009, cutting a whole year of drops. Another rise is expected in Q1 of 2010.
  2. Rate decision: Published on Wednesday at 21:00 GMT. Alan Bollard, head of the RBNZ, is expected to be the third central banker in the West to raise the interest rate. He is expected to lift the Official Cash Rate from 2.5% to 2.75%, given the global recovery. In the previous event, he said that this tightening cycle will probably be lighter than previous ones. The rate statement and the monetary policy statement that accompany the release are no less important – they will contain hints for the next moves.
  3. Business NZ Manufacturing Index: Published on Wednesday at 22:30 GMT. This survey of manufacturers has a similar score system as purchasing managers indices, with a score above 50 being positive. In the past 8 months, this indicator has been positive – climbing to 58.9 points last month. Another small rise is expected now.
  4. FPI: Published on Thursday at 22:45 GMT. The Food Price Index is released every month, while the overall consumer price index is released only once a quarter. So, this figure fills the gap. Prices have been quite volatile in the past months. Following last month’s drop, a rise is expected now.

NZD/USD Technical Analysis

The kiwi traded between 0.67 and 0.6850 throughout most of the week. It managed to climb a little bit higher, but then dropped sharply and closed at 0.6700.

The current range of 0.66 to 0.6850 continues to dominate the pair’s trading. Note that I’ve slightly extended the range from last week’s outlook.

Looking up, the next line of resistance above 0.6850 is 0.70 – a round number that also worked several times as a support line. 0.7050 works as a minor resistance line before the next strong line at 0.72, which proved to be strong when NZD/USD was trading higher.

If 0.72 is broken, the pair will find strong resistance at 0.7320. This line worked as a support line in January and also in April.

Looking down below 0.66, further support is found at 0.64, an area of struggle last summer. Further down, 0.62 already worked as a strong support line about a year ago.

I’m bullish on the kiwi.

The upcoming rate should boost the currency, which isn’t too sensitive to the European troubles.

Further reading:

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

USD/CAD Outlook – June 7-11

Posted: 06 Jun 2010 12:20 AM PDT


The Canadian dollar didn’t really enjoy the rate hike and the better-than expected GDP, in a very busy week. The governor of the central bank will have a chance to explain the rate hike and talk about future moves, and there are additional releases as well. Here’s an outlook for the Canadian events, and an updated technical analysis for USD/CAD.

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

usd cad

Job data was better than expected in Canada, but this was far from enough to battle the might greenback that enjoyed risk aversive trading on Friday, following the disappointing Non-Farm Payrolls. This week features a head to head battle with the trade balance. Let’s start:

  1. Mark Carney talks: Starts speaking on Monday at 17:50 GMT, and will hold another speech on Thursday at 12:30 GMT. Following his move on the rates, the BOC’s governor will have a chance to explain the move and lay out his expectations for the next months in a conference in Montreal.
  2. Housing Starts: Published on Tuesday at 12:15 GMT. This major indicator has steadily climbed in recent months. It already passed the 200K mark, standing at 201K last month (annualized). The forecast for housing starts is another climb to 206K.
  3. Trade Balance: Published on Thursday at 12:30 GMT. The surplus in the Canadian trade balance dropped sharply last month to 0.3 billion, indicating weaker demand abroad. The surplus is expected to grow back to 0.7 billion, still lower than two months ago. At the same time, the American trade balance is released as well, making it a volatile timing for USD/CAD. In the US, the deficit is expected to remain almost unchanged at 40 billion.
  4. NHPI: Published on Thursday at 12:30 GMT and overshadowed by the trade balance release. This housing figure has also showed steady growth in recent months, ticking up slowly, too slow. The New House Price Index is expected to rise by 0.3%, exactly like last month.
  5. Capacity Utilization Rate: Published on Friday at 12:30 GMT. The economy is still far from utilizing all its resources, but an improvement is underway. The forecasts stand on a rise from 70.9% to 73.4% in the utilization rate.

USD/CAD Technical Analysis

The Canadian dollar traded between 1.04 and 1.0550 during most of the week. It then dipped below 1.04 and reached 1.0333, but that proved to be a false break. Friday’s extreme trading sent it to the other direction, it broke above 1.0550 and closed at 1.0623.

USD/CAD currently trades between 1.0550 and 1.0750. Most lines haven’t changed since last week. The upper border is very strong – it used to be the resistance line of a trading range that the loonie was in for several months, and also worked as a resistance line recently.

