GBP/JPY Weekly Technical Forecast (Oct 4-8 2010)

GBP/JPY:  Current 131.65 (Sunday, Oct 3, 2010).

Trend: Up

GBP/JPY Outlook: Some sideways move before further upward movement.

Please refer daily currency charts and not short-term charts e.g. hourly Forex charts.

GBP/JPY - Fundamentals (Recent economic releases):

1. UK: GDP data same as forecasts but much better than the previous release.
2. UK: Net Lending to individuals data much better as compared to the previous release as well as the forecasts.
3. UK: Barclays Plc revised its forecasts for GBP against the Euro and US Dollar for short- term downside risks increase.
4. UK: A factory index in the U.K. dropped to a 10-month low.

5. Japan: Trade Balance data releases less as compare to previous releases but adjusted Trade balance much better than the forecast.
6. Japan: Release for Tankan index of sentiment for large manufacturers quite positive as compared to the previous release as well as the forecasts.
7. Japan: Tankan Non-Manufacturing Index and Outlook releases positive as compared to the previous release as well as the forecasts.
8. Japan: Industrial Production preliminary releases negative as compared to the forecasts but generally quite positive as compared to the previous releases.
9. Japan: Large Retailers' Sales data negative as compared to the forecasts but much better than the previous release.
10. Japan: Retail Trade (YoY) release negative as compared to the forecasts but much better than the previous release.
11. Japan: Housing Starts data very positive as compared to the previous release as well as the forecasts
12. Japan: The jobless rate fell to 5.1 percent in August from 5.2 percent in July.
13. Japan’s Prime Minister Naoto Kan said he is prepared to resume selling the country’s currency to prevent it from strengthening.

GBP/JPY- Technical and market perception:

1. Daily MACD line crossed below the signal line while 3-hourly MACD line crossed above the signal line. These as well as the MACD histogram are indicating some volatile sideways movement with a bearish outlook.
2. ADX: +DI line crossing –DI line up and below time and again while ADX much below 25. Indicates some non-directional movement.
3. Ichimoku Cloud: GBP/JPY had broken above the resistance of the upper edge before a fall. The currency pair had found support at the lower edge of the cloud and tried to move over the upper edge of the cloud but fell sharply again.

GBP/JPY Analysis/Outlook: The fall from the psychological level of 135 continued during previous week but GBP/JPY found support exactly at the support level of July 22nd.

We expect some extended sideways movement. On the downside if GBP/JPY falls below 130.80, we would expect more support in the range of 130.10/130.40. In case this support level is broken then we would expect some more fall towards 129.20 first and then towards the recent low of 127.63.

On the upside the resistance levels of 133.76 and then 135.05/135.20 need to be watched. The possibilities of intervention by Bank of Japan should work in favor of upward movement after initial sideways move.

Overall we expect that GBP/JPY should move up after the initial sideways movement. A break over 135.20 should take GBP/JPY towards 137.00 first and then 137.75. Strong resistances are expected in that area. A break over 137.75 will make the currency pair to target 141.50 in the coming days.

Approach for trading/Strategies for GBP/JPY: With overall neutral outlook initially, we will be buying at downward movements, considering the support and resistance levels mentioned above.

EUR/USD Weekly Technical Forecast (Oct 4-8 2010)

The Euro had another amazing week, breaking significant levels every day. It now faces a wide variety of releases, with the rate decision in the limelight. Here’s an outlook for the European events and an updated technical analysis for EUR/USD.

EUR/USD Technical Analysis

The Euro began the week with a struggle between 1.3430 and 1.35, but then jumped above 1.3530 and traded in a range between 1.3530 and 1.37 (all lines mentioned last week as well), before breaking 1.27 and closing at 1.3790 – another impressing weekly gain of 300 pips.EUR/USD is now between 1.37 that provided resistance in the past week and also in April, and 1.3850 from above. This line supported the Euro in January, and then turned into a fierce resistance line.

Above, 1.40 is a round psychological number and also provided support in 2009. The next line of resistance is at 1.42, that provided support for the Euro during December 2009.

Higher, 1.4450 worked as resistance twice in 2009. It’s followed by 1.4580, a swing high in January, before the pair deteriorated quickly.

Looking down, 1.35-1.3530 is an area of support after working as resistance in the past week. It’s followed by 1.3430 that provided support in February and also recently.

Lower, 1.3267 is the next support line, after working as such twice in March and April, recently working as resistance. Below, 1.3110 is another line of support that later worked as resistance.

1.3050 is a minor line of support, after working as resistance. It’s followed by 1.2920 that capped the pair in September and 1.2730 which had the same role.

