Showing posts with label Eur. Show all posts
Showing posts with label Eur. Show all posts
Saturday, September 11, 2010
Sunday, September 5, 2010
EUR/USD Weekly Summary: Testing 1.2930, the bearish outlook is in serious threat
The EUR/USD had a significant bullish correction this week. On h4 chart below we can see price break above my minor trend line resistance (yellow) to the upside indicating potential further bullish momentum testing the key resistance level 1.2930 area. Break above that area could be seen as potential bearish failure and bullish reversal in medium term testing the major trend line resistance (red) and 1.3115 area which is the 38.2 Fibonacci retracement of 1.5140 - 1.1876. On the downside, only a violation to the downside on the bullish channel and bearish pullback below 1.2800 could stop the current strong bullish momentum and keep the medium term bearish outlook intact.
EUR/JPY Elliot Wave Weekly Forecast and Trade(SEP 6- 10)
Weekly
* Last Candlesticks pattern: Dragonfly Doji
* Time of formation: Aug 2010
* Trend bias: Down
Daily
* Last Candlesticks pattern: Morning star
* Time of formation: 29 June 2010
* Trend bias: Up
The single currency moved pretty much in line with our expectation and despite rebounding to 109.56 on Monday morning this week (we recommended in our previous update last Friday to sell euro at 109.00 targeting for 106.30-40), price then quickly retreated sharply from there and reached our indicated target at 106.30/40 (with 260 points profit) before rebounding from 106.16. This bounce from 106.16 suggests downtrend is not ready to resume yet and further consolidation would take place, however, upside should be limited to this week’s high of 109.56. Only a daily close above the Kijun-Sen (now at 109.83) would signal a temporary low has been formed at 105.44 earlier and then correction to 110.09 (50% Fibonacci retracement of 114.74 to 105.44) and possibly 111.19 (61.8% Fibonacci retracement) would follow but reckon the Ichimoku cloud area (now at 111.40-70) would hold.
On the downside, a daily close below this week’s support at 106.16 would revive our bearishness and signal rebound from 105.44 has ended at 109.56, bring retest of this support later. Below there would extend downtrend to 105.00, however, loss of near term downward momentum would prevent sharp fall below 104.42 (50% projection of 127.95 to 107.30 measuring from 114.74) and price should stay well above 101.98 (61.8% projection) and bring rebound later.
Recommendation: Short position entered at 109.00 met target at 106.30/40 with 260 points profit
Recommended Trade for This Week: Sell @ 109.80 with SL Above 110.50 for 107.00
On the weekly chart, despite last week’s selloff to 105.44, the subsequent rebound from there left a ‘Dragonfly doji’ candlestick pattern there, suggesting consolidation above this level would take place, however, it is necessary to see a long white candlestick in order to confirm a low formation, otherwise, downside risk remains. A weekly close above the Tenkan-Sen (now at 110.08) would be the first sign that low has been made and then rebound to 111.19 (61.8% Fibonacci retracement of 114.74 to 105.44) and possibly 112.50 would follow but reckon resistance at 114.74 would cap upside.
On the downside, below this week’s low at 106.16 would revive bearishness for a retest of 105.44, however, break there is needed to confirm downtrend from 169.97 has resumed for further weakness towards 104.42 (50% projection of 127.95 to 107.30 measuring from 114.74), however, loss of near term downward momentum should prevent sharp fall below 101.98 (61.8% projection) and risk has increased for a rebound later.
* Last Candlesticks pattern: Dragonfly Doji
* Time of formation: Aug 2010
* Trend bias: Down
Daily
* Last Candlesticks pattern: Morning star
* Time of formation: 29 June 2010
* Trend bias: Up
The single currency moved pretty much in line with our expectation and despite rebounding to 109.56 on Monday morning this week (we recommended in our previous update last Friday to sell euro at 109.00 targeting for 106.30-40), price then quickly retreated sharply from there and reached our indicated target at 106.30/40 (with 260 points profit) before rebounding from 106.16. This bounce from 106.16 suggests downtrend is not ready to resume yet and further consolidation would take place, however, upside should be limited to this week’s high of 109.56. Only a daily close above the Kijun-Sen (now at 109.83) would signal a temporary low has been formed at 105.44 earlier and then correction to 110.09 (50% Fibonacci retracement of 114.74 to 105.44) and possibly 111.19 (61.8% Fibonacci retracement) would follow but reckon the Ichimoku cloud area (now at 111.40-70) would hold.
On the downside, a daily close below this week’s support at 106.16 would revive our bearishness and signal rebound from 105.44 has ended at 109.56, bring retest of this support later. Below there would extend downtrend to 105.00, however, loss of near term downward momentum would prevent sharp fall below 104.42 (50% projection of 127.95 to 107.30 measuring from 114.74) and price should stay well above 101.98 (61.8% projection) and bring rebound later.
Recommendation: Short position entered at 109.00 met target at 106.30/40 with 260 points profit
Recommended Trade for This Week: Sell @ 109.80 with SL Above 110.50 for 107.00
On the weekly chart, despite last week’s selloff to 105.44, the subsequent rebound from there left a ‘Dragonfly doji’ candlestick pattern there, suggesting consolidation above this level would take place, however, it is necessary to see a long white candlestick in order to confirm a low formation, otherwise, downside risk remains. A weekly close above the Tenkan-Sen (now at 110.08) would be the first sign that low has been made and then rebound to 111.19 (61.8% Fibonacci retracement of 114.74 to 105.44) and possibly 112.50 would follow but reckon resistance at 114.74 would cap upside.