Higher, 1.0850 is the next line of resistance, working as such before the loonie entered the range. The next line is 1.1130, which capped the pair more than once, and now provides strong resistance. Even higher, 1.1470 is the next stronghold, but that’s quite far now.

Looking down, 1.04 remains a strong line of support, despite being falsely broken recently. Below, 1.03 provides minor support, and it’s followed by a more important line – 1.02, which was the 2009 low, and worked as a clear line of support and resistance in recent weeks.

The ultimate line of support is parity, a line that the pair reached in April, but seems quite far now.

I am bearish on USD/CAD

The fresh figures from Canada were quite convincing. The rate hike should push the pair lower, overcoming risk aversive trading that follows bad news from Europe.

Further reading:

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

EUR/USD Outlook – June 7-11

Posted: 05 Jun 2010 11:02 AM PDT


The troubled Euro, hit by Hungary and risk aversive trading following the Non-Farm Payrolls, is facing a busy week, with the rate decision being the climax. Here’s an outlook for the European events, and an updated technical analysis for EUR/USD.

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

euro dollar eur usd forecast

No matter how the debt issues are handled, it now seems clear that the Euro-zone, either united or split, is facing a double dip recession. Austerity measures will take their toll on the economies, and the Euro as well. As European leaders are lowering their tone, the indicators return to play an important role. Let’s start:

  1. Sentix Investor Confidence: Published on Monday at 8:30 GMT. LAst month, this important indicator perfectly reflected the economic turmoil, in real time. This survey of 2,000 analysts and investors turned negative – from +2.5 to -6.4. A negative figure means pessimism. This pessimism is expected to weaken this time, with a rise to -3.4 points.
  2. German Factory Orders: Published on Monday at 10:00 GMT. Europe’s largest economy enjoyed a huge leap in factory orders in the last release. A small correction is expected this time – 0.1%. Note that the figure relates to April, and that the report for May will probably be worse.
  3. German Industrial Production: Published on Tuesday at 10:00 GMT. Complementing the factory orders figure, industrial production in Germany also made a significant jump last time – 4%, but is expected to continue rising this time as well, by 0.7%. The result of the factory orders will probably indicate the direction of this figure as well.
  4. German Final CPI: Published on Thursday at 6:00 GMT. It seemed that prices were picking up in Europe, led by its largest economy. But last month already saw them cooling down, with a drop of 0.1%. This release will probably confirm another calm month, with a rise of only 0.1%, as initially reported.
  5. French Industrial Production: Published on Thursday at 6:45 GMT. Europe’s second largest economy also enjoyed nice growth in its industrial production last month – a rise of 1%. Growth is expected to accelerate this month – 1.2%. While there are talks of a credit downgrade for France as well, its economy is rather strong.
  6. Rate decision: Published on Thursday at 11:45 GMT. Jean-Claude Trichet isn’t expected to change the European Minimum Bid Rate. Yet again, he’s expected to leave it unchanged at 1%. A small rise in inflation put some pressure for a rate hike, but the rise in prices isn’t too strong. On the other hand, the dire situation in the Euro-zone prompts slashing the rates, but the ECB isn’t too keen on such a move. The focus will be on the ECB Press Conference, where hints about future policy and remarks about the current situation will be closely watched.

EUR/USD Technical Analysis

The “Lehman levels” at 1.2330 capped EUR/USD during the week, as it traded between this line and last week’s low of 1.2142. On Friday, this range trading was broken, as the pair collapsed below this support line and closed under 1.20, at 1.1968.

Lower support lines were added on last week’s outlook. The current range is between 1.20, which is a round number eyed by many, and 1.1820, which was a support line back in 2006.

Looking down, the next line of support is at 1.17. This is a symbolic number – this is the level that the Euro launched at, in 1999, as an interbank currency, before there were euro coins and bills. Below, 1.1630 – this was the bottom in November 2005, and now provides strong support.

A drop below this line sends the Euro back to levels last seen in 2003. Minor support is found at 1.1560, followed by stronger support at 1.1370. Even lower, 1.11 is the next support line, serving as both a support and resistance line back at the beginning of 2003, 7 years ago.

Looking up above 1.20, the next line of resistance is at 1.2142, the former resistance line. This is followed by 1.2330 mentioned earlier.

Higher, 1.2460 is a strong line of resistance, capping the pair a few weeks ago. The next line is at 1.2670, which was a swing high. There are many more resistance line above, but they’re quite far at the moment.

I remain bearish on EUR/USD.

