Forex Crunch USD/CAD Outlook – July 5-9

Forex Crunch USD/CAD Outlook – July 5-9

USD/CAD Outlook – July 5-9

Posted: 05 Jul 2010 07:47 PM PDT


Employment figures are the highlight of this week’s loonie trading. Here’s an outlook for the Canadian events, and an updated technical analysis for USD/CAD.

USD/CAD daily graph with support and resistance lines on it. Click to enlarge:

canadian dollar forecast

The Canadian dollar continues to be sensitive to the price of oil, as well as the troubles in Europe. GDP released last week was very disappointing – 0% growth. This hurt the loonie badly. Another jump in jobs will remind us about the strength of the Canadian economy. Let’s start:

  1. Building Permits: Published on Tuesday at 12:30 GMT. After a few months of drops, this important yet volatile indicator leaped in the past few months: 12.3% and 5.4%. A smaller rise in building permits is expected this time. A drop will hurt the loonie.
  2. Ivey PMI: Published on Wednesday at 14:00 GMT. The Richard Ivey Business School has shown a very positive number last time – 62.7 points. This survey of 175 senior purchasing managers is expected to show a small drop this time, but the number is expected to stay above 50 points.
  3. NHPI: Published on Thursday at 12:30 GMT. The New Housing Price Index is a very stable indicator. It showed that prices ticked up by 0.3% in the past two months. Another similar rise is expected this time. This figure is often overshadowed by other releases, and now we can see its full impact.
  4. Employment data: Published on Friday at 11:00 GMT. We saw great number in the past two months. The rise of 108,700 jobs seen two months ago was confirmed last month, and we also saw another positive surprise with a rise of 24,700 jobs then. Employment change is expected to show a similar gain this time. The unemployment rate, which stabilized on 8.1% in the past two months, is expected to edge down to 8%.
  5. Housing Starts: Published on Friday at 12:15 GMT. This figures might be disregarded if there’s a big surprise in the employment data. After topping 200K, the number of starts slowed down and dropped to 189K last month, causing some worries. We’ll now see if this was a one time drop or a change of trend.

USD/CAD Technical Analysis

After starting the week in a narrow range under 1.04, USD/CAD leaped after the weak GDP. After a struggle with 1.0550, the pair continued climbing and peaked at 1.0680, a line added on last week’s outlook.

USD/CAD is bound between 1.0550 and 1.0680, a higher range than in previous weeks. Looking even higher, 1.0750 was the resistance line of a wide range in the past, and has an important role also now.

Above, 1.0850 is the next line of resistance -serving as the 2010 high and also as a resistance line in the past. 1.1130 is the next significant line in the horizon.

Looking down below 1.0550, 1.04 is now a line of support, returning to this role over and over again. Below, the 2009 low of 1.02 is the next line of support, and it’s followed by parity, which seems far now.

I remain bearish on USD/CAD.

The pair gained a lot on the weak Canadian GDP, and could make a comeback on the job figures.

Further reading:

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AUD/USD Outlook – July 5-9

Posted: 05 Jul 2010 05:47 PM PDT


This is a very busy week for Aussie traders: a rate decision and employment figures will rock the Aussie, alongside other events. Here’s an outlook for these events as well as an updated technical analysis for AUD/USD.

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

The Chinese move on the yuan, although doubted by many, still has a positive impact on the Aussie. Also one Chinese event is expected this week. Let’s start:

  1. AIG Services Index: Published on Sunday at 23:30 GMT. The Australia Industry Group has released a very disappointing number last time – 47.5 points. A figure below 50 points means economic contraction – the probably outcome of many rate hikes. It’s now expected to stay at the same zone. Actual: 48.8
  2. ANZ Job Advertisements: Published on Monday at 1:30 GMT. The amount of jobs advertised in the media proves to be an excellent gauge for the official employment figures later in the week. A more modest rise than 4.3% is expected this time. Actual: 2.7%.
  3. Trade Balance: Published on Tuesday at 1:30 GMT. A great surprise was seen last month, as Australia saw a first surplus in over a year. The 130 million dollar surplus will probably be followed by a bigger one this time. A return to a deficit will hurt the Aussie.
  4. Rate decision: Published on Tuesday at 4:30 GMT. The six rate hikes that Australia already saw in this tightening cycle already had an impact in taming inflation, especially in the housing market. After last month’s pause, another pause will probably be seen now, with Glenn Stevens leaving the Cash Rate at 4.50%. Hints about future policy will probably be seen in the RBA Rate Statement.
  5. AIG Construction Index: Published on Tuesday at 23:30 GMT. This second PMI-like release from AIG dipped last month to 53.2 points, but was still good, standing above 50 points. Another slide is predicted this time, but it’s likely to remain above 50.
  6. Westpac Consumer Sentiment: Published on Wednesday at 00:30 GMT. Following three months of big drops in consumer sentiment, including 5.7% and 7% drops, this survey of 1200 people is expected to rise this time, but not a significant scale.
  7. Employment data: Published on Thursday at 1:30 GMT. Last month was great once again, with a rise of almost 27K in jobs (employment change). Also the unemployment rate was superb, dropping unexpectedly from 5.4% to 5.2%. This time, both figures aren’t expected to change significantly.
  8. Chinese Trade Balance: Published on Friday. Following the revaluation of the yuan, Australia’s main trade partner could import more Australian goods. We’ll now see if the Chinese surplus will continue growing – meaning there’s more room for consumption of goods from Australia.

AUD/USD Technical Analysis

The Aussie fell during the first part of week and made a false break below 0.8360. From there it recovered to the 0.8477 area and bounced off this line as well.

Note that some of the lines have changed since last week’s outlook. AUD/USD is now supported by 0.8360. A break below this line will find support at 0.8275, which was a support line during June.

Lower, the year-to-date low of 0.8066 is the next strong line of support that is still far at the moment. Even lower, 0.77 is the next line.

Looking up above 0.8477, we reach 0.8567 continues to be an important pivotal line. A break above this line will mark a run upwards.

Higher, 0.8735, which was the low line in December, is the next line of support. It’s followed by the round number of 0.88 and then the round number of 0.90. Both were important lines.

I turn neutral on AUD/USD.

Last week’s drop in building approval and weak retail sales cast a shadow over the Aussie’s strength. Together with the uncertainty of the Chinese move, the pair will probably see some range trading. The unemployment figures can supply the fuel for a long term rally, but this isn’t expected this week.

Further reading:

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GBP/USD Outlook – July 5-9

Posted: 05 Jul 2010 04:30 PM PDT


A very interesting rate decision expects us in Britain, with inflation becoming a threat. There are many more indicators in this busy week. Here’s an outlook for the British events, and an updated technical analysis for GBP/USD.

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

The pressure for a rate hike now comes from the inside as well, with Andrew Sentance voting for it last time. Will there be a rate hike? Or are the fears of a double dip recession limiting the chances? There are lots of other indicators on the way. Let’s start:

  1. Halifax HPI: Publication time unknown at the moment. This index is based on rather accurate data, as it’s based on internal data from HBOS. According to this indicator, an initial dip in prices seen 4 months ago was not accidental. Despite an immediate correction three months ago, prices disappointed with two consecutive months of drops. Last month’s drop of 0.4% will probably be followed by a similar dip.
  2. Services PMI: Published on Monday at 8:30 GMT. After last week’s manufacturing PMI, we’ll now hear news from the services sector. Although the score is below the high levels of 58 points, it has been stable and positive in recent months – around 55 points. A small drop is predicted now. Actual: 54.4.
  3. Manufacturing Production: Published on Tuesday at 8:30 GMT. This indicator always rocks the Pound. After two strong months, production dipped last month by 0.4%. A small correction is expected this time. Note that manufacturing is around 80% of industrial production, which is released at the same time but has less impact.
  4. Nationwide Consumer Confidence: Published on Tuesday at 23:00 GMT. This important barometer returns to its normal release time, a day and a half before the rate decision. After reaching a peak of 81 points, this survey of 1000 consumers fell gradually, and now stands at 65. Another drop is expected now.
  5. Rate decision: Published on Thursday at 11:00 GMT. Mervyn King is facing growing pressure for raising the rates. The new Prime Minister David Cameron has urged the central bank to tackle inflation. Also one of King’s colleagues, Andrew Sentance, voted for a rate hike last time. Nevertheless, King is expected to leave the Official Cash Rate unchanged once again at 0.5%. The wording of the MPC Rate Statement will be watched very carefully this time. Will they finally hint a rate hike?
  6. NIESR GDP Estimate: Published on Thursday at 14:00 GMT. This independent institute is usually more accurate in forecasting the GDP than other economists, and they also release their estimates on a monthly basis. According to NIESR, the British economy is growing in recent months, at a rate of about 0.6% per quarter. This release relates to the three months ending in June – the full second quarter. It will be very interesting to see if growth continues, or if the European problems hurt Britain as well.
  7. Trade Balance: Published on Friday at 8:30 GMT. After the deficit fell to 6.3 billion pounds, it rose above 7 billion and disappointed the Pound, which was especially hurt two months ago. A small deficit than 7.3 billion seen last month is expected now.
  8. PPI: Published on Friday at 8:30 GMT, together with the trade balance. While being more volatile than the CPI, producer prices have also exceeded expectations, showing that inflation is on the rise also here. Following last month’s drop of 0.6% in PPI Input (the main figure), a rise is expected now. Also PPI Output is expected to rise and boost the Pound.

GBP/USD Technical Analysis

The Pound began the week with a slip below 1.50 and bottomed out at 1.4870, a line that was added on last week’s outlook. From this bounce, the pair skyrocketed, passing 1.5130 and peaking out at 1.5230.

The pair is now struggling again with the pivotal 1.5130 that served as a strong support line when the Pound was trading higher. Above 1.5230, the next line is the previous pivotal line of 1.5350.

Higher, 1.5530 is a very strong resistance line which the pair didn’t break since February. Above this line, 1.5833 worked as a strong line of support and then switched its role.

Looking down, 1.5050 is still an important line, and it’s followed by 1.4870 which held the pair last week. Below, 1.4780 is a strong line of support, that worked in both directions.

1.4610 was the middle of the previous range and now works as a support line. 1.45 and 1.44 follow, but they’re far now.

I continue being neutral on the pair.

The rate decision could boost the Pound even higher, if there’s a hike, but the fragile state of the British economy still weighs on the pair.

Further reading:

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EUR/USD Outlook – July 5-9

Posted: 05 Jul 2010 03:30 PM PDT


The rate decision towards the end of the week is the main European event in the upcoming week, after the common currency settled on higher ground. Here’s an outlook for the European events and an updated technical analysis for EUR/USD.

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

It will be interesting to hear Trichet’s comments in the ECB Press Conference after the rate announcement. Will he express fear of a double dip recession? His words usually move the markets. Let’s start:

  1. Sentix Investor Confidence: Published on Monday at 8:30 GMT. This survey of 2800 analysts and investors turned positive 3 months ago, but this proved to be a temporary jump – it returned to negative, meaning pessimism. The score is expected to remain at around last month’s score: -4.1 points. Actual: -1.3.
  2. Retail Sales: Published on Monday at 9:00 GMT. The volume of sales was very disappointing last month, as it dropped by 1.2% instead of rising. It’s important to note that in the last 8 months, this figure was always revised later to the upside. A small rise is expected this time. Actual: 0.2%
  3. Final GDP: Published on Wednesday at 9:00 GMT. After Europe officially emerged out of recession in Q3, its economy stalled in the Q4 of 2009. The initial and second releases for Q1 of 2010 showed a small growth rate of 0.2%. This will probably be confirmed this time. There are usually no surprises here. The next quarters are expected to be worse.
  4. German Factory Orders:  Published on Wednesday at 10:00 GMT. Europe’s largest economy had an excellent performance according to this indicator – growth rates of 5% and 2.8% in the past two months. Will the German factories continue carrying the whole Euro-zone?
  5. German Industrial Production: Published on Thursday at 10:00 GMT. Also this figure, similar to the previous one, is great. Growth rates exceeded expectations in the past two months, and this trend is expected to continue, although a rise of 4.3% that occurred two months ago, isn’t expected now.
  6. Rate decision: Published on Thursday at 11:45 GMT. Jean-Claude Trichet is expected to leave the Minimum Bid Rate unchanged for another month. The European issues prevent a rate hike, and while inflation is picking up, it still isn’t a threat – there are deeper issues.

EUR/USD Technical Analysis

The Euro began the week with a small rise and then a fall to test the critical support line of 1.2150. After bouncing and struggling with 1.2250, EUR/USD made a leap, crossed the 1.2330 line and broke 1.2460. From there came another break to peak at 1.2611 (a new minor line that didn’t appear last week) before the pair fell to support around 1.2520.

The pair now trades between 1.2520 and 1.2611. Above, 1.2670 is already a stronger line that held the pair in mid-May, in a failed attempt to recover. A break above this line will send the pair towards 1.2880 which was a support line back last year. This is followed by 1.3110, which supported the pair and quickly switched its role at the beginning of May.

Looking down, 1.2460 continues to be a relevant line. A fall below this line will indicate further weakness. Lower, the 1.2330 line (“Lehman levels”), is a minor support line.

1.2250 is the next minor support line, and its followed by 1.2150 – a very strong line that worked in both directions.

I remain neutral on EUR/USD.

Troubles in the US pushed the Euro higher, but when there’s trouble all over the world, this is usually better for the dollar. After the NFP shocker, the markets will probably slow down this week.

This pair receives excellent reviews on the web. Here are my favorites:

  • Michael Storm, on Casey’s site, analyzes many pairs and has an interesting analysis for EUR/USD.
  • Andrei provides pivotal lines for the major pairs and also shares my general sentiment.
  • Piphut analyzes the Euro bulls.
  • TheGeekKnows reviews the week and looks forward.

Further reading:

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Forex Daily Outlook – July 6 2010

Posted: 05 Jul 2010 02:00 PM PDT


US ISM Non-Manufacturing PMI, Canada, Building Permits, Swiss CPI and Australian rate decision are the major events on our menu. Here is an outlook for today’s events.

In the US, ISM Non-Manufacturing PMI a leading indicator of economic conditions in the services industries: agriculture, mining, construction, transportation, communications, wholesale trade and retail trade, The ISM Non-Manufacturing Index could provide further evidence of a U.S. economic slowdown with activity in the services industries pulling back to 55.2 from a previous reading of 55.4.

In Canada, Building Permits are likely to drop to -1.3% following the remarkable rise in the past two months.

For more on USD/CAD, read the Canadian dollar forecast.

In Great Britain, Halifax HPI : Following the 0.4% slide in May and 0.1% in April, a house prices increase of 0.6% is expected.

More in Great Britain, BRC Shop Price Index Overall shop price inflation slowed to 1.8% in May from 2.0% in April. A similar figure is expected now.

Read more about the Pound in the GBP/USD forecast.

In Switzerland, CHF- Swiss Consumer Price Index, the main measure of inflation.
The Swiss National Bank recently announced that deflation is no longer a threat to the economy and the report may confirm that view with the inflation gauge rising by 0.1% m/m compared with a 0.1% m/m decline in May.

In Australia, AUD- Reserve Bank of Australia Interest Rate Announcement, likely to keep interest rates unchanged for another month on signs of global and domestic economic slowdown. Therefore, Australian rate decision will probably remain 4.5%, so the focus will be on the rate statement – hints for future moves.

Also in Australia, Trade Balance expected to further increase trade surplus from 0.13B in May, to 0.53B.

Finally in Australia, AIG Construction Index measuring the level of a diffusion index based on surveyed construction companies rated 53.2 in May.

For more on the Aussie, read the AUD/USD forecast.

In Japan, Leading Indicators measuring the level of a composite index based on 12 economic indicators is expected to drop to 99.7% from 101.7% in May

That’s it for today. Happy forex trading!

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