On the downside, below this week’s low at 106.16 would revive bearishness for a retest of 105.44, however, break there is needed to confirm downtrend from 169.97 has resumed for further weakness towards 104.42 (50% projection of 127.95 to 107.30 measuring from 114.74), however, loss of near term downward momentum should prevent sharp fall below 101.98 (61.8% projection) and risk has increased for a rebound later.
Sunday, July 11, 2010
EUR/USD Is Ending Its Bullish Correction?
Euro/Dollar had another positive week, but it failed to break above the important long term resistance line. Also the short term trends show an exhaustion. Will it turn down?
EUR/USD began a strong upwards move on last week’s Non-Farm Payrolls but couldn’t break the resistance line. These moves came on top of US weakness and not on an improvement in Europe. Yohay already wrote about these issues earlier this week on forexcrunch . Now let’s look at another technical aspect.
Looking at the hourly chart, we can see a rising uptrend channel that accompanied the Euro in the past week. This can be seen in the graph. The top of this uptrend channel was challenged more than 3 times, and is very clear. As the Euro climbed upwards, it closely followed this top border.
The bottom border of this line was approached three times. While the pair stayed away from this line during most of the week, it closed at 1.2639, quite close to it. Together with the failure to making a convincing break above 1.2672 (which was the peak on May 21st) and settling at the bottom of the uptrend channel, this shows again that EUR/USD is out of air.
Apart for the regular events that are expecting us (detailed in the Euro dollar forecasts), there’s a very important one-time event on July 23rd – results of the bank stress tests. This will determine how the European banks are dealing with the debt crisis, the big issue looming over the Euro-zone in the past few months.
EUR/USD began a strong upwards move on last week’s Non-Farm Payrolls but couldn’t break the resistance line. These moves came on top of US weakness and not on an improvement in Europe. Yohay already wrote about these issues earlier this week on forexcrunch . Now let’s look at another technical aspect.
Looking at the hourly chart, we can see a rising uptrend channel that accompanied the Euro in the past week. This can be seen in the graph. The top of this uptrend channel was challenged more than 3 times, and is very clear. As the Euro climbed upwards, it closely followed this top border.
The bottom border of this line was approached three times. While the pair stayed away from this line during most of the week, it closed at 1.2639, quite close to it. Together with the failure to making a convincing break above 1.2672 (which was the peak on May 21st) and settling at the bottom of the uptrend channel, this shows again that EUR/USD is out of air.
Apart for the regular events that are expecting us (detailed in the Euro dollar forecasts), there’s a very important one-time event on July 23rd – results of the bank stress tests. This will determine how the European banks are dealing with the debt crisis, the big issue looming over the Euro-zone in the past few months.
Saturday, July 10, 2010
EUR/JPY Weekly Technical Forecast (July 12-16 2010)
EUR/JPY's rebound from 107.30 extended further to as high as 112.65 last week. While such rebound was strong, there is no change in the view that it's a correction only. Hence, we'd still expect upside to be limited below 113.40 resistance and bring fall resumption. Below 109.13 minor support will flip intraday bias back to the downside for retesting 107.30 low first. However, note that decisive break of 113.40 resistance will argue that an important bottom might be formed and bring stronger rebound towards 119.64 key resistance.
In the bigger picture, fall from 139.21 is treated as resumption of long term down trend from 2007 high of 169.96 and should target 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 which is close to 100 psychological level. Though, we'd expect strong support between 2000 low of 88.96 and 100 psychological level to contain downside and bring reversal. On the upside, break of 119.64 support turned resistance is needed to be the first signal of medium term reversal. Otherwise, outlook will remain bearish.
In the long term picture, up trend from 88.96 (00 low) has completed at 169.96 and made a long term top there. Based on the five wave structure of the rise from 88.96 to 169.96, we're favoring that fall from 169.96 is corrective in nature. It should develop into a three wave correction with first wave completed at 112.10, second wave completed at 139.21. The third falling leg is now in progress but would be contained above 88.96 key support level. We'll hold on this this view unless fall from 169.96 shows sign of acceleration.
In the bigger picture, fall from 139.21 is treated as resumption of long term down trend from 2007 high of 169.96 and should target 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 which is close to 100 psychological level. Though, we'd expect strong support between 2000 low of 88.96 and 100 psychological level to contain downside and bring reversal. On the upside, break of 119.64 support turned resistance is needed to be the first signal of medium term reversal. Otherwise, outlook will remain bearish.
In the long term picture, up trend from 88.96 (00 low) has completed at 169.96 and made a long term top there. Based on the five wave structure of the rise from 88.96 to 169.96, we're favoring that fall from 169.96 is corrective in nature. It should develop into a three wave correction with first wave completed at 112.10, second wave completed at 139.21. The third falling leg is now in progress but would be contained above 88.96 key support level. We'll hold on this this view unless fall from 169.96 shows sign of acceleration.
Friday, July 9, 2010
GBP/USD Is Range Bound– Will it Fall?
GBP/USD is trading in an almost perfect range in the past week. The longer the range – the stronger the explosion, but in which direction? Here are some reasons for it to go down.
Last Friday, GBP/USD enjoyed the weak Non-Farm Payrolls in the US to rise to new levels. Since then, it has traded in an almost perfect range – from 1.5080 to 1.5240. This 160 pip range saw three tops and three bottom throughout the week, without breaking out. But the situation doesn’t look good for the Pound:
Recent economic data is mostly negative. British Services PMI disappointed with a drop to 54.4 points, worse than expected. Halifax HPI, which shows the change in house prices, fell by 0.6% instead of rising by the same scale. Manufacturing Production fell short of expectations as it rose by only 0.3%, and last month’s drop was revised – 0.8% instead of 0.8% – double.