Yes, the Euro already lost a lot of ground, and some may say it’s oversold. But these falls are backed by an unstoppable flood of bad news. In the past week, it was Hungary, which compared itself to Greece. More debt black holes will probably be discovered, pushing the Euro lower.

This pair receives lots of great reviews on the web. Here are my picks:

  • James Chen reacts to the recent breakdown of the Euro, and marks the next levels.
  • Kathy Lien diagnoses the Non-Farm Payrolls and provides an outlook for the Euro.
  • Casey Stubbs is looking for a possible bounce in EUR/USD.
  • Joseph Trevisani analyzes the Hungarian blues.
  • TheGeekKnow reviews the week and looks forward.

Further reading on Forex Crunch:

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

AUD/USD Outlook – June 7-11

Posted: 05 Jun 2010 09:00 AM PDT


After another week of tense range trading, another busy week expects the Aussie, with employment data being the climax. Here’s an outlook for the Australian events, and an updated technical analysis for AUD/USD.

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

The past week saw two important releases: GDP and the rate decision that were OK. The Aussie didn’t fully enjoy them. Will employment numbers boost the currency? Let’s see:

  1. AIG Construction Index: Published on Sunday at 23:30 GMT. This gauge for the housing sector from the Australian Industry Group jumped back above 50 points last month, indicating economic expansion. From 55.8 points last month, it’s expected to edge down.
  2. ANZ Job Advertisements: Published on Monday at 1:30 GMT. This is often regarded as an indicator towards the official employment figures due later in the week. The amount of jobs advertised in newspapers unexpectedly fell by 1.2% last month, hurting the Aussie. A small rise is predicted this time.
  3. Westpac Consumer Sentiment: Published on Wednesday at 1:30 GMT. This survey of 1200 consumers already reflected the recent turmoil last month, with a drop of 7%. The upcoming release should show a small correction – a small rise. This indicator tends to move the Aussie, due to its freshness.
  4. Home Loans: Published on Wednesday at 1:30 GMT. The amount of loans given towards buying homes dropped in the past 6 months, disappointing the Aussie over and over again. This is a direct result of the tightening policy by the RBA – higher interest rates make mortgages less attractive. Another drop is due this time – 1.9%.
  5. NAB Business Confidence: Published on Wednesday at 1:30 GMT and overshadowed by home loans. 550 businesses are polled for National Australia Bank’s survey. This important survey is already off the peak of 19 points it scored two months ago. From 13 points, another small drop is expected now.
  6. MI Inflation Expectations: Published on Thursday at 1:00 GMT. The Australian authorities publish the CPI only once a quarter, so this indicator by the Melbourne Institute, fill the gap. After leaping to 4.1%, expectations fell back to more normal levels – 3.6%, also a result of the rate hikes. It’s expected to remain almost unchanged this time.
  7. Employment data: Published on Thursday at 1:30 GMT. The best is kept for last. Last month’s employment figures surprised with a leap of 33,700 jobs, about 50% more than expected. But now, only half of this gain is predicted – 16,100. On the other hand, the unemployment rate ticked up to 5.4% – a figure which isn’t expected to change this time. Any outcome will rock the Aussie.

AUD/USD Technical Analysis

The Aussie traded between the0.8240 support line and 0.85 during most of the week. On Friday the pair broke under 0.8240 but the break wasn’t convincing – the pair closed at 0.8231.

Most support and resistance lines haven’t changed since last week’s outlook, but the Aussie is positioned in a sensitive spot. The opening of the new week is critical for the Aussie. If the pair bounces back above 0.8240, the drop can be disregarded. Otherwise, it will open the road to lower levels.

The next line of support is at 0.8066, the area where the Aussie fell to in the big collapse at the beginning of May. Below, minor support is found at 0.7860, which was an area of resistance about a year ago.

Below, the 0.77 line provides strong support – the Aussie fell off from this line at the height of the financial crisis. It fell to 0.7450, which is the next line of support.

Looking up, 0.8477 is still a minor line of resistance, serving as such about 9 months ago. The stronger line of resistance is at 0.8567, which worked as a convincing line of support and resistance recently.

Further up the road, 0.88 worked as a support line, and now serves as a line of resistance. Higher, 0.90 is a round number and also provided support when the pair was trading higher.

I remain bullish on the Aussie.

The strong fundamentals that we’ve seen last week, and the employment figures which are usually good, should supply the fuel the Aussie needs to overcome the risk aversive trading that is caused by trouble overseas.

Further reading:

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