Forex Crunch EUR/USD Outlook – May 31 – June 4

Forex Crunch EUR/USD Outlook – May 31 – June 4

EUR/USD Outlook – May 31 – June 4

Posted: 29 May 2010 10:04 AM PDT


Employment figures are the highlight of this week’s busy European calendar, as the old continent continues to struggle with the contagious debt disease. Here’s an outlook for the events the will move the Euro, and an updated technical analysis for EUR/USD.

Euro/Dollar graph with support and resistance lines marked. Click to enlarge:

eur usd forecast

The report that Spain, Portugal and Greece are in debt of 2 trillion euros hurt the common currency, but China’s sign of confidence helped stabilize it. With the recent downgrade of Spain’s credit rating by Fitch, the crisis now focuses more and more on the Iberian peninsula than on Greece. OK, let’s start:

  1. Jean-Claude Trichet talks: Begins speaking on Monday at 00:25 GMT. The president of the ECB participates in a conference by Korea’s central bank, via satellite. Trichet usually shakes the markets. As this speech comes so early in the week, any comments about the debt crisis will cause moves.
  2. M3 Money Supply: Published on Monday at 8:00 GMT. The amount of money in circulation dropped in recent months, signalling deflationary pressure and contradicting the small rise in CPI. The year-over-year value fell by 0.1% last month. The forecast is for a 0.2% drop this time.
  3. CPI Flash Estimate: Published on Monday at 9:00 GMT. The Euro-zone’s annual rise in prices climbed to 1.5%, the highest since the end of 2008. Looking at other inflation-related figures, a significant pick up of inflation isn’t expected in Europe – a rise to 1.7% is expected this time, but given the crisis, it could be lower. Note that this is the initial release.
  4. Axel Weber talks: Starts speaking on Tuesday at 5:00 GMT. The president of the German Bundesbank, an influential member of the ECB and the main candidate to replace Trichet, usually stirs the markets. His speech in Frankfurt is likely to do it once again.
  5. German Retail Sales: Published on Tuesday at 6:00 GMT. Europe’s locomotive suffered a big drop in retail sales last month – a drop of 2.4%. This report relates to May, and it will probably show that consumers were more careful amidst the big crisis and the talks of an austerity plan. A rise of 0.7% is expected now.
  6. German Unemployment Change: Published on Tuesday at 7:55 GMT. Germany showed impressing drops in the number of unemployed people – 68,000 last month and 42,000 in the previous month. A smaller drop is predicted this time, 17,000, as consumer and investor confidence is down, and the turmoil in the content will also reach the German job market.
  7. Unemployment Rate: Published on Tuesday at 9:00 GMT. The various countries in the Euro-zone vary in their unemployment rate. Spain reported over 20%. The average for the euro zone stands on 10%, a number that has been rather stable for 6 months, and causes worries. A drop under this double digit figure will sure help, but there’s a bigger chance of a rise – hurting the Euro.
  8. PPI: Published on Wednesday at 9:00 GMT. Producer prices have a tendency of jumping in one month and then stalling in the next month. Last month’s rise of 0.6% was weaker than expected, but this month is still expected to see a smaller rise in prices – closer to 0.
  9. Retail Sales: Published on Thursday at 9:00 GMT. Despite being release after the German release, the all-European number is of high importance. The volume of European sales hasn’t risen since January, and this isn’t expected to be seen now. No change in sales volume was reported last month, and an insignificant rise of 0.1% is the forecast for this release.
  10. Revised GDP: Published on Friday at 9:00 GMT. This revision usually confirms the initial read, but it still shakes the markets. The Euro-zone’s growth in Q1 was 0.2% – quite weak. An upgrade will help the Euro, as the second quarter will probably see a return to contraction.

EUR/USD Technical Analysis

The Euro traded in a range, going lower throughout most of the week. The pair reached 1.2152, just 10 pips away from the 4 year low that it reached in the previous week, before making a neat comeback but finally settling at 1.2270 – a weekly loss of over 350 pips.

The Euro now trades between the 4 year low of 1.2142 and the “Lehman levels” of 1.2330. Some of the levels have changed since last week’s outlook.

Looking up above 1.2330, the next level of resistance is at 1.2460, which was the past week’s high and also a support line back at the beginning of 2009.

Above, 1.2672 provides minor resistance after breaking one of the short lived Euro recoveries. Higher, 1.2880 was another line of support in 2009, and it’s followed by 1.3114 and 1.3267, which held Euro/Dollar before the collapse.

Looking down below 1.2142, the round number of 1.20 is the next line of support. Stronger support appears at 1.1820, and its followed with 1.1630, which is the lowest level since 2003.

I continue being bearish on EUR/USD.

Another week of high volatility had one point of light – the Chinese denial, but ended with a dark tone – another credit downgrade, and an appetite for new lows. The contagious debt diseases are very far from over. A break under 1.20 could be seen soon.

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

  • James Chen, in his new blog, sees more downside risk despite the double bottom.
  • Kathy Lien sees more downside for the Euro in an interview on Bloomberg.
  • Casey Stubbs covers the Euro/Dollar, and you can also find a coverage for EUR/JPY, also shaking on the risk factor.
  • Andrei reports on the volatility that EUR/USD feels following bad news on all fronts. He usually posts technical levels towards the new week.
  • TheGeekKnows reviews the week and looks forward.

Further reading on Forex Crunch:

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GBP/USD Outlook – May 31 – June 4

Posted: 29 May 2010 09:04 AM PDT


The British Pound is closely tied to the Euro, and didn’t manage to close higher. The upcoming week has many important events that will shake the Pound. Here’s an outlook for those events and an updated technical analysis for GBP/USD.

GBP/USD graph with support and resistance lines marked. Click to enlarge:

british pound gbp forecast

Britain’s growth rate for the first quarter of 2010 was upgraded to 0.3%, but this didn’t seem to help the Pound. After a bank holiday on Monday, we have British figures coming in every day. Let’s start:

  1. Halifax HPI: Publication time unknown at the moment. This is a highly regarded house price index, as HBOS calculates the changes in prices using its wide internal data. After many months of rises, prices became more unstable. A drop in prices three months ago was followed by a neat rise, but last month’s drop undermined the thought that the drop wasn’t a one time event. The forecast is for a small rise of 0.3%.
  2. Manufacturing PMI: Published on Tuesday at 8:30 GMT. Purchasin managers in Britain’s manufacturing sector are quite optimistic – the index rose to 58 points last month – the highest level sine the outbreak of the financial crisis, and it also beat expectations. This survey of 600 managers is likely to drop this time, but remain above 50 – the line that separates optimism and pessimism.
  3. Net Lending to Individuals: Published on Wednesday at 8:30 GMT. After a few strong months, the Bank of England showed that borrowing dropped to 0.6 billion, from the highs of 2 billion. This indicates a more cautious attitude from consumers. This trend will probably continue, and a negative figure won’t be surprising.
  4. Construction PMI: Published on Wednesday at 8:30 GMT. The second purchasing managers’ release for this week concerns the housing sector. Also here, a big leap was seen last month to 58.2 points. These numbers follow many months of scores under 50, so this fast jump might be followed with a downside correction.
  5. Nationwide HPI: Published on Thursday at 6:00 GMT. This important house price index fell only in one month and then returned to strong rises. This is different than the Halifax HPI. But this time, prices are expected to rise by only 0.5%, half of last month’s rise.
  6. Services PMI: Published on Thursday at 8:30 GMT. The last PMI figure is different from the first two. It fell in the past two months, and isn’t at record numbers anymore. From 55.3 points last month, the forecast is for a small rise to 55.6 points.

GBP/USD Technical Analysis

Cable began the week with a dip towards this year’s low of 1.4227, but remained far enough. A rally sent all the way to 1.4611, but these gains didn’t hold, and the pair closed at 1.4451, not far from last week’s close.

Some lines have changed since last week’s outlook. The Pound’s range is now between 1.44, a minor support line, and 1.4520, a pivotal line in the past week. It’s quite far from stronger lines.

Looking up, the stubborn peak of 1.4611 provides the next resistance line for the pair. This is followed by 1.4780, a very important line that stopped the previous collapse of the Pound, and now works as a resistance line.

Higher, 1.4975 is another minor line, and it’s followed by 1.5140, which worked as a strong support line, before the recent collapse. The next lines are 1.5350 and 1.5520, but they’re quite far away now.

Looking down, the 2010 low of 1.4227 is a strong line of support. It was approached several times, and wasn’t breached. Not yet. The next support line is quite close – 1.4130, serving as a support line at the beginning of 2009.

Even lower, 1.38 also worked as a support line at the beginning of 2009. Below, 1.3514 is the ultimate line of support, being the lowest level in over two decades. This is still very far.

I remain bearish on GBP/USD.

The European debt issues have a very strong impact on Britain. The Pound will probably suffer from the deteriorating situation. The contagious disease is on the doorstep of the UK.

Further reading:

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AUD/USD Outlook – May 31 – June 4

Posted: 29 May 2010 08:04 AM PDT


A very busy week expects Aussie traders: a rate decision, the GDP release and 11 more events will shake the Australian dollar. Here’s an outlook for the Australian events and an updated technical analysis for AUD/USD.

AUD/USD graph with support and resistance lines marked. Click to enlarge:

aud usd forecast

The Australian dollar enjoyed a significant recovery this week, finally dropping the Euro’s weight on the global markets. The crowded Australian calendar means that this trend will continue. Let’s start:

  1. HIA New Home Sales: Publication time unknown at the moment. Australia’s Housing Industry Association finally provided a stable change in the number of newly constructed homes last month. The rise of 0.9% followed a drop of 5.2% and a rise of 9.5% beforehand. The forecast is for a small rise that will help the Aussie.
  2. MI Inflation Gauge: Published on Monday at 12:30 GMT. Melbourne Institute’s inflation gauge completes the gap that the government leaves by releasing the CPI figures only once per quarter. Prices have risen by 0.4% last month, and this modest rise will probably be repeated.
  3. Current Account: Published on Monday at 1:30 GMT. Although this figure lags the related trade balance release, this quarterly figure  still has a strong impact on currencies. Australia’s deficit rose to 17.5 billion in Q4, and is now expected to show a smaller deficit of 16.4 billion.
  4. Private Sector Credit: Published on Monday at 1:30 GMT. Businesses and consumers increased their credit by 0.5% last month, a higher rate than in previous months, indicating economic expansion. Forecasts stand on a 0.5% rise.
  5. AIG Manufacturing Index: Published on Monday at 23:30 GMT. The Australia Industry Group showed a big improvement in the manufacturing sector last month – this PMI-like figure rose to 59.8, a level unseen since the beginning of the global crisis. The 200 manufacturers that are surveyed for this indicator will probably show a drop, but a figure above 50 – more economic expansion.
  6. Chinese Manufacturing PMI: Published on Tuesday at 1:00 GMT. Australia’s main trade partner is expected to show a similar score this time – 55.5 points. Any leap or drop in this major Chinese indicator will rock the Aussie as well.
  7. Retail Sales: Published on Tuesday at 1:30 GMT. After a big drop two months ago, consumers increased their spending once again – sales volume rose by 0.3% and is expected to rise by the same scale once again.
  8. Building Approvals: Published on Tuesday at 1:30 GMT and overshadowed by retail sales. After two months of big drops, this major housing sector gauge leaped by 15.3%. This volatile indicator will probably show another correction – to the downside this time, with a drop of 4.9%.
  9. Rate decision: Published on Tuesday at 4:30 GMT. After two surprising rate hikes, Glenn Stevens’ RBA is expected to pause before another rate hike. The hikes succeeded in cooling down the housing sector, and the global turmoil in May create a consensus that Australia’s Cash Rate will remain at 4.5%. There are no other forecasts for this Australian rate decision.
  10. Commodity Prices: Published on Tuesday at 6:30 GMT. Australia’s commodity oriented economy saw a big year-over-year jump in prices last month – 29.4%. It’s hard to tell where prices will go this time, making the release more important this time. On one hand, gold reached new highs, but oil prices slumped.
  11. GDP: Published on Wednesday at 1:30 GMT. The Australian economy, that never experienced an official recession, is expected to show slower growth in Q1 – only 0.6%, after a strong 0.9% rise last time. This major indicator will shake the markets, no matter the outcome.
  12. AIG Services Index: Published on Thursday at 23:30 GMT. The second release from AIG is different. Contrary to the manufacturing sector, Australia’s services sector returned to expansion just last month, following three months of contraction. The index rose above 50 to 52.3 points. A similar score is predicted this time.
  13. Trade Balance: Published on Thursday at 1:30 GMT. This figure relates to April. Forecasts are positive this time. Australia is expected to see a drop in its deficit – from 2 billion to 770 million. This significant change will probably boost the Aussie.

AUD/USD Technical Analysis

The Aussie challenged the 0.8066 support line once again, but bounced off it and began a rally. After struggling with the 0.8240 resistance line, it rose up to 0.8550 before closing at 0.8477.

The current range for AUD/USD is between the minor resistance line of 0.8477, which was a strong line of resistance last year, and with 0.8240 which had a similar role.

Looking down, strong support is found at 0.8066, a line that was added on last week’s outlook. Further below, 0.7860 was a support line back in July 2009, and it’s followed by the important support line of 0.77. AUD/USD fell off this line with a big gap at the height of the financial crisis. Lower, 0.7450 is the line the Aussie fell to in those dark days.

Looking up, 0.8567, which provided support for many months, is now a strong resistance line. It’s followed by 0.88, that also was a line of support, and with 0.90, which is also a round psychological number.

Higher, 0.9135 supported the Aussie before the big collapse. It’s followed by 0.9327, which was a line of resistance lots of times in recent months.

I am bullish on AUD/USD.

The Aussie returned to enjoy its strong fundamentals, and take less hits from risk aversive trading. This busy week should provide more fuel for the Aussie to rise.

Further reading:

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NZD/USD Outlook – May 31 – June 4

Posted: 29 May 2010 07:26 AM PDT


The kiwi managed to end a volatile week higher, moving mostly on  higher inflation expectations and an improved surplus in its trade balance. The kiwi will move mostly on technicals in the upcoming week. Here’s an outlook for the events in New Zealand and an updated technical analysis for NZD/USD.

NZD/USD graph with support and resistance lines marked. Click to enlarge:

nzd usd forecast

  1. NBNZ Business Confidence: Published on Monday at 3:00 GMT. This important indicator for the central bank showed growing optimism last month. The big rise from 42.5 to 49.5 points helped the kiwi, although it didn’t break new records. The 1500 businesses surveyed here are expected to be less optimistic this time.
  2. ANZ Commodity Prices: Published on Wednesday at 3:00 GMT. New Zealand’s commodities are a big part of the economy, making this indicator important. Last month saw a strong rise in prices – 4.9%. The forecast is for a small rise.

NZD/USD Technical Analysis

After another volatile week, which kiwi traders aren’t usually used to, the pair closed at 0.6780, between the support line of 0.6680 and the resistance line of 0.68, which was shattered in the past week.

Looking up, the next line of resistance above 0.68 is the round number of 0.70, which worked as a strong support line in the past months. 0.7050 is the next minor line of resistance, also working mostly as a support line.

Higher, 0.72 is a resistance line that mostly had this exact role in the past few months. It’s followed by 0.7320, which is quite far at the moment.

Looking down below 0.6685, 0.66 is the next line of support, being a support and resistance line in August. Minor support is found around 0.64, and the next line in the horizon is 0.62, which worked as support line in July.

I’m neutral on the kiwi.

Similar to the Aussie, it managed to detach itself from the European turmoil. But contrary to the Australia, the fundamentals of New Zealand aren’t strong enough for gains, at least not in such a light-calendared week.

Further reading:

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USD/CAD Outlook – May 31 – June 4

Posted: 29 May 2010 07:04 AM PDT


A combination of GDP, a rate decision and employment figures promise an exciting week for the Canadian dollar. Here’s an outlook for the Canadian events and an updated technical analysis for USD/CAD.

USD/CAD graph with support and resistance lines marked. Click to enlarge:

canadian dollar forecast

An improvement in the current account and the temporary relief that the markets felt on Thursday helped the loonie recover from new lows. This week, it’ll be mostly about Canadian figures. Let’s start:

  1. GDP: Published on Monday at 12:30 GMT. After a few strong months, especially a strong growth rate in Q4, Canada’s monthly GDP rose by only 0.3% last month, disappointing the markets. A return to stronger growth is expected now – 0.5%. This figure is for March, thus completing the data for the first quarter. The loonie will shake around this release.
  2. RMPI: Published on Monday at 12:30 GMT and overshadowed by the GDP release. Canada’s oil export is a significant part of the country’s economy. Prices of raw materials are expected to rise b 1.1%, stronger than last month. Note that the data relates to April. The drop in oil prices will be reflected in the next release.
  3. Rate decision: Published on Tuesday at 13:00 GMT. Mark Carney made it clear last month – the interest rate is going to rise. The big question is if it will happen now, or in the next decision due on July 20th. On one hand, the recent drop in the Canadian dollar’s value make it easier for the BOC to raise the rates now. On the other hand, the recent turmoil might make it a bad timing. Any decision, whether its a rise to 0.5% or an unchanged value of 0.25%, will rock the loonie. It’s also important to note the BOC Rate Statement concerning future moves. This will provide a forecast for future moves.
  4. Employment data: Published on Friday at 11:00 GMT. After a whopping rise of 108,700 jobs last month, more than 4 times the early expectations, a modest rise is expected this time – 20,700, similar to job gains in previous months. In the past, huge leaps boosted the loonie, but now the trend is different, and a disappointment can send it way down. The unemployment rate also exceeded expectations last month, dropping to 8.1%. Another drop to 8% is expected now. An unchanged value won’t be too bad.
  5. Building Permits: Published on Friday at 12:30 GMT. This figure is slightly overshadowed by the American release of the Non-Farm Payrolls. Also here, a big leap was seen last month – 12.2%. This corrected 4 straight months of drops. A correction in the other direction is predicted now – a drop of 1.6%.
  6. Ivey PMI: Published on Friday at 14:00 GMT. This important gauge from the Richard Ivey Business School closes the week. The past two months saw positive surprises, with the index reaching 58.7 points. Economists forecast another rise to 59.6 points, but the global trouble, could make the 175 purchasing mangers more cautious this time. A drop won’t be a surprise.

USD/CAD Technical Analysis

The pair began the week with strong action – it rose and stopped at the 1.0850 resistance line – the highest levels in 6 months. The loonie then recovered going under the important 1.0750 line, and after aiming for 1.04, it closed just under 1.0550.

USD/CAD now trades between 1.0550, which is a minor resistance line that played a role in recent weeks, and the strong support line of 1.04, which had a role both as a support line and as a resistance line many times in recent months. Note that some lines have been modified since last week’s outlook.

Looking down, the next line of support under 1.04 is 1.02 – this was the 2009 low, and it also played an important role in April – when USD/CAD broke under it, the road to parity was open. Below, the ultimate line is parity. There are further support lines on the road, but they’re too far now.

Looking up, 1.0750, which was the top border of a long-term range, is still a strong resistance line. It’s break in the past week was temporary. The next line, 1.0850, proved to be valid, as it stopped the upwards movement now.

Even higher, 1.1130 worked several times as a resistance line, and will come in handy if the pair jumps above 1.0850. The next line is 1.1470, but that’s to far now.

I continue being bearish on USD/CAD.

As tensions eased in Europe, the Canadian dollar re-enjoyed its good fundamentals. This week, major Canadian events should give it another boost, perhaps opening the road to USD/CAD parity once again.

Further reading:

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