But the biggest disappointment came from interest rate issues. First, the Bank of England didn’t raise the rates. While this was the consensus, this came after we saw that one member voted to raise the rates last month – Andrew Sentance’s vote came on rising inflation that missed the government’s target month by month.
The decision not to raise the rates was later backed with the PPI figures – producer prices dropped last month by 0.2% when expectations stood on a rise of 0.1%. So, maybe the inflationary pressures aren’t too strong?
Similar to the Euro, it seems that the British Pound mostly enjoyed the US dollar’s weakness rather than its own strength. A drop will find immediate support at 1.5050, followed by 1.4870 and 1.4780. A breakout to the upside will meet resistance at 1.5350, followed by 1.5530 and 1.5833.
Last Friday, GBP/USD enjoyed the weak Non-Farm Payrolls in the US to rise to new levels. Since then, it has traded in an almost perfect range – from 1.5080 to 1.5240. This 160 pip range saw three tops and three bottom throughout the week, without breaking out. But the situation doesn’t look good for the Pound:
Recent economic data is mostly negative. British Services PMI disappointed with a drop to 54.4 points, worse than expected. Halifax HPI, which shows the change in house prices, fell by 0.6% instead of rising by the same scale. Manufacturing Production fell short of expectations as it rose by only 0.3%, and last month’s drop was revised – 0.8% instead of 0.8% – double.
But the biggest disappointment came from interest rate issues. First, the Bank of England didn’t raise the rates. While this was the consensus, this came after we saw that one member voted to raise the rates last month – Andrew Sentance’s vote came on rising inflation that missed the government’s target month by month.
The decision not to raise the rates was later backed with the PPI figures – producer prices dropped last month by 0.2% when expectations stood on a rise of 0.1%. So, maybe the inflationary pressures aren’t too strong?
Similar to the Euro, it seems that the British Pound mostly enjoyed the US dollar’s weakness rather than its own strength. A drop will find immediate support at 1.5050, followed by 1.4870 and 1.4780. A breakout to the upside will meet resistance at 1.5350, followed by 1.5530 and 1.5833.
Wednesday, July 7, 2010
EUR/USD Pusing Forward to Touch 1.27..
EUR/USD continued pushing forward and touched 1.27. At this point, it seems that the heights aren’t easy for the pair, that still carries debt issues and gloomy forecasts. Update on this pair.
Euro/Dollar continued the trend that began with the weak Non-Farm Payrolls on Friday and gradually edged up during the week – from the support line of 1.2460, it rose in waves and reached 1.2702, breaking 30 pips above the 1.2672 peak it reached on May 21, in the recovery rally that followed the turmoil.
So, at this point, the highest since the beginning of May, the pair seems exhausted. EUR/USD fell back down to 1.2660 after reaching the new highs. The break seems false and the next line of resistance, 1.2880 is out of reach. 1.2880 was a support line in May 2009.
Below 1.2460, support appears at 1.2330, 1.2250 and most importantly 1.2150. Above, 1.3110 is the next resistance line.
Reasons for Euro rally
The recent Euro rally came on top of weak economic figures in the US, and especially the Non-Farm Payrolls, that disappointed two months in a row. The sentiment is that the US economic recovery is much weaker than expected, meaning low interest rates for a very extended period of time. With a weak US economy, how can the dollar rise?
But there’s something else: the risk factor. The Euro didn’t rally on its own strength, but on US weakness. US weakness is global weakness, and this will eventually trigger risk aversive trading.
The situation in the Euro-zone isn’t good. The European teams might be good football / soccer, but their economies aren’t doing well.
Top economists say that the worst is yet to come:
When fear will return to the markets, the Euro will suffer. The dollar and the yen will rise. So, if you’re enjoying this current risk rally, you better watch out before the tables turn once again.
Euro/Dollar continued the trend that began with the weak Non-Farm Payrolls on Friday and gradually edged up during the week – from the support line of 1.2460, it rose in waves and reached 1.2702, breaking 30 pips above the 1.2672 peak it reached on May 21, in the recovery rally that followed the turmoil.
So, at this point, the highest since the beginning of May, the pair seems exhausted. EUR/USD fell back down to 1.2660 after reaching the new highs. The break seems false and the next line of resistance, 1.2880 is out of reach. 1.2880 was a support line in May 2009.
Below 1.2460, support appears at 1.2330, 1.2250 and most importantly 1.2150. Above, 1.3110 is the next resistance line.
Reasons for Euro rally
The recent Euro rally came on top of weak economic figures in the US, and especially the Non-Farm Payrolls, that disappointed two months in a row. The sentiment is that the US economic recovery is much weaker than expected, meaning low interest rates for a very extended period of time. With a weak US economy, how can the dollar rise?
But there’s something else: the risk factor. The Euro didn’t rally on its own strength, but on US weakness. US weakness is global weakness, and this will eventually trigger risk aversive trading.
The situation in the Euro-zone isn’t good. The European teams might be good football / soccer, but their economies aren’t doing well.
Top economists say that the worst is yet to come:
Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto, said the euro will depreciate to $1.13 in the third quarter, $1.08 by year-end and may near $1 in 2011 before recovering. Osborne, whose predictions were within 4.1 percent of the mark on average, according to data compiled by Bloomberg, was echoed by the nine following most-accurate forecasters in anticipating a lower euro in the next two quarters.
When fear will return to the markets, the Euro will suffer. The dollar and the yen will rise. So, if you’re enjoying this current risk rally, you better watch out before the tables turn once again.
Sunday, June 27, 2010
EUR/USD Weekly Technical Forecast (June 28-July 2 2010)
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:
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:
- 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.
- 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.
- 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.
- 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.
- 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.