Note that since the beginning of September, EUR/USD is trading in a very steep uptrend channel (also marked in the graph). It will be interesting to follow this channel in the upcoming week.

I now turn from bullish to bearish on EUR/USD.

There are several reasons: European debt issues, which were reflected in the Anglo-Irish problems and demonstrations across the continent, cannot remain under the carpet for too long. The net dollar-short positions is at the highest levels since the summer of 2008 – the time when the Euro began collapsing. And I believe that even the Euro bulls can agree that a retracement is needed after scooping 1100 pips in a month.

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



The Spanish credit downgrade and the problems in the Anglo Irish bank couldn’t stop the Euro. Net dollar shorts are at the highest levels since the summer of 2008. If everybody’s short, who’s left to sell? It will be interesting to see if Trichet says something about the currency after the rate decision. Let’s start:

1. Sentix Investor Confidence: Monday, 8:30. This official survey of 2800 analysts and investors disappointed last month by dropping to 7.6 points. It’s now expected to climb up to 8.6 points, indicating stronger optimism.


2. PPI: Monday, 9:00. Producer prices aren’t expected to follow consumer prices. The all-European figure is released after Germany and France release their own. Nevertheless, it tends to move the Euro. Monthly PPI is expected to rise by 0.2%, slightly slower than last month.


3. Retail Sales: Tuesday, 9:00. After a significant drop of 0.9% four months ago, the volume of sales posted gains in the past three months. Also here, the data is released after the biggest countries have already published their own, but the figure tends to surprise. A 0.2% rise is predicted this time.


4. Final GDP: Wednesday, 9:00. According to the initial release, Q2 was surprisingly good in Europe, with a 1% growth rate. Germany stood out with a whopping 2.2% growth rate. This 1% figure will probably be confirmed now. Surprises are rare with this publication.


5. German Factory Orders: Wednesday, 10:00. Europe’s economic locomotive disappointed last month with big drop of 2.2% in the total value of orders. A rise of 0.9% is expected to provide a nice correction for last month’s fall.


6. German Industrial Production: Thursday, 10:00. Complementing on factory orders, this related figure also disappointed last month with a modest 0.1% rise. A stronger rise is expected now – 0.4%. This comes very close to the rate decision.


7. Rate decision: Thursday, 11:45.  The president of the ECB sees inflation gradually rising in the Euro-zone (1.8% annually), but unemployment is still high, 10.1%. The gap between the different European countries is widening. The result will probably be another month of an unchanged rate at 1%. Any comment about the state of the economies and especially about the debt issues, now in Ireland, will move the markets. The press conference will be held at 12:30, and Trichet usually says something that shakes the Euro.


8. German Trade Balance: Friday, 6:00. Germany enjoys a significant surplus in its trade balance, as its economy is export-oriented. After reaching 12.7 billion last month, the surplus is expected to squeeze down to 12.2 billion this time.

All times are GMT.

AUD/USD Weekly Technical Forecast (Oct 4-8 2010)

After a week of big gains, Aussie traders expect a busy week, with an interesting rate decision and employment figures being the most important events. 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 marked. Click to enlarge:



The Aussie enjoyed the positive mood – risk appetite. But contrary to the Euro, the Aussie has good reasons to rise. Will this continue, or will we see a pause? Let’s start:

1. MI Inflation Gauge: Sunday, 23:30. This inflation indicator from the Melbourne Institute fills in the gap for the government, that publishes official CPI only once a quarter. A similar rise to last month’s 0.2% is expected now.


2. AIG Services Index: Monday, 22:30. The Australian Industry Group publishes an index that is similar to PMI releases in other countries. Last month’s figure was worrying – 47.5 points, under the critical 50 point mark. A rise above 50 points is expected now.


3. Retail Sales: Tuesday, 12:30. Consumers seem quite confident in Australia. Last month saw a nice rise of 0.7% rise in the volume of sales. Also now, a neat 0.5% rise is predicted. This is the most important release in a bunch of 4 simultaneous releases.


4. ANZ Job Advertisements:  Tuesday, 00:30. The amount of job advertisements in newspapers is considered a good indicator for the official jobs released later in the week. Last month’s 2.6% in this indicator proved to be correct when it came to the official figures. Another small rise is expected in job ads.


5. Trade Balance: Tuesday, 00:30. Australia enjoys a nice surplus in its trade balance, especially due to exports to China. This surplus is predicted to significantly widen now from 1.89 to 2.31 billion.


6. NAB Business Confidence: Tuesday, 00:30. National Australia Bank showed that businesses are still confident and optimistic last month, with a score of 11 points. A similar figure is expected now. Unless there’s a big surprise here and no surprises in the other indicators released at the same time, this will have a small impact.


7. Rate decision: Tuesday, 3:30. This time, there’s no clear consensus on what the RBA will do. On one hand, the economy grew at a great 1.2% rate in Q2, and employment causes envy from other countries. On the other hand, the global uncertainty is high and perhaps Glenn Stevens and his colleagues wouldn’t like to push the currency higher. So, an unchanged rate of 4.50% or a resumption of hikes with a raise to 4.75% will both rock the Aussie, as well as the statement about future moves.


8. AIG Construction Index: Wednesday, 22:30. Also the construction sector is contracting according to AIG. From 43.2 points, this indicator will probably rise this time, showing that housing is improving following the slowdown they got after the rate hikes.


9. Employment data: Thursday, 00:30. Last month’s excellent job figures gave a big boost to the Aussie. This time, the unemployment rate is expected to remain unchanged at 5.1% and a smaller gain is expected in jobs – 20,300 after 30,900 last month. Any figure will rock the Aussie.


10. RBA Annual Report: Thursday morning. This report can provide deeper analysis of the Australian economy and what it faces after the recovery from the global crisis.


11. Ric Battellino talks: Friday, 2:30. The RBA deputy governor will speak in a conference in Brisbane and will likely expand on future monetary policy, following the rate decision.

All times are GMT.

AUD/USD Technical Analysis

After a struggle with 0.96 (mentioned in last week’s outlook), the Aussie pushed upwards and settled between 0.9660 and 0.9730. Attempts to move even higher didn’t succeed.

At 0.9721, the Aussie is just under the new resistance line of 0.9730 that it reached in the past week. Even higher, 0.98 provided resistance after the Aussie fell from the peak in July 2008. The last line is the all-time high of 0.9849.

The ultimate line of resistance is parity between the Aussie and the greenback. This never happened.

Looking down, 0.9660 was an area of struggle in the past week and provides minor support. It’s followed by 0.96 which capped the pair in the previous week. 0.9465 also temporarily capped the Aussie on the way up, and provides further resistance.

Below 0.9465, the next significant line of support is 0.9366, which was a stubborn peak in April. Below, the veteran 0.9327 line that is of significance for almost a year, is the next line of support.

Lower, 0.9220 capped the pair in August and now serves as the next support line. It’s followed by 0.9080, which worked as resistance in July.

I turn from bullish to neutral on AUD/USD.

The Aussie has all the reasons to rise – a great economy amidst global weakness. But, the greenback could retrace this week. Unless there’s a rate hike in Australia, a pause in the Aussie’s run is more likely.

NZD/USD Weekly Technical Forecast (Oct 4-8 2010)

The calendar in New Zealand is rather light in the upcoming week, so the kiwi will mostly depend on the general mood. Nevertheless, there are still a couple of meaningful events. Here’s an outlook for the events in New Zealand, and an updated technical analysis for NZD/USD.

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



The kiwi dollar enjoyed the greenback’s weakness, but fell short of the extraordinary gains seen with the Aussie. Will this continue?

1. ANZ Commodity Prices: Monday, 2:00. As an exporter of commodities, New Zealand depends on commodity prices. In the past three months, commodity prices fell, with 1.4% last month. A rise is expected this time.


2. NZIER Business Confidence: Monday, 21:00. This wide quarterly survey of 3500 businesses has a very strong impact on the kiwi. The figure has been positive in the past year, indicating optimism. On the other hand, the figure dropped from a peak of 36 points to 18 points. Another drop is due now, but still remaining in positive territory.

All times are GMT.

NZD/USD Technical Analysis

The kiwi had a rough time with the 0.7350 line before pushing up to the 0.74 region. A push towards the end of the week sent the pair briefly above the 0.7440 line before closing at 0.7430.

Looking up, 0.7440 was a stubborn peak at the beginning of the year and now provides immediate resistance. It’s followed by 0.7523 which was a swing high in November 2009.

Above, 0.7634 was a peak in October and is the highest level in two years. Beyond, 0.7760 and 0.7920 are distant lines that were last seen in 2008.

Looking down, 0.74 temporarily capped the pair in the past week and also July – it’s now an immediate support line. 0.7350 that capped the pair at the end of July and the beginning of August, is now a minor line after being shattered in the past week.

0.7260 provided support at the beginning of September and is already a more significant line of support. 0.7210 is another support line from September.

Below, 0.71 worked in both directions in August. It’s followed by the round number of 0.70, that had a role many times in the past.

I turn from neutral to bearish on the kiwi.

Fundamentals in New Zealand weren’t too good in the past week. Without extreme greenback weakness, the kiwi cannot continue running.