Forex Crunch Forex Weekly Outlook – July 26-30

Forex Crunch Forex Weekly Outlook – July 26-30

Forex Weekly Outlook – July 26-30

Posted: 24 Jul 2010 02:07 AM PDT


The upcoming week is dominated by American releases, with the best kept for last – the first release of GDP for the second quarter. Here’s an outlook for the major market movers this week.

Friday’s European stress tests will still be felt in the markets at the start of the new week. Will the weak US figures continue hurting the dollar? Or is it going to change?

  1. American New Home Sales: Published on Monday at 14:00 GMT. Sales of new homes are very dependent on government stimulus, as we’ve seen in recent releases. From a leap to 446K to months ago, the number of new sales (annualized) dropped to 300K last month, hurting the dollar. A significant rise is expected this time.
  2. US CB Consumer Confidence: Published on Tuesday at 14:00 GMT. This major survey of 5,000 people always shakes the markets. After reaching 63.3 points two months ago, the indicator plunged to 52.9 last month – showing the fear of a double-dip recession. A small recovery is expected this time.
  3. US Beige Book: Published on Wednesday at 18:00 GMT. The 12 regional districts of the Federal Reserve team to produce economic analysis which precedes the FOMC meeting two weeks later. We’ll get to see how the economy is doing, and a hint towards the next decision. Will a fear of a double-tip recession be expressed in the Beige Book?
  4. US Durable Goods Orders: Published on Wednesday at 12:30 GMT. Manufacturing has been quite unstable in recent months – a drop of 1.3% was followed by a leap of 3% and then by a drop of 0. 6% last month. Also the core figure, which is closely watched by the Federal Reserve, hasn’t been much more stable. This event always shakes the markets. A significant rise is necessary for the dollar to gain.
  5. New Zealand rate decision: Published on Wednesday at 21:00 GMT. Alan Bollard will probably raise the rates for a second time in a row, from the current rate of 2.75% to 3%. While inflation isn’t going wild in New Zealand, the economy is doing well, prompting another hike now. The kiwi and Aussie will move on the rate decision as well as the prospects for future moves.
  6. US Unemployment Claims: Published on Thursday at 12:30 GMT. A dip to 429K two weeks ago didn’t impress the markets, as it was disregarded as an error. Jobless claims have proved to be the best indicator towards the Non-Farm Payrolls, and shakes the currency markets every week.
  7. European Unemployment Rate: Published on Friday at 9:00 GMT. Europe’s high unemployment rate of 10% is a big burden on the Euro. This rate hardly changed in the past 6 months, and it isn’t expected to change materially now. A drop to 9.7% or lower will boost the Euro, but this isn’t likely.
  8. Swiss KOF Economic Barometer: Published on Friday at 9:30 GMT. This highly regarded composite index reflects the great state of the Swiss economy quite well. After reaching a multi-year high score of 2.25 its expected to tick down, but if it doesn’t fall too much, the Swissy will still enjoy it.
  9. Canadian GDP: Published on Friday at 12:30 GMT. Canada’s monthly GDP disappointed last month by remaining unchanged, after a great first quarter. But the overall situation in Canada is excellent, so this GDP release should be strong, and can counter a strong GDP release in US happening at the exact same time.
  10. US Advance GDP: Published on Friday at 12:30 GMT. This is the first release of GDP for the second quarter of 2010. After an excellent end to 2009 (growth of 5.6%), the first quarter was slow (2.7%) and caused serious fears of a double dip recession. This initial release has a strong impact, but it’s not always accurate – last quarter’s number was gradually revised downwards from 3.5% to 2.7%. Anyway, the markets are going to rock.

That’s it for the major events this week. Stay tuned for specific currency coverages.

Further reading:

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EUR/USD Outlook – July 26-30

Posted: 23 Jul 2010 06:07 PM PDT


Important releases of inflation and unemployment are due from Germany and then from the whole continent, in a busy week for the Euro. Here’s an outlook for the events that will move the Euro and an updated technical analysis for EUR/USD.

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

eur usd forecast

The echoes of the bank stress tests will still affect the Euro, and so will the US dollar’s weakness. Where do you think the pair will go? Let’s start:

  1. GfK German Consumer Climate: Published on Monday at 6:00 GMT. This important survey of 2000 consumers has been very stable in recent months, reflecting the good situation in Germany compared to other Euro-zone countries. After remaining unchanged at 3.5 points, this indicator is expected to edge up and support the Euro.
  2. M3 Money Supply: Published on Tuesday at 8:00 GMT. The amount of money in circulation dropped in the past 6 out of 7 months, exposing the weakness of the European economies and the slowdown. Another drop of about 0.2%, like last month, is likely now, hurting the Euro.
  3. German Prelim CPI: Published on Wednesday. After a rise of 0.5% in March, this key inflation figure returned to normal and treaded water around 0%. The rise of 0.1% seen in the past two months will probably repeat itself for a third consecutive month. Note that the different German states release their CPI results during the day, so the impact can be long.
  4. German Unemployment Change: Published on Thursday at 7:55 GMT. The number of unemployed people in Germany dropped during most of the past year, usually beating economists’ expectations, which tended to be more pessimistic. The locomotive of the Euro zone will probably show another improvement in employment – another drop in unemployment, of around 20,000 people.
  5. German Retail Sales: Published on Friday at 6:00 GMT. Germany has seen rather strong fluctuations in retail sales, with drops and rises intertwining. After a 0.4% rise last month, a stall is expected now. The data for the month of June could surprise, as this was the month after the big economic turmoil in May.
  6. CPI Flash Estimate: Published on Friday at 9:00 GMT. Two days after Germany released its CPI, the initial estimation for the whole continent is due. Inflation has rise to a peak of 1.6% (annualized) but then fell to 1.4%. These small rises in consumer prices aren’t inflationary. Only a rise above 2% will trigger thoughts of a rate hike and will boost the Euro.
  7. Unemployment Rate: Published on Friday at 9:00 GMT. Contrary to Germany, the unemployment rate in other Euro-zone countries is high, with Spain having an unemployment rate of about 20%. The rate for the Euro-zone now stands at 10%, having very similar levels throughout the year. This will probably remain unchanged, weakening the Euro once again.

EUR/USD Technical Analysis

The Euro ranged between the stubborn 1.30 line and the 1.2880 line at the beginning of the week, before dropping to support at 1.2720. After a mad Friday with the stress tests, the pair managed to close above 1.2880, at 1.2907, closing the week almost unchanged.

Some lines have been added on last week’s outlook. The pair remains in the 1.2880 to 1.30 range, like last week. The round number of 1.30 is becoming a very tough line of resistance.

A break above 1.30 will open the road to 1.3110 which supported Euro/Dollar before the collapse in May, and capped an attempt to recover. Above, 1.3267 was also a line of support that turned into resistance.

Even higher, 1.3435 was a strong line of support at the beginning of the year, and it’s followed by 1.37, which was a peak in April.

Looking down, 1.2720 which supported the pair in the past week provides immediate, minor support. The next support line is very close – at 1.2670, which was a peak of a recovery attempt in May.

Lower, 1.2520 is a minor support line, working as such at the beginning of the month, and it’s followed by 1.2460, that provided resistance in June. There are more lines below, with 1.2150 being the most notable one.

I remain neutral on EUR/USD.

While other pairs rally against the dollar, the Euro fails to break 1.30 and isn’t impressed from the stress tests, that didn’t really cope with the real issues – sovereign debt. On the other hand, the continent saw genuine positive figures, with Germany leading the pack. All this means more range trading.

Here are additional Euro Dollar analyses from excellent writers on the web:

  • Sophia Todorova, on Casey’s site, sees the EUR/USD bears sharpening their claws.
  • A Ganti, on James Chen’s site, analyzes the delicate state of the Euro – between the European rock and a US hard place.
  • Mohammed Isah sees the pair maintaining the corrective tone.
  • Kathy Lien gave a TV interview about the stress tests before they happened. Her analysis proved correct.
  • Andrei marks the support and resistance lines awaiting the pair.
  • The Geek Knows reviews the week and looks forward.

Further reading on Forex Crunch:

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Forex Links for the Weekend

Posted: 23 Jul 2010 02:00 PM PDT


After a volatile week and before a new one begins, it’s time to sit back and read some long-term forex-related articles. Here are my picks. Enjoy:

  • Michael Storm, on Casey’s site, asks what are the making of a good scalper trader, and provides some answers.
  • James Wooley explains the price oscillator indicator with examples.
  • Francesc Riverola reports that GFT is expected to launch fractional pips quite soon. Will other brokers follow?
  • Michael Greenberg dives into misleading PRs and examines the case of FXDD. There are worse things, such as Crown’s reincarnation.
  • Adam Kritzer follows the emerging markets, that continue shining, no matter what happens elsewhere.
  • Andrei raises a poll about the worst enemy a forex trader has. The results are interesting.
  • Larry Greenberg examines the two roles of the Federal Reserve and how it balances between them.
  • James Chen talks about trading forex only on price action.

You’re also welcome to read my post, in search of the best forex trader.

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Tests OK – Euro hesitant over the methods of the tests

Posted: 23 Jul 2010 09:12 AM PDT


At the moment, only 7 banks failed the tests, better than expected. Now the big question is about the quality of the tests. Until the methods of the tests are clarified, the Euro will continue hesitating. The number of failures is less important than the seriousness of the tests. Update: A case of a sovereign default wasn’t taken into account.

The European stress tests are slowly being released. Each bank gets its grade: pass or fail. Currently many Spanish banks receive a Fail grade. In the meantime, EUR/USD is slightly lower.

Cajasur, Banca Civica Savings Bank Group, Espiga and Unnim Savings Bank are among the Spanish banks that failed. Also the Greek bank Atebank failed.

EUR/USD jumped to 1.2920 immediately after the release, but quickly dropped to 1.2826, before bouncing up again. All in all, Euro/Dollar is slightly lower, but the event is still going on.

Update 16:30 GMT: Euro/Dollar extending falls to 1.2813 on the notion that the results are “too good to be true”. It currently seems that the Euro indeed falls on the stress tests.

It’s important to note that a case of a sovereign default wasn’t taken into account. Here’s what Christian Noyer, a senior member of the ECB had to say to explain this:

“The hypothesis of a (sovereign) default is excluded because the European states, especially in the Eurozone, have put several hundreds of billions of euros on the table with the support of the IMF to make this hypothesis completely excluded.

Do you believe the stress test results?

Update 19:30 GMT: Stock market rally in New York triggers risk appetite. Euro makes gains above 1.29, but still struggles under 1.30.

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