Sunday, June 20, 2010
USD/CAD Weekly Technical Forecast (June 21-25 2010)
The loonie enjoyed risk appetite for a second week in a row. This week consists of key indicators for the next rate decision. Here’s an outlook for Canadian events and an updated technical analysis for USD/CAD, which is closer to parity once again.
USD/CAD chart with resistance and support lines on it. Click to enlarge:
The markets disregard the European trouble (with focus now on Spain again) and seek “risky” currencies. The Canadian dollar also enjoys the rising price of oil, and his its eyes on parity. Prices need to rise in other areas in order to push inflation. Let’s start:
- CPI: Published on Tuesday at 11:00 GMT. A rise in the consumer price index is necessary for further rate hikes, after the BOC made its first move. Current inflation conditions are still tame. CPI rose by 0.3% last month after remaining unchanged beforehand, and Core CPI, which is also closely watched by the central bank, also rose by 0.3%. More modest rises are expected this time.
- Retail Sales: Published on Wednesday at 12:30 GMT. This major consumer indicator made a surprising jump last month – 2.1% instead of 0.2% that was predicted. Also the core figure was a big surprise, jumping by 1.7%. Yet again, the expectations remain modest, with a rises of less than 1% predicted in both indicators.
USD/CAD Technical Analysis
The Canadian dollar continued the trend from last week, and after falling below 1.04, USD/CAD continued to fall gradually towards the next support line – 1.02, which it closed very close to, at 1.0210.
1.02 continues to be a dominant line – this was the 2009 low and also a line of resistance when the pair reached parity. A break below 1.02 will send the pair towards minor support at 1.01 (a line that was added on last week’s outlook).
Below 1.01 comes the ultimate support line – parity. USD/CAD parity was last seen in April but didn’t hold for too long. Lower, 0.98 is a minor line of support, followed by 0.97. A bigger surge in oil prices is necessary for the pair to approach these areas.
Looking up, the immediate resistance line is at 1.0560, which served as a line of support and resistance in recent weeks. Higher, 1.0750 was the high line of long time range, and was also tested about a month ago. It’s followed by 1.0850, which was a swing high before the pair went lower.
I remain bearish on USD/CAD.
As the fear factor leaves the markets, the Canadian dollar, with a growing economy, receives the strength it deserves. Next stop – parity.
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Saturday, June 12, 2010
Fundamental Analysis On Forex Trading
It has become imperative for every forex trader to learn how to predict the price trend and which method or software is the best.
When you do forex trading, it is very important to understand the difference between fundamental analysis and technical analysis. A quick explanation of the difference among the two types of analysis is: fundamental analysis focuses on money policy, government policy and economic indicators such as GDP, exports, imports etc within a business cycle framework while technical analysis focuses on price action and market behavior, especially on chart and technical indicators.
Needless to say both schools are equally disparaging about the other, and both believe their techniques are infinitely superior. But the reality is that it has become increasingly difficult to be a purist of either persuasion. Fundamentalists need to keep an eye on the various signals derived from the price action on charts, while few technicians can afford to completely ignore impending economic data, critical political decisions or the myriad of societal issues that influence prices.
Generally speaking, fundamental analysis can only judge which direction the market will move, and technical analysis can supply both direction and rough currency rate.
Keeping in mind that the financial underpinnings of any country, trading bloc or multinational industry takes into account many factors, including social, political and economic influences, staying on top of an extremely fluid fundamental picture can be challenging. Meanwhile, forecasting models are as numerous and varied as the traders and market buffs that create them. Different people can look at the exact same data and come up with two completely different conclusions about how the market will be influenced by it. At the end, some may make huge profit and some lose their money. You can not say fundamental analysis is easy.
Remember, fundamental analysis is a very effective way to forecast economic conditions, but not necessarily exact market prices. For example, when analyzing an economist's forecast of the upcoming GDP or employment report, you begin to get a fairly clear picture of the general health of the economy and the forces at work behind it. However, you'll need to come up with a precise method as to how best to translate this information into entry and exit points for a particular trading strategy.
Tip: If you are new to do forex trading and do not trade frequently, you can mainly use fundamental analysis for your trading.
Don't disturb yourself by information overload. Sometimes traders fall into this trap and are unable to pull the trigger on a trade. Normally, your first feel is the answer for you to do forex trading. At that time, you are sure which currency is strong and which country's economy is good. The more simple, the more useful.
However, trading a particular market without knowing a great deal about the exact nature of its underlying elements is unbelievable. You might get lucky and snare a few on occasion but it's not the best approach over the long haul.
For forex traders, the fundamentals are everything that makes a country tick. From interest rates and central bank policy to natural disasters, the fundamentals are a dynamic mix of distinct plans, erratic behaviors and unforeseen events. Therefore, it is very important to understand fundamental analysis and use them on forex trading.
When you do forex trading, it is very important to understand the difference between fundamental analysis and technical analysis. A quick explanation of the difference among the two types of analysis is: fundamental analysis focuses on money policy, government policy and economic indicators such as GDP, exports, imports etc within a business cycle framework while technical analysis focuses on price action and market behavior, especially on chart and technical indicators.
Needless to say both schools are equally disparaging about the other, and both believe their techniques are infinitely superior. But the reality is that it has become increasingly difficult to be a purist of either persuasion. Fundamentalists need to keep an eye on the various signals derived from the price action on charts, while few technicians can afford to completely ignore impending economic data, critical political decisions or the myriad of societal issues that influence prices.
Generally speaking, fundamental analysis can only judge which direction the market will move, and technical analysis can supply both direction and rough currency rate.
Keeping in mind that the financial underpinnings of any country, trading bloc or multinational industry takes into account many factors, including social, political and economic influences, staying on top of an extremely fluid fundamental picture can be challenging. Meanwhile, forecasting models are as numerous and varied as the traders and market buffs that create them. Different people can look at the exact same data and come up with two completely different conclusions about how the market will be influenced by it. At the end, some may make huge profit and some lose their money. You can not say fundamental analysis is easy.
