Forex Crunch USD/CAD Outlook – July 12-16

Forex Crunch USD/CAD Outlook – July 12-16

USD/CAD Outlook – July 12-16

Posted: 11 Jul 2010 04:01 AM PDT


The Canadian dollar expects 4 events in the upcoming week, after rising against the greenback. Here’s an outlook for these events and an updated technical analysis for USD/CAD.

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

canadian dollar forecast

Excellent employment figures on Friday gave a huge boost to the loonie. It seems that the Canadian economy is doing well, regardless of oil prices. Let’s start:

  1. BOC Business Outlook Survey: Published on Monday at 14:30 GMT. This quarterly report always has a strong impact on the loonie. The survey of 100 businesses describe their sentiment towards the economy for the next quarter. A good report is expected this time, showing sustainable growth.
  2. Trade Balance: Published on Tuesday at 12:30 GMT. Canada enjoys a surplus in the trade balance for already 5 months, although this surplus squeezed to only 200 million last month. It’s now expected to grow to 400 million. Note that the American trade balance is released at the same time, and this always means volatile trading in USD/CAD around this release.
  3. Manufacturing Sales: Published on Thursday at 12:30 GMT. This important indicator was positive in the past 8 months, growing nicely in most months. After a rise of 0.2% in factory sales, a rise of 0.4% is predicted now.
  4. Leading Index: Published on Friday at 12:30 GMT. Most of the 10 components of this index have already been released. Nevertheless, the release tends to surprise and shake the Canadian dollar. After a strong rise of 0.9% last month, a more modest rise of 0.5% is expected now.

USD/CAD Technical Analysis

At the beginning of the week, USD/CAD retested the 1.0680 resistance line that it already encountered in the previous week. Later on, it fell below 1.0550 and made a break under 1.04 on Friday to close at 1.0335.

The pair is back to the 1.02 to 1.04 range. Note that some lines changed since last week’s outlook. 1.04 was the bottom line of the long-term 1.04 to 1.0750 range, and is now a resistance line.

Above, 1.0550 is a minor line of resistance, working as such in recent months. A more important line is 1.0680, that proved its strength in the past two weeks.

Above, 1.0750 is the next strong line, last tested in May. Also 1.0.850 was tested in May. Both lines were also significant in 2009.

Looking down, 1.02 provides immediate support. This was the 2009 low. Below, 1.01 provides minor support. 1.01 worked as a resistance line after the pair hit parity in April.

Below, the magic parity line provides support. In case the pair falls below 1, the next support line is found at 0.98 and then 0.97.

I remain bearish on USD/CAD.

As seen in the employment figures, the Canadian economy is doing great, and this should be reflected in USD/CAD as well.

Further reading:

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GBP/USD Outlook – July 12-16

Posted: 11 Jul 2010 01:49 AM PDT


A busy week expects cable traders: inflation, employment and Final GDP are part of the events that will shake the Pound this week. 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. Click to enlarge:

GBP USD forecast

In the past week, the Pound traded in a tight range, and didn’t fall during most of the week, despite many bad economic indicators that were released in the UK. The fall began only on Friday. Will it continue? Let’s start:

  1. Final GDP: Published on Monday at 8:30 GMT, delayed from two weeks ago. The initial release of GDP for Q1 was very disappointing – a growth rate of only 0.1% caused fears of a new recession. But the revision already showed a 0.3% rise, and this will probably be confirmed now. Britain’s economy is still very vulnerable, with the European debt issues still having an impact on the UK. This release will rock the Pound.
  2. Current Account: Published on Monday at 8:30 GMT and slightly overshadowed by the GDP release. Britain’s deficit is expected to grow from 1.7 to 3.9 billion pounds. A rise in the deficit was also seen in the related figure – trade balance, and already took its toll on the pair.
  3. BRC Retail Sales Monitor: Published on Monday at 23:00 GMT (midnight UK). This release gives a good idea about retail sales, as it’s a subset of the total figure. After a drop of 2.3% two months ago, sales rose by 0.8% last month. Another small rise is expected now.
  4. RICS House Price Balance: Published on Monday at 23:00 GMT. This indicator shows the balance between areas that see a rise in house prices and the areas that see drops. This indicator recovered and reached a positive balance of 22% last month, but similar housing indices show a probable drop this time.
  5. CPI: Published on Tuesday at 8:30 GMT. Inflation passed the government’s 1-3% target in the past 5 months, reaching an annual rate of 3.7% at the peak. It then eased to 3.4% and it’s now expected to drop to 3.2%. One MPC member, Andrew Sentance, already wants a rate hike, but this didn’t happen yet. A drop under 3% will reduce the chances of a hike and will hurt the Pound. Core CPI is also expected to ease from an annual rate of 2.9% to 2.7%. RPI (Retail Price Index), which often reflects better what customers feel, will probably drop from 5.1% to 4.9%.
  6. Nationwide Consumer Confidence: Published on Tuesday at 23:00 GMT, delayed from last week. The Nationwide Building Society usually releases this report before the rate decision, but the delay gives it a different perspective. After hitting a peak at 81 points, it fell down to 65 points, and is expected to tick down to 64 points this time.
  7. Employment data: Published on Wednesday at 8:30 GMT. Claimant Count Change, is the earliest report on employment in the UK, and shows the changed in the number of unemployed people. In the past 4 months, it has dropped significantly, surprising economists. After the 30.9K drop seen last month, a more modest drop of 20.3K is predicted this time. The unemployment rate, which relates to the month of May,  is expected to remain unchanged at 7.9%. Also note the Average Earnings Index, which is likely to rise at an annual rate of 3.1%, less than last month’s 4.2%.
  8. Housing Equity Withdrawal: Published on Friday at 8:30 GMT. In this quarterly report, the Bank of England shows the change in the value of mortgages that aren’t used for housing. A squeeze of 3.1 billion is expected to follow last month’s 4 billion drop.

GBP/USD Technical Analysis

Tight range trading characterized the Pound’s week. An almost perfect 160 pip range was seen – between 1.5080 and 1.5240. Eventually, the currency fell and closed at 1.5060, lower than the range, but still above the 1.5050 support line mentioned in last week’s outlook.

The pair’s current range is between 1.5050 and the minor resistance line of 1.5130. Much stronger support is found at 1.5240, the highest level seen since the beginning of May.

Above, 1.5350 worked as a pivotal line in April, and is now a resistance line. Higher, 1.5530 is the highest level since the beginning of the year, and worked as stubborn resistance line during many days in April. Higher, 1.5833 provided support before the pair collapsed, and later worked as a resistance line.

Looking down, 1.4870 supported the pair in its recent climb upwards and is a strong support line. Further below, 1.4780 was a strong support line in March and April, and recently worked as resistance.

A big collapse of the pair will send it back to 1.4610, last seen at the beginning of June, and then 1.45. The year-to-date low of 1.4227 provides support way down.

I turn bearish on GBP/USD.

The recent weakness of the British economy and the decreasing chances of a rate hike can release the hot air out of the Pound, sending it down.

Further reading:

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NZD/USD Outlook – July 12-16

Posted: 11 Jul 2010 12:15 AM PDT


Retail sales and the all-important CPI are the major events that will rock the kiwi this week. Here’s an outlook for the events in New Zealand, and an updated technical analysis for NZD/USD.

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

nzd usd forecast

The kiwi advanced after crossing the round number of 0.70. It’s further steps depend now on inflation, which will determine the outcome of the next rate decision. Let’s start:

  1. FPI: Published on Monday at 22:45 GMT. This monthly gap fills the gap that the government creates by releasing inflation figures only once per quarter. The prices of food, which fell in the past two months, is expected to rise this time. This will be an indicator for the CPI released later in the week.
  2. Retail Sales: Published on Tuesday at 22:45 GMT. Consumers disappointed in the past three months. Sales grew less than expected, or fell more than expected. This important indicator hurt the kiwi. After a drop of 0.6% last month, a rise of 0.6% is predicted now. Also note core retail sales, which fell by 0.2% and are likely to rise by 0.6% now. We’ve seen a strong impact when retail sales fell two months ago.
  3. Business NZ Manufacturing Index: Published on Wednesday at 22:30 GMT. This survey of manufacturers fell from the peak it reached two months ago and dropped from 58.6 to 54.5 points. Another drop is expected now, but the number will probably remain above 50, meaning economic expansion.
  4. CPI: Published on Thursday at 22:45 GMT. A rise in the consumer price index is the key to an intense tightening cycle by the central bank, that already began. Last quarter’s rise of 0.4% will probably be followed by a rise of 0.5% this time. A jump above 1% will boost the kiwi.

NZD/USD Technical Analysis

The kiwi continued struggling with the 0.6910 line at the beginning of the week, but then made a strong move upwards and broke above the round number of 0.70 to close just under 0.71.

NZD/USD’s range is between the round support line of 0.70 and the next resistance line of 0.7160, which was a stubborn top during June. The next line of resistance is at 0.72, which capped the kiwi in the past.

Higher, May’s highs of 0.7325 provide the next strong resistance line. This was an area of resistance also in December. The last line of resistance is at 0.7440, which was a peak at the beginning of the year.

Looking down below 0.70, 0.6910 provides the next support line. It has been a pivotal line recently. Lower, 0.68 provides support very recently and also in February, and is the next line of support.

There are many lines below, but the most notable one is 0.6560, which was the year-to-date low.

I remain bullish on the kiwi.

With a stable, growing economy, and with a cycle of rate hikes that already began, it’s likely to gradually rise.

Further reading:

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AUD/USD Outlook – July 12-16

Posted: 10 Jul 2010 06:30 PM PDT


A variety of Australian releases and one Chinese release will move the Aussie in the upcoming week. Here’s an outlook for the Australian events, and an updated technical analysis for AUD/USD, now in higher ground.

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

aud usd forecast

The Australian economy enjoys a bubbling job market. The fresh figures came out significantly better than expected, and this gave a big boost to AUD/USD. Will this continue? Let’s start:

  1. Home Loans: Published on Monday at 1:30 GMT. This important housing indicator reflects the impact of the rate hikes – less people are taking loans due to the high interest rate. After 7 consecutive months of drops, the number of loans is finally expected to rise, but at a very modest scale – 0.1%. This will provide a shaky start for AUD/USD at the beginning of the new week.
  2. NAB Business Confidence: Published on Tuesday at 1:30 GMT. National Australia Bank has shown a significant drop in business confidence in the past three months – a drop from 19 to 5 points, although still positive, still showing optimism. This survey of 350 businesses will probably show another drop this time.
  3. Westpac Consumer Sentiment: Published on Wednesday at 1:30 GMT. Westpac’s survey deals with the consumers. 1,200 consumers have shown less confidence in the past three months, with sharp drops of 5.7% and 7% in the past two months. This time, a small rise is expected.
  4. MI Inflation Expectations: Published on Thursday at 1:30 GMT. The Melbourne Institute fills in for the gap created by the government, that publishes the CPI only once per quarter. According to MI, inflation is now weaker – 3.4% in comparison to a strong 4.1% figure three months ago. A drop under 3% will weaken the Aussie.
  5. New Motor Vehicle Sales: Published on Thursday at 1:30 GMT. Vehicle sales are a strong indicator of consumption, but this indicator tends to be very volatile. After a rise of 8.4% two months ago, a drop of 3.2% was seen last month. A small rise is predicted now.
  6. Chinese GDP: Published on Thursday at 2:00 GMT. Australia’s main partner continued to grow rapidly while the West suffered from economic contraction. In the past two quarters, the growth rate return to double digits: 10.5% in Q4 of 2009 and 11.9% in Q1. China releases the figures for Q2 quite early. They’re expected to show a growth rate of 10.5%, still very strong. The Aussie will gain from a stronger rise.

AUD/USD Technical Analysis

The Aussie had a bad start to the week, testing the 0.8315 support line, which it also tested in the previous week. It then began a rally during which it broke many resistance lines and eventually bounced at the resistance line 0f 0.88.

The Aussie is now in a tight range between 0.8735 (December’s low) and the round number of 0.88 which it just tested. Note that some lines have changed since last week’s outlook.

Below 0.8735, the next support line is 0.8567, which served as a strong support line during many months in the past year, and recently worked as a pivotal line. Below, 0.8505 is a minor support line.

Lower, 0.8390 worked as a minor support line in recent months. It’s followed by 0.8315, which was a double bottom in the past two weeks – this makes it a strong line of support now.

Even lower, 0.8240 is an old line of resistance that now serves as a support line, and its followed by the year-to-date low of 0.8066.

Looking up above 0.88, the next line of resistance is the round number of 0.90, which was tested in March and in May. Higher, 0.9327 is a very strong line of resistance which held the Aussie back lots of times in the past year.

Even higher, 0.94 was the 2009 high and its followed by the round number of 0.95, but they’re still far.

I remain bullish on the Aussie.

Once again, we’ve seen that the Australia is doing great – the economy gained lots of jobs. We’ll now probably see that Australia’s main trade partner, China, is also doing well, and this is likely to provide further strength for the Aussie.

Further reading:

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EUR/USD Outlook – July 12-16

Posted: 10 Jul 2010 04:30 PM PDT


The German ZEW Economic Sentiment is the major European event this week. Will it end the Euro rally? Here’s an outlook for the European events and an updated technical analysis for EUR/USD.

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

euro dollar forecast

Riding on weak economic data from the US, EUR/USD edged up to new highs. The big question is if it’s sustainable. We didn’t get many headlines about the debt crisis recently, so the indicators have a bigger role. Let’s start:

  1. German ZEW Economic Sentiment: Published on Tuesday at 9:00 GMT. This major survey has a history of hurting the Euro. The European debt issues that rocked the markets at the beginning of May were seen in last month’s change – a 20 point drop to 28.7 points. Also now, a drop is predicted, but it will probably be smaller, to 25.3 points. Note that the all-European figure, released at the same time, is also expected to drop, from 18.8 to 16.8 points. The German figure usually has a stronger impact.
  2. CPI: Published on Wednesday at 9:00 GMT. European inflation isn’t a problem, like it is in Britain. The preliminary release, showing an annual rise of 1.4%, will probably be confirmed this time. This doesn’t put any pressure for a rate hike. Trichet can continue leaving the rate at 1%.
  3. Industrial Production: Published on Wednesday at 9:00 GMT. After last week’s German industrial production surprised with a strong rise, we’ll see if it managed to pull the whole Euro-zone forward. After a rise of 0.8% last month, a rise of 1.2% will probably be seen now.
  4. ECB Monthly Bulletin: Published on Thursday at 8:00 GMT. This monthly release of statistical data contains important economic outlooks for the coming months. It will be interesting to see how the ECB relates to the debt crisis in the continent – whether it sees it as over or not.
  5. Trade Balance: Published on Friday at 9:00 GMT. The Euro-zone still enjoys a surplus in the trade balance despite seeing it squeezed. The surplus is likely to drop from 1.6 to 1.3 billion euros this time.

EUR/USD Technical Analysis

The Euro gradually went up during the week, but struggled to make a convincing break above 1.2670. It did reach 1.2720 (a new line that was added on last week’s outlook), but eventually closed at 1.2670.

Looking up above the past week’s peak of 1.2720, EUR/USD will find last year’s line of support at 1.2880 as its next resistance line. Above, 1.3110 was a strong support line before the collapse of the pair, and now provides resistance.

The next support line that now turned into a resistance line is 1.3267, still far away for now.

Looking down, 1.2608 serves as an immediate line of support after working well in the past week. It’s followed by 1.2480, which is already a strong line of support.

Below, 1.2395 is the next minor support line, working temporarily as a resistance line in mid June. Lower, 1.2250 worked as a support line and is still relevant.

The strongest support line is 1.2150. This worked as a support line before the Euro collapsed under 1.20, and serving as the bouncing spot before the recent rally. A drop below this line will open the road to a collapse.

I return to the bearish sentiment on the Euro.

EUR/USD made a strong correction, and is leaning towards the bottom of the uptrend channel. The debt issues in Europe are far from over, and American figures should show the difference once again, resuming the downtrend.

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

  • Kathy Lien explains what’s behind the recent Euro gains.
  • Piphut sees a bullish consolidation pattern.
  • Sophia Smith, on Casey’s site, focuses on the Euro vs the Aussie, and sees opportunities.
  • Andrei draws the technical lines, and sees a downtrend.
  • Mohammed Isah examines the key levels for EUR/USD.
  • TheGeekKnows reviews the week and looks forward.

Further reading:

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