Posted: 27 Aug 2010 02:24 AM PDT

British growth for the second quarter was unexpectedly revised to 1.2%. These good news lifted GBP/USD lifted the Pound only for a short period of time. Worries about the future and the upcoming second release of GDP for the US loom. Update on cable.

British GDP already posted a big surprise in the first release – 1.1% instead of 0.6% that was predicted. It then boosted the Pound and sent the bulls raging. Also now, the upwards revision surprised economists that merely expected a confirmation of the first release. But this time, the reaction was very mild:

GBP/USD made a jump above the 1.5520 resistance line and reached 1.5443, but this last less than a minute – the pair fell quickly down under 1.55, but a safe distance from the 1.5470 line that it managed to regain yesterday.

At the beginning of the week, GBP/USD managed to cling to the 1.5470 support line, but later it fell below the line and stopped only at 1.5370, 20 pips above the critical 1.5350 line. A recovery yesterday sent it back to the narrow 1.5470 – 1.5520 range.

Q2 was great, but the future is dark

The Euro zone also saw great growth in Q2, with Germany leading the pack – an amazing 2.2% growth rate, the best since the reunification of the country. Still, the Euro failed to rise, on fears that the near future will be bad. Many worrying signs of a double-dip recession in the US were released in the past weeks, triggering risk aversive trading.

So, similar to the Euro, these good figures in the UK fail to lift the Pound. In addition to worries about the future, Q2 was probably much worse in the US – later we’ll get the second release for US GDP in Q2. The initial report about a weak 2.4% growth rate (annualized) will probably be significantly downgraded to only 1.5% or even worse.

So, with a risk aversive mood in the markets, more bad news from the US can send GBP USD further down. Below 1.5350, the next support lines are 1.5230 and 1.5130. A recovery of the Pound will send it towards 1.5720 and 1.5833.

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EUR/USD Aug. 27: Tight Range Trading Before GDP

Posted: 27 Aug 2010 12:29 AM PDT

EUR/USD climbed higher but couldn’t convincingly break the resistance line. After many hours of range trading, all is set for the grand finale of the week. Will it manage to break higher or collapse? Here’s a quick update on fundamentals, technicals and community trends.

EUR/USD below long term support, attempting on 1.2722 – click to enlarge

EUR/USD Technicals

Asian session: A quiet Asian session saw the pair trade around the 1.2722 line.
Current Range is between 1.2665 to 1.2722. Yesterday’s swing above 1.2722 didn’t turn into a convincing breakout.
Further levels: Below, 1.2610, 1.2460, 1.2330 and 1.2150. Above 1.2840, 1.2930, 1.30 and 1.3110.
Long term: On August 20th, EUR/USD lost less steep uptrend channel began on June 7th, from the year-to-date low of 1.1876. This turns into a resistance line now. For today, it stands on 1.2890. A push upwards will make this line important once again.

EUR/USD Fundamentals

Throughout the day: German Prelim CPI. Exp. +0.2%.
6:00 GMT: German Import Prices . Exp. +0.1. Actual -0.2 small disappointment.
12:30 GMT: US Prelim GDP (second release). Expected downwards revision from 2.4% to 1.5%.
13:55 GMT: US Reveised Consumer Sentiment (UoM): Exp. upwards revision from 67.8 to 69.8.
14:00 GMT: US Federal Reserve Chairman Ben Bernanke speaks at the Jackson Hole Symposium.

EUR/USD Sentiment

Market is in risk aversive mood. This means that bad US indicators are dollar positive, although devastating figures that we’ve seen in recent days just shocked the markets.
The 1.2610 line is critical on the downside.
US GDP, and possibly Bernanke’s speech, will rock the markets.
Note that Friday’s, before the London session close, tend to be extreme.
Currensee Community: 57% are Short, 43% are long, with shortists having the upper hand. This is a small change from yesterday, when the ratio was 55:45. These are 968 open positions in real accounts trading this pair at the moment.

Note – This is a new and still experimental section on Forex Crunch. It’s still in development.

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Forex Daily Outlook – August 27 2010

Posted: 26 Aug 2010 02:00 PM PDT

U.S. Gross Domestic Product and Jackson Hole Economic Symposium are the main economic events of this trading weekend. Join us for an outlook on today’s market moving events.

In the U.S., Gross Domestic Product, the main measure of economic activity and growth expected a modest growth of 1.5% in the 2nd quarter compared to 2.4% q/q growth in the first and Prelim GDP Price Index is expected to remain 1.8% as in the previous quarter.

More in the U.S., Federal Reserve Chairman Ben Bernanke delivers a speech titled “The Economic Outlook and the Federal Reserve’s Policy Response” at the Federal Reserve Bank of Kansas City’s Economic Symposium, in Jackson Hole can create significant market volatility.

Finally in the US, Consumer Sentiment, the University of Michigan’s monthly survey of 500 households on their financial conditions and outlook of the economy is expected to a small rise to 69.9 from 67.8 in the previous month and Revised UoM Inflation Expectations reached 2.7% in July is expected to remain the same this month.

Jackson Hole Economic Symposium second and third days attended by central bankers, finance ministers, academics, and financial market participants from around the world. Comments and speeches from central bankers and other influential officials can create significant market volatility this Could Have Wide-Ranging Implications on all markets.

In Europe, German Preliminary Consumer Price Index an indicator of inflation is forecasted 0.2% growth following 0.3% in the previous month and German Import Prices also contributing to inflation is foreseen a small increase of 0.1% after 0.9% rise in the previous month.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs' latest analysis.

In Great Britain, Gross Domestic Product, the main measure of economic activity and growth is forecasted to show the same growth of 1.1% q/q in Q2 2010, as shown in the previous quarter.
Later in Hreat Britain, Bank of England Deputy Governor Charles Bean also speaks at the Federal Reserve Bank of Kansas City’s Economic Symposium, in Jackson Hole the main economic event this weekend may create market volatility.

More in Great Britain, Preliminary Business Investment a leading indicator of economic health expected to grow by 2.3% following better than expected 8.7% rise in the previous quarter and Index of Services predicted 0.7% rise after 0.8% in June.

In Switzerland, KOF Economic Barometer index designed to predict the direction of the economy over the following 6 months is expected to reach 2.22 points 0.01 less than the previous month.

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

That’s it for today. Happy forex trading!

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