Remember, fundamental analysis is a very effective way to forecast economic conditions, but not necessarily exact market prices. For example, when analyzing an economist's forecast of the upcoming GDP or employment report, you begin to get a fairly clear picture of the general health of the economy and the forces at work behind it. However, you'll need to come up with a precise method as to how best to translate this information into entry and exit points for a particular trading strategy.
Tip: If you are new to do forex trading and do not trade frequently, you can mainly use fundamental analysis for your trading.
Don't disturb yourself by information overload. Sometimes traders fall into this trap and are unable to pull the trigger on a trade. Normally, your first feel is the answer for you to do forex trading. At that time, you are sure which currency is strong and which country's economy is good. The more simple, the more useful.
However, trading a particular market without knowing a great deal about the exact nature of its underlying elements is unbelievable. You might get lucky and snare a few on occasion but it's not the best approach over the long haul.
For forex traders, the fundamentals are everything that makes a country tick. From interest rates and central bank policy to natural disasters, the fundamentals are a dynamic mix of distinct plans, erratic behaviors and unforeseen events. Therefore, it is very important to understand fundamental analysis and use them on forex trading.
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Sunday, June 6, 2010
EUR/JPY Weekly Technical Analysis (June 7-11 2010)
EUR/JPY Weekly Outlook
EUR/JPY's sharp recover on Friday and break of 109.76 minor support suggests that consolidation from 108.82 has completed at 114.13 already. Initial bias is on the downside this week and break of 108.82 will confirm down trend resumption for 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 next. On the upside, in case of another rise, we'd expect strong resistance at 38.2% retracement of 127.88 to 108.82 at 116.10 to conclude the consolidation and bring fall resumption finally.
In the bigger picture, fall from 139.21 is treated as resumption of long term down trend from 2007 high of 169.96 and should target 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 which is close to 100 psychological level. Though, we'd expect strong support between 2000 low of 88.96 and 100 psychological level to contain downside and bring reversal. On the upside, break of 119.64 support turned resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.
In the long term picture, up trend from 88.96 (00 low) has completed at 169.96 and made a long term top there. Based on the five wave structure of the rise from 88.96 to 169.96, we're favoring that fall from 169.96 is corrective in nature. It should develop into a three wave correction with first wave completed at 112.10, second wave completed at 139.21. The third falling leg is now in progress but would be contained above 88.96 key support level. We'll hold on this this view unless fall from 169.96 shows sign of acceleration.
EUR/JPY's sharp recover on Friday and break of 109.76 minor support suggests that consolidation from 108.82 has completed at 114.13 already. Initial bias is on the downside this week and break of 108.82 will confirm down trend resumption for 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 next. On the upside, in case of another rise, we'd expect strong resistance at 38.2% retracement of 127.88 to 108.82 at 116.10 to conclude the consolidation and bring fall resumption finally.
In the bigger picture, fall from 139.21 is treated as resumption of long term down trend from 2007 high of 169.96 and should target 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 which is close to 100 psychological level. Though, we'd expect strong support between 2000 low of 88.96 and 100 psychological level to contain downside and bring reversal. On the upside, break of 119.64 support turned resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.
In the long term picture, up trend from 88.96 (00 low) has completed at 169.96 and made a long term top there. Based on the five wave structure of the rise from 88.96 to 169.96, we're favoring that fall from 169.96 is corrective in nature. It should develop into a three wave correction with first wave completed at 112.10, second wave completed at 139.21. The third falling leg is now in progress but would be contained above 88.96 key support level. We'll hold on this this view unless fall from 169.96 shows sign of acceleration.
EUR/USD Weekly Technical Analysis (June 7-11 2010)
The troubled Euro, hit by Hungary and risk aversive trading following the Non-Farm Payrolls, is facing a busy week, with the rate decision being the climax. Here’s an outlook for the European events, and an updated technical analysis for EUR/USD.
EUR/USD chart with support and resistance lines on it.
No matter how the debt issues are handled, it now seems clear that the Euro-zone, either united or split, is facing a double dip recession. Austerity measures will take their toll on the economies, and the Euro as well. As European leaders are lowering their tone, the indicators return to play an important role. Let’s start:
Sentix Investor Confidence: Published on Monday at 8:30 GMT. LAst month, this important indicator perfectly reflected the economic turmoil, in real time. This survey of 2,000 analysts and investors turned negative – from +2.5 to -6.4. A negative figure means pessimism. This pessimism is expected to weaken this time, with a rise to -3.4 points.
German Factory Orders: Published on Monday at 10:00 GMT. Europe’s largest economy enjoyed a huge leap in factory orders in the last release. A small correction is expected this time – 0.1%. Note that the figure relates to April, and that the report for May will probably be worse.
German Industrial Production: Published on Tuesday at 10:00 GMT. Complementing the factory orders figure, industrial production in Germany also made a significant jump last time – 4%, but is expected to continue rising this time as well, by 0.7%. The result of the factory orders will probably indicate the direction of this figure as well.
German Final CPI: Published on Thursday at 6:00 GMT. It seemed that prices were picking up in Europe, led by its largest economy. But last month already saw them cooling down, with a drop of 0.1%. This release will probably confirm another calm month, with a rise of only 0.1%, as initially reported.
French Industrial Production: Published on Thursday at 6:45 GMT. Europe’s second largest economy also enjoyed nice growth in its industrial production last month – a rise of 1%. Growth is expected to accelerate this month – 1.2%. While there are talks of a credit downgrade for France as well, its economy is rather strong.
Rate decision: Published on Thursday at 11:45 GMT. Jean-Claude Trichet isn’t expected to change the European Minimum Bid Rate. Yet again, he’s expected to leave it unchanged at 1%. A small rise in inflation put some pressure for a rate hike, but the rise in prices isn’t too strong. On the other hand, the dire situation in the Euro-zone prompts slashing the rates, but the ECB isn’t too keen on such a move. The focus will be on the ECB Press Conference, where hints about future policy and remarks about the current situation will be closely watched.
EUR/USD Technical Analysis
The “Lehman levels” at 1.2330 capped EUR/USD during the week, as it traded between this line and last week’s low of 1.2142. On Friday, this range trading was broken, as the pair collapsed below this support line and closed under 1.20, at 1.1968.
Lower support lines were added on last week’s outlook. The current range is between 1.20, which is a round number eyed by many, and 1.1820, which was a support line back in 2006.
Looking down, the next line of support is at 1.17. This is a symbolic number – this is the level that the Euro launched at, in 1999, as an interbank currency, before there were euro coins and bills. Below, 1.1630 – this was the bottom in November 2005, and now provides strong support.
A drop below this line sends the Euro back to levels last seen in 2003. Minor support is found at 1.1560, followed by stronger support at 1.1370. Even lower, 1.11 is the next support line, serving as both a support and resistance line back at the beginning of 2003, 7 years ago.
Looking up above 1.20, the next line of resistance is at 1.2142, the former resistance line. This is followed by 1.2330 mentioned earlier.
Higher, 1.2460 is a strong line of resistance, capping the pair a few weeks ago. The next line is at 1.2670, which was a swing high. There are many more resistance line above, but they’re quite far at the moment.
I remain bearish on EUR/USD.
Yes, the Euro already lost a lot of ground, and some may say it’s oversold. But these falls are backed by an unstoppable flood of bad news. In the past week, it was Hungary, which compared itself to Greece. More debt black holes will probably be discovered, pushing the Euro lower.
EUR/USD chart with support and resistance lines on it.
No matter how the debt issues are handled, it now seems clear that the Euro-zone, either united or split, is facing a double dip recession. Austerity measures will take their toll on the economies, and the Euro as well. As European leaders are lowering their tone, the indicators return to play an important role. Let’s start:
Sentix Investor Confidence: Published on Monday at 8:30 GMT. LAst month, this important indicator perfectly reflected the economic turmoil, in real time. This survey of 2,000 analysts and investors turned negative – from +2.5 to -6.4. A negative figure means pessimism. This pessimism is expected to weaken this time, with a rise to -3.4 points.
German Factory Orders: Published on Monday at 10:00 GMT. Europe’s largest economy enjoyed a huge leap in factory orders in the last release. A small correction is expected this time – 0.1%. Note that the figure relates to April, and that the report for May will probably be worse.
German Industrial Production: Published on Tuesday at 10:00 GMT. Complementing the factory orders figure, industrial production in Germany also made a significant jump last time – 4%, but is expected to continue rising this time as well, by 0.7%. The result of the factory orders will probably indicate the direction of this figure as well.
German Final CPI: Published on Thursday at 6:00 GMT. It seemed that prices were picking up in Europe, led by its largest economy. But last month already saw them cooling down, with a drop of 0.1%. This release will probably confirm another calm month, with a rise of only 0.1%, as initially reported.
French Industrial Production: Published on Thursday at 6:45 GMT. Europe’s second largest economy also enjoyed nice growth in its industrial production last month – a rise of 1%. Growth is expected to accelerate this month – 1.2%. While there are talks of a credit downgrade for France as well, its economy is rather strong.
Rate decision: Published on Thursday at 11:45 GMT. Jean-Claude Trichet isn’t expected to change the European Minimum Bid Rate. Yet again, he’s expected to leave it unchanged at 1%. A small rise in inflation put some pressure for a rate hike, but the rise in prices isn’t too strong. On the other hand, the dire situation in the Euro-zone prompts slashing the rates, but the ECB isn’t too keen on such a move. The focus will be on the ECB Press Conference, where hints about future policy and remarks about the current situation will be closely watched.
EUR/USD Technical Analysis
The “Lehman levels” at 1.2330 capped EUR/USD during the week, as it traded between this line and last week’s low of 1.2142. On Friday, this range trading was broken, as the pair collapsed below this support line and closed under 1.20, at 1.1968.
Lower support lines were added on last week’s outlook. The current range is between 1.20, which is a round number eyed by many, and 1.1820, which was a support line back in 2006.
Looking down, the next line of support is at 1.17. This is a symbolic number – this is the level that the Euro launched at, in 1999, as an interbank currency, before there were euro coins and bills. Below, 1.1630 – this was the bottom in November 2005, and now provides strong support.
A drop below this line sends the Euro back to levels last seen in 2003. Minor support is found at 1.1560, followed by stronger support at 1.1370. Even lower, 1.11 is the next support line, serving as both a support and resistance line back at the beginning of 2003, 7 years ago.
Looking up above 1.20, the next line of resistance is at 1.2142, the former resistance line. This is followed by 1.2330 mentioned earlier.
Higher, 1.2460 is a strong line of resistance, capping the pair a few weeks ago. The next line is at 1.2670, which was a swing high. There are many more resistance line above, but they’re quite far at the moment.
I remain bearish on EUR/USD.
Yes, the Euro already lost a lot of ground, and some may say it’s oversold. But these falls are backed by an unstoppable flood of bad news. In the past week, it was Hungary, which compared itself to Greece. More debt black holes will probably be discovered, pushing the Euro lower.
