Forex Crunch Forex Weekly Outlook – September 20-24

Forex Crunch Forex Weekly Outlook – September 20-24

Forex Weekly Outlook – September 20-24

Posted: 18 Sep 2010 02:00 AM PDT


The FOMC meeting is the highlight of a busy week, with US figures dominating the scene: home sales, durable goods orders and building permits. Here’s an outlook for the major events in the upcoming week.

Japanese are on holiday on Monday and on Thursday, yet the BOJ will probably follow up on the big intervention to weaken the yen. It will also be interesting to see how the Irish debt issues wind up in the upcoming week.

  1. US Housing figures: Published Tuesday, 12:30. The housing sector is critical to the US economy. Building permits remained stable at an annual rate of 560K last month – failing to rise. The same level is expected now. Housing starts, which are the next stage after permits, also stalled at 550K and will probably remain unchanged now.
  2. US rate decision: Tuesday, 18:15. The Federal Reserve is unlikely to be as dramatic as the previous one.  Ben Bernanke will probably continue the pledge to support the economic recovery by committing again to keeping the interest rates at a low level for an extended period of time. In addition, the bond buying scheme will probably continue at the same scale.Given the recent better-than-expected NFP, there’s a low chance of seeing more extreme measures such as raising inflation targets, an idea that Bernanke raised in Jackson Hole but took off the table quickly.
  3. British Inflation Report Hearings: On Wednesday, delayed from last week. After British inflation remained above the target but the employment situation got worse, Mervyn King is in a dilemma. This will be reflected in his appearance in parliament, where the governor of the BoE will speak not only of inflation, but also about the general situation. Given his previous appearances, the Pound is likely to shake during the hearings.
  4. New Zealand GDP: Wednesday, 22:45. New Zealand enjoyed a full year of economic growth. This is likely to be seen in Q2 as well, but the scale of growth will probably be more modest than Q1′s 0.6% rise. With a higher unemployment rate and a higher interest rate, a weaker growth rate of 0.5% will probably be seen, weakening the kiwi.
  5. US Unemployment Claims: Thursday, 12:30. This weekly release always rocks the markets. Jobless claims are already off the alarming peak recorded in mid-August, yet only a drop under 430K will provided significant evidence of improvement. The current level of 450K will probably remain unchanged.
  6. Existing Home Sales: Thursday, 14:00. This all-important figure was a bitter disappointment last month, with a 27% drop from the previous month. The housing sector is extremely dependent on government aid and still cannot grow alone. Sales of existing homes will probably bounce off the low annual level of 3.83 million and reach 4.11 million.
  7. German Ifo Business Climate: Friday, 8:00. This wide survey of 7,000 business usually exceeds expectations and shows optimism, contrary to the ZEW survey which turned negative last week. The Ifo survey will probably remain unchanged at 106.7 it reached last week.
  8. US Durable Goods Orders: Friday, 12:30. Orders of durable goods rose by 0.4% last month, but this was only due to a one time event. Core durable goods orders, which are more closely watched by economists, plunged by 3.7% and hurt the dollar. Orders will probably drop this time, while the core figure will recover.
  9. US New Home Sales: Friday, 14:00. Similar to existing home sales, also this indicator was disastrous last month, plummeting from 315K to 276K, very low levels. Sales of new homes are small in comparison to existing homes. Nevertheless, the timing of the release, just before markets close, will probably create lots of action.

That’s it for the major events this week. Stay tuned for coverages on specific currencies, including technical analysis.

Further reading:

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Forex Articles for the Weekend September 18

Posted: 17 Sep 2010 03:00 PM PDT


After a roller coaster week, the markets are closed, and its time to sit back and read some more long-term articles. Here are my favorites from all over the web. Enjoy:

Exactly one month is left until the new 50:1 leverage limit is applied in the US. It will be interesting to see how traders react.

  • Kathy Lien explains the difference between a sterilized and an unsterilized intervention, following this week’s massive yen intervention.
  • Michael Storm, on Casey’s site, also discusses the yen intervention amongst other big market movers.
  • Andriy has an interesting poll about online forex tools. Do you use any?
  • Adam Kritzer looks at long term moves in EUR/USD and states that “trend is your friend” saying is very relevant now.
  • Michael Greenberg updates about MG Forex ceasing to exist and where traders will go to.
  • Francesc Riverola reports that 1500 people already took the wide survey of forex traders. Go ahead and take it!
  • James Wooley is back to business and returns to provide market analysis and forex education material.

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EUR/USD Loses Uptrend Channel on Risk Aversion

Posted: 17 Sep 2010 07:58 AM PDT


EUR/USD traded in a steep uptrend channel (graph below). Starting with another reminder of debt issues from Ireland and with a contribution of weak American consumer sentiment, risk aversive trading sent the below uptrend support.

The Anglo-Irish bank is struggling to pay its debt. Now owned by the Irish government, the options for financing this debt don’t look good. The Irish government can  fund the huge debt and suffer from weaker growth. This isn’t likely.

Another option is to make a “haircut” – meaning that the bank will either default on debt or have owner absorb some of it – meaning that German and French pension funds will pay the price for holding the Irish bonds.

Another option is to use the European safety net to tackle it. In any case, this isn’t Euro-positive – yet another reminder that the debt issues cannot be put under the carpet.

These news, originating in an Irish opinion article, and in the meantime being denied, were the first blow on the Euro’s steep rise. Also other currencies suffered against the dollar.

As the mood turned to risk aversion once again, US consumer sentiment joined the club with a weaker than expected score – 66.8 instead of 70.2. At least for now, we’ve returned to bad US figures = stronger US dollar. Risk aversion.

EUR/USD dropped below the uptrend support line. It then made an attempt to get back into the channel. This attempt failed. A dip under the 1.3050 support line wasn’t confirmed at the moment.

The lines below are 1.2960, 1.2920 and 1.2840. Above, 1.3110, 13267 and 1.3435.

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