Forex Crunch EUR/USD Outlook – June 28 – July 2

Forex Crunch EUR/USD Outlook – June 28 – July 2

EUR/USD Outlook – June 28 – July 2

Posted: 26 Jun 2010 11:25 AM PDT


The troubled Euro expects inflation and employment figures in the upcoming week. Here’s an outlook for the events that will move the Euro, and an updated technical analysis for EUR/USD.

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

euro dollar forecast

In the past week, the Euro got a positive indicator from the German Ifo Business Climate, but the impact was very limited. This week has more significant indicators. Let’s begin:

  1. German CPI: Published on Monday. After showing some signs of picking up, inflation returned to normal in the past two months, rising by 0.1% last month, after a drop in the same small scale beforehand. The initial version of the CPI is collected from the various German states throughout the day. A small rise is expected this time.
  2. M3 Money Supply: Published on Monday at 8:00 GMT. The amount of money in circulation usually rises, but the drop seen in the past 3 months is another evidence of less economic activity and an upcoming double-dip recession. Another drop of 0.1% is expected this time.
  3. German Unemployment Change: Published on Wednesday at 7:55 GMT. This important figure shows that Germany continues to be the locomotive of the Euro-zone. The number of unemployed people squeezed by 45,000 people, for a third month in a row. Another small drop is expected now. Note that the actual figure was usually better than early forecasts.
  4. CPI Flash Estimate: Published on Wednesday at 9:00 GMT. Following Germany’s first release for the inflation figures, the figure for the whole continent is also published. The annualized level of inflation rose to 1.6% last month – still under control. Only a jump above 2% could be significant for the Euro, and this isn’t expected now.
  5. Unemployment Rate: Published on Friday at 9:00 GMT. The all-European unemployment rate is very problematic – 10.1%. The area of 10% has been with us for the past 7 months and this isn’t about to change. Any rise will be a burden on the Euro, and only a fall to a single digit figure will boost the common currency.

EUR/USD Technical Analysis

The Euro began the week by descending from a failed attempt to break above 1.2460, and eventually dropped below 1.2330. A false break under 1.2250 was followed by a jump, and the pair closed at 1.2375.

The Euro’s range is 1.2330 to 1.2460. Note that more lines were added on last week’s outlook. The trading ranges of the pair are more narrow now.

Above the strong line of 1.2460, a minor resistance line appears at 1.2520, which was a swing low when the pair was dropping from higher levels. Higher, 1.2670 provides strong resistance, being the highest level in over a month.

Higher, 1.2880 is the next minor line, followed by 1.3114, which was tested from both directions, but that’s quite far now.

Looking down, the Lehman levels at 1.2330 continue to play a small role. The next level of support is at 1.2250, which the pair failed to break in the past week. 1.2150 is a very strong line – it held the pair for some time, and when it collapsed, the fall was quite strong.

1.20 is a round number eyed by many, so it provides further support, and the last line is 1.1876, the year-to-date low.

I remain neutral on Euro/Dollar.

As mentioned last week, range trading indeed continued for another week. Given the looming double dip recession, the European debt issues and risk aversive trading due to slowdown in the US as well, the long term sees further drops. But for now, the narrowing ranges are still with us.

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

  • James Chen analyzes the cautious bearishness of the Euro.
  • Marco Hague of TheLFB discusses the week’s trading activity on ForexTv ahead of the G20 meetings, with a look at the Euro.
  • Kathy Lien sees more risk in the Euro.
  • TheGeekKnows reviews the week and looks forward.

More links will be added when available.

Further reading:

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GBP/USD Outlook – June 28 – July 2

Posted: 26 Jun 2010 10:25 AM PDT


Final GDP and purchasing managers’ indices lead the busy economic calendar in the UK. Here’s an outlook for the events in Britain and an updated technical analysis for GBP/USD.

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

GBP USD Forecast

The headline from the British government’s emergency budget is a raise of sales tax. This didn’t impact forex trading. On the other hand, we saw that one member voted to raise the rates in the last MPC meeting. This sent the Pound way up. Let’s start:

  1. Nationwide HPI: Publication time unknown at the moment. The Nationwide Building Society has shown three consecutive months of rises in prices of homes. This came after a one time dip. After rising by 0.5% last months, prices are predicted to rise by a smaller scale this time.
  2. Net Lending to Individuals: Published on Tuesday at 8:30 GMT. The Brits are being more careful in lending – the past few months showed very low level of lending – 0.3 and 0.4 billion, significantly lower than expected. Less lending means less economic activity. This trend is expected to continue.
  3. GfK Consumer Confidence: Published on Tuesday at 23:00 GMT. This survey of 2,000 consumers showed that consumers’ pessimism is growing. After the score already reached -13, it fell back to -18 last month. The negative numbers mean pessimism, and this will probably grow once again.
  4. Final GDP: Published on Wednesday at 8:30 GMT. The final version of Britain’s first quarter GDP is expected to confirm the improved second release and show a growth rate of 0.3% in the first quarter. Only an upwards revision of this weak growth rate will boost the Pound, but this isn’t likely. The next quarters will probably be worse in Britain, with budget cuts expected to take their toll on the economy.
  5. Current Account: Published on Wednesday at 8:30 GMT, and overshadowed by the GDP. This quarterly release lags behind the related figure – trade balance. Nevertheless, it always shakes the Pound. Britain’s deficit significantly squeezed in Q4 to 1.7 billion pounds, much less than expected. A similar deficit is expected this time.
  6. Manufacturing PMI: Published on Thursday at 8:30 GMT. This purchasing managers’ index has been positive in the past 8 months, reaching a peak of 58 points in the past two months. This survey of 600 purchasing managers, which is expected to slide this time, always rocks the Pound
  7. BOE Credit Conditions Survey: Published on Thursday at 8:30 GMT, and somewhat overshadowed by the PMI release. This is a good indicator of economic activity. The quarterly release make it an important release for the Pound. Worsening credit conditions will hurt the currency.
  8. Construction PMI: Published on Friday at 8:30 GMT. The construction sector was slower to recover, with the PMI rising above 50 only three months ago. Since then, this indicators rose nicely. From 58.5 last month, its expected to drop this time.

GBP/USD Technical Analysis

The beginning of the week wasn’t good for the pair, as it fell below 1.4780. It then began a nice rally and eventually managed to close above the critical line of 1.5050, at 1.5060.

If the break above 1.5050 is indeed confirmed, the next level is 1.5130, which provided strong support during April. Above, 1.5350 was a strong pivotal line that the pair played with before collapsing, and is now a resistance line.

Higher, 1.5530 was a strong resistance line and the highest level in four months, and provides strong resistance. Even higher, I’ve added a higher line on last week’s outlook – 1.5833. This worked as a strong support line, and later as resistance.

Looking down, the 1.4780 line remains intact, despite being broken several times. The next line of support is 1.4610 – a minor line. Lower, 1.45 worked as a support line and is another minor line.

1.44 is already a strong line of support. A break below will open the road for the year-to-date low of 1.4227, which is another significant support line.

I’m still neutral on the pair.

The rising inflation that I’m mentioning over and over finally got attention in the recent MPC meeting minutes – a Pound bullish sign, but the UK’s troubles are still deep. A downgrade revision of the GDP could be painful for cable.

Further reading:

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AUD/USD Outlook – June 28 – July 2

Posted: 26 Jun 2010 09:25 AM PDT


Retail Sales as well as building approvals are the highlights in a busy Australian week. Will the Aussie continue north? Here’s an outlook for the Australian events and an updated technical analysis for AUD/USD.

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

australian-dollar-aud-usd-forecast

The Chinese move on the yuan is great for Australia, that exports commodities to China. With a stronger yuan, the Chinese can buy more. As the dust settled from  this move, the political problems in Australia hurt the Aussie. With the new Prime Minister sworn in, the focus returns to fundamentals:

  1. HIA New Home Sales: Publication time unknown at the moment. The Housing Industry Association showed a bit leap in prices last month – 6.2%. This comes despite the rate hikes that partially cooled the Australian housing sector. A smaller rise is expected this time.
  2. MI Inflation Gauge: Published on Tuesday at 00:30 GMT. The official inflation figures are released only once a quarter. So, this unofficial release from the Melbourne Institute tends to moves the Aussie. After rises of 0.4% or 0.5% in recent months, a weaker rise in prices is predicted this time.
  3. Private Sector Credit: Published on Wednesday at 1:30 GMT. More lending means more economic activity, but last month’s small rise of 0.2% was quite disappointing for the Aussie. This followed 4 stronger months. A return to higher growth rates will probably be reported by the RBA this time.
  4. AIG Manufacturing Index: Published on Wednesday at 23:30 GMT. The Australia Industry Group publishes a PMI-like indicator that has been above 50 in the past 5 months. This means expectations for economic expansion. The drop from the high 59.8 points to 56.3 last month is expected to be followed by a stable number this time.
  5. Chinese Manufacturing PMI: Published on Thursday at 1:00 GMT. China is Australia’s main trade partner. Growth in Chinese manufacturing translates into more imports from Australia. After peaking at 55.7 points, this Chinese indicator fell to 53.9 points this time. A rise is expected this time.
  6. Retail Sales: Published on Thursday at 1:30 GMT. This major consumer-related indicator rose by 0.6% last month, showing confidence for a second month in a row, despite the rate hikes. A smaller rise is expected this time.
  7. Commodity Prices: Published on Thursday at 6:30 GMT. Australia’s commodity-oriented economy enjoyed a recovery in commodity prices in June. This will be reflected in this  indicator that is expected to show a year-over-year growth rate of over 50%, boosting the Aussie.
  8. Building Approvals: Published on Friday at 1:30 GMT. This indicator is very volatile, and tends to have a strong impact on the Aussie. A drop of almost 15% was reported in approvals last month, but this was merely a correction for a 17% rise beforehand. A rise in approvals will empower the Aussie.

AUD/USD Technical Analysis

The Aussie’s crazy week began with a temporary jump above 0.8735 and then 0.88, but this changed quickly. The pair deteriorated quickly and dipped below 0.86 before recovering and settling slightly higher than last week – at 0.8741. Note that most lines haven’t changed since last week’s outlook.

Looking up, 0.88 continues to be a minor line of resistance, and the break above it was false. Higher, 0.90 is a round psychological number and also was a swing low in March.

Higher, 0.9135 was a very strong line of support when the pair was trading higher, and now works as resistance. The next important line far above is 0.9327, which was a strong line of resistance many times in the past.

Looking down, immediate support is found at 0.8735, which was December’s low, and worked as a line of resistance in the previous week. Lower, 0.8360 was a pivotal line a few weeks ago.

Lower, 0.8240 was a strong resistance line in 2009 and worked when the pair was trading lower recently. Below, the year-to-date low of 0.8066 provides strong support. That’s quite far now.

I remain bullish on the Aussie.

The political crisis that rocked the Aussie is over, with a new Prime Minister, Julia Gillard, quickly assuming office. With the revaluation of the Chinese yuan, a high interest rate and strong economy, the Australian dollar continues to have good reasons to rise.

Further reading:

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NZD/USD Outlook – June 28 – July 2

Posted: 26 Jun 2010 08:25 AM PDT


Business confidence is the highlight of kiwi events in the upcoming week. Here’s an outlook for these events and an updated technical analysis for NZD/USD.

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

new-zealand-dollar-nzd-usd

The kiwi enjoyed the Chinese announcement to push forward. Also the better-than-expected GDP was kiwi-positive. Risk aversive trading limited the gains of the kiwi.

  1. NBNZ Business Confidence: Published on Monday at 3:00 GMT. This monthly survey of 1500 businesses always rocks the kiwi. The indicator edged down last month from 49.5 to 48.2 after the market mayhem. This month will probably see a rise, that will push the kiwi higher.
  2. Building Consents: Published on Monday at 22:45 GMT. The housing sector enjoyed a leap of 8.5% in building permits last month. This volatile indicator usually falls after such strong leaps. A weak drop will help the currency.
  3. ANZ Commodity Prices: Published on Friday at 3:00 GMT. Similar to Australia, New Zealand’s economy is dependent on commodity exports. The mild rise of 2.5% last month will probably be followed by a stronger rise this time. Note that the similar release in Australia impacts the kiwi as well.

NZD/USD Technical Analysis

A gap was seen in the NZD/USD chart at the start of the week, with the pair jumping above the 0.7080 resistance line. The pair then attempted to break 0.7160 three times and failed. This is a new resistance line that didn’t appear in last week’s outlook.

Looking above 0.7160, the next line remains 0.72, which is quite close. Higher, the 0.7325 line which capped the pair at the beginning of May provides the next significant resistance line.

Even higher, the 0.7440 line provided strong resistance for a few straight days at the beginning of the year, and provide the last line for now.

Looking down, 0.7080 continues to be of some significance, but less than last week. Much stronger support appears at the round number of 0.70, which supported the pair during the past week.

Lower, 0.6910 is the next support line for the pair, after being an important stepping stone on the way up, and working as resistance in the past. It’s followed by 0.68 which supported the pair in February, 0.6685 which held it in September and by the year-to-date low of 0.6560.

I remain bullish on NZD/USD.

The stronger-than-expected GDP in Q1 and also in Q4 show that New Zealand’s economy is in the right direction.

Further reading:

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USD/CAD Outlook – June 28 – July 2

Posted: 26 Jun 2010 07:25 AM PDT


Canadian monthly GDP is the highlight in the upcoming week. Here’s an outlook for the Canadian events and an updated technical analysis for USD/CAD.

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

canadian-dollar-usd-cad

Canadian CPI came out as expected, and this wasn’t loonie-positive. There’s no rush for speedy tightening cycle by the central bank.

  1. RMPI: Published on Tuesday at 12:30 GMT. The Raw Materials Price Index made a leap in last month’s release – 1.7%, stronger than expected. The Canadian dollar isn’t expected to enjoy this indicator now, as the figure relates to May, a bad month in the global markets.
  2. GDP: Published on Wednesday at 12:30 GMT. The Canadian economy grew by 0.6% in March, better than expected. This concluded a great first quarter with an annual growth rate of 6.1%, double the American growth rate. A similar growth rate is expected in April, the first month of Q2.

USD/CAD Technical Analysis

After making a small dip under 1.02 the pair ascended and struggled with 1.03 (a new line that didn’t appear in last week’s outlook) and eventually rose above temporarily above 1.04 before closing at 1.0350.

Looking up, 1.04, that was the boundary of the 1.04 to 1.0750 range is still a minor line of resistance. Above we get resistance at 1.0560 that was a pivotal line in recent weeks.

Higher, 1.0750 worked as a resistance line during May and also in 2009. It’s followed by 1.0850, which was similarly a line of resistance about a year ago and also a month ago. Even higher, 1.1130 remains a distant line.

Looking down, 1.03 provides immediate support, and it’s followed by 1.02 – the 2009 low which also played a role in capping the pair after it reached parity. USD/CAD parity is the ultimate support line.

A break below parity, which isn’t likely in the upcoming week, will send the pair towards 0.98 and then 0.97.

I remain bearish on USD/CAD.

The Canadian economy is doing great, better than the American one. This week’s GDP release should provide a fresh boost.

Further reading:

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