GBP/USD Weekly Technical Analysis (June 7-11 2010)
A very busy week awaits the British Pound, with the rate decision being the highlight. Will Mervyn King tackle inflation? Here’s an outlook for the events that will rock the Pound, and an updated technical analysis for GBP/USD.
GBP/USD chart with support and resistance lines on it.
The Pound enjoyed the failure of the Prudential -AIG Asia deal. This deal would have sent billions of pounds overseas, and its failure strengthened the Pound. That wasn’t enough to hold the Pound after Friday’s Non-Farm Payrolls though. Let’s see the British events:
BRC Retail Sales Monitor: Published on Monday at 23:00 GMT (midnight UK). This figure is a great indicator for the official retail sales release. The British Retail Consortium showed a drop of 2.3% in the retailers that belong to its organization. This came after two months of neat rises. Another drop is predicted this time.
Nationwide Consumer Confidence: Published on Tuesday at 23:00 GMT. This survey of 1,000 consumers is a highly regarded barometer for the mood of consumers and of MPC members that meet later in the week. After steadily climbing to 81, this indicator dropped and now stands on 74 points. This is the first survey for the new government and also the first one after the escalation of the European troubles. Economists expected a rise to 78 points, but given the worries, a drop under 70 won’t be very surprising.
Trade Balance: Published on Wednesday at 8:30 GMT. After making a surprise drop two months ago and boosting the British Pound, the trade deficit jumped once again to 7.5 billion pounds, weakening the currency. It’s expected to squeeze down to 7 billion this time.
Rate decision: Published on Thursday at 11:00 GMT. The BoE is trapped between the desire to stimulate the economy by leaving the interest rate unchanged, and by the rising inflation. Mervyn King dismissed the rising inflation and said it’s only oil prices, but the new Prime Minister, David Cameron, doesn’t buy this, and made it clear that he wants the issue to be tackled. The consensus is for an unchanged Official Bank Rate – at 0.5%. If there isn’t a rate hike, traders will watch the MPC Rate Statement – if they express worries about inflation, the Pound will rise. If they focus on economic troubles, it will weaken.
Manufacturing Production: Published on Friday at 8:30 GMT. This major indicator always rocks the Pound. Last month’s release was a big surprise – output grew by 2.3%, far better than expected.The forecast for this release is more modest – 0.6% growth. Note that manufacturing is part of the overall industrial production, which is predicted to rise by 0.5% after a 2% rise last time. Manufacturing is more closely watched.
PPI: Published on Friday at 8:30 GMT. Following a leap of 3.8% in producer prices two months ago (3.8%), prices grew by only 0.6% last month, and they;re expected to drop by 0.1% this time, showing that inflation is still under control, at least with the PPI Input figure. The complementary number, PPI Output, is expected to rise by 0.6% after rising by 1.4% last time.
NIESR GDP Estimate: Published on Friday at 14:00 GMT. Last but not least, the NIESR institute usually provides accurate estimations about the GDP, and they release it on a monthly basis. ast month’s figure was positive – it showed a growth rate of 0.5% in the three months ending in April. A weaker growth rate is expected now, when May is added and February omitted from the calculation.
GBP/USD Technical Analysis
After some range trading between 1.44 and 1.4610, the Pound made a breakout and reached 1.4770, just 10 pips below the 1.4780 resistance line. Friday’s mess sent the pair back down to 1.4450.
Note that many lines have changed since last week’s outlook. The pair is bound by 1.44 and 1.4610 once again. Both lines aren’t very strong.
Looking down below 1.44, the next line is the year-to-date low of 1.4230. This was also a line of support last year. Below, 1.4130 was a swing low and now provides minor support.
Even lower, 1.38 is a strong line, working as a support line at the beginning of 2009. It’s followed by 1.3660, and by the ultimate multi-decade support line of 1.35.
Looking up above 11.4610, strong resistance is found at 1.4780. This is the line that the Pound collapsed to a few months ago, and it was tested successfully just this week.
A break above this line will send the pair to 1.5065, followed by 1.5130, which was a strong support line. There are more resistance lines higher above, but they are too far now.
I am neutral on the GBP/USD.
On one hand, the British economy is still growing slowly and it suffers from the debt issues in continental Europe. But on the other hand, rising inflation can trigger a rate hike, that will probably come sooner than later.
GBP/USD chart with support and resistance lines on it.
The Pound enjoyed the failure of the Prudential -AIG Asia deal. This deal would have sent billions of pounds overseas, and its failure strengthened the Pound. That wasn’t enough to hold the Pound after Friday’s Non-Farm Payrolls though. Let’s see the British events:
BRC Retail Sales Monitor: Published on Monday at 23:00 GMT (midnight UK). This figure is a great indicator for the official retail sales release. The British Retail Consortium showed a drop of 2.3% in the retailers that belong to its organization. This came after two months of neat rises. Another drop is predicted this time.
Nationwide Consumer Confidence: Published on Tuesday at 23:00 GMT. This survey of 1,000 consumers is a highly regarded barometer for the mood of consumers and of MPC members that meet later in the week. After steadily climbing to 81, this indicator dropped and now stands on 74 points. This is the first survey for the new government and also the first one after the escalation of the European troubles. Economists expected a rise to 78 points, but given the worries, a drop under 70 won’t be very surprising.
Trade Balance: Published on Wednesday at 8:30 GMT. After making a surprise drop two months ago and boosting the British Pound, the trade deficit jumped once again to 7.5 billion pounds, weakening the currency. It’s expected to squeeze down to 7 billion this time.
Rate decision: Published on Thursday at 11:00 GMT. The BoE is trapped between the desire to stimulate the economy by leaving the interest rate unchanged, and by the rising inflation. Mervyn King dismissed the rising inflation and said it’s only oil prices, but the new Prime Minister, David Cameron, doesn’t buy this, and made it clear that he wants the issue to be tackled. The consensus is for an unchanged Official Bank Rate – at 0.5%. If there isn’t a rate hike, traders will watch the MPC Rate Statement – if they express worries about inflation, the Pound will rise. If they focus on economic troubles, it will weaken.
Manufacturing Production: Published on Friday at 8:30 GMT. This major indicator always rocks the Pound. Last month’s release was a big surprise – output grew by 2.3%, far better than expected.The forecast for this release is more modest – 0.6% growth. Note that manufacturing is part of the overall industrial production, which is predicted to rise by 0.5% after a 2% rise last time. Manufacturing is more closely watched.
PPI: Published on Friday at 8:30 GMT. Following a leap of 3.8% in producer prices two months ago (3.8%), prices grew by only 0.6% last month, and they;re expected to drop by 0.1% this time, showing that inflation is still under control, at least with the PPI Input figure. The complementary number, PPI Output, is expected to rise by 0.6% after rising by 1.4% last time.
NIESR GDP Estimate: Published on Friday at 14:00 GMT. Last but not least, the NIESR institute usually provides accurate estimations about the GDP, and they release it on a monthly basis. ast month’s figure was positive – it showed a growth rate of 0.5% in the three months ending in April. A weaker growth rate is expected now, when May is added and February omitted from the calculation.
GBP/USD Technical Analysis
After some range trading between 1.44 and 1.4610, the Pound made a breakout and reached 1.4770, just 10 pips below the 1.4780 resistance line. Friday’s mess sent the pair back down to 1.4450.
Note that many lines have changed since last week’s outlook. The pair is bound by 1.44 and 1.4610 once again. Both lines aren’t very strong.
Looking down below 1.44, the next line is the year-to-date low of 1.4230. This was also a line of support last year. Below, 1.4130 was a swing low and now provides minor support.
Even lower, 1.38 is a strong line, working as a support line at the beginning of 2009. It’s followed by 1.3660, and by the ultimate multi-decade support line of 1.35.
Looking up above 11.4610, strong resistance is found at 1.4780. This is the line that the Pound collapsed to a few months ago, and it was tested successfully just this week.
A break above this line will send the pair to 1.5065, followed by 1.5130, which was a strong support line. There are more resistance lines higher above, but they are too far now.
I am neutral on the GBP/USD.
On one hand, the British economy is still growing slowly and it suffers from the debt issues in continental Europe. But on the other hand, rising inflation can trigger a rate hike, that will probably come sooner than later.
Monday, May 31, 2010
EUR/USd Daily Technical Analysis (June-01-2010)
The EURUSD didn't make significant movement yesterday. Earlier today in Asian session, price struggling around 1.2260 support area as you can see on my h1 chart below indicating critical intra-day technical phase. The major scenario remains to the downside but we need a consistent move below 1.2260 to continue the bearish pressure testing 1.2140/50 area before targeting 1.2000. A failure to do so could open the door for another upside pullback testing 1.2350 even 1.2450/70 region.
Sunday, May 30, 2010
EUR/USD Weekly Technical Analysis (May 31 - June 04 2010)
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:
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Euro/Dollar graph with support and resistance lines marked. Click to enlarge:
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
EUR/USD Weekly Technical Analysis (May 31 - June 04 2010)
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:
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Euro/Dollar graph with support and resistance lines marked. Click to enlarge:
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Best Non-Farm Payrolls in Past 13 Years?
The upcoming Non-Farm Payrolls release on June 4th holds high expectations – a job gain of 500K jobs, the best since 1997, but this includes special government hiring. Here are the things to watch for in this release, and the expected impact on currencies.
It’s important to stress that the Non-Farm Payrolls release is the most volatile event in forex trading, and causes very high volatility. I suggest you read my 5 notes for Non-Farm Payrolls trading. The comment regarding the risk factor is very important these days. OK, let’s see what’s special this time:
The decennial government census already had an impact on previous Non-Farm Payrolls releases. The impact will come to a climax in June 4th’s report. Previous months were dedicated for preparations, and this reported month, May, is when the census was held.
So, a big bulk of the gain in jobs comes from the government. Private sector hiring is only a small part of this month’s report, but it’s of high importance, as it serves as the core value, only slightly affected by the census, and supplying a long-term value.
The markets will pay less importance to the headline number, but rather focus on hiring in the private sector, which is expected to reach 180,000.
Contradicting rise in the unemployment rate
Last month saw a huge leap of 290K jobs, far better than expected. The figure for the previous month was also revised to the upside. But the unemployment rate jumped from 9.7% to 9.9%, very close to the scary 10% figure.
Despite the huge gain expected in jobs in the public sector, and the neat gain in jobs in the private sector, the unemployment rate is expected to drop by only 0.1% to 9.8%. The best explanation for last month’s rise and this month’s expected small dip is that the deep crisis sent many people off charts. As they stopped being part of the workforce, they didn’t contribute to the unemployment rate.
Now that they’re starting to get back, they enlarge the total workforce in a similar scale to the gain in jobs, thus leaving the unemployment rate almost unchanged.
Impact on forex trading
Yet again, this seems to be another win-win situation for the dollar, especially in the Euro/Dollar and the Pound/Dollar. If the results come as expected, it will be another sign of the American economy’s strength. This strength stands out against the great European weakness and against the Pound that follows it.
On the other hand, the Canadian and Australian economies are also doing quite well, and could still rise after this result. AUD/USD has lots of room to rise after the recent falls, driven mostly by risk aversive action. A good NFP will trigger risk appetite behavior and send the Aussie up.
Canada expects a busy week, with a possible rate hike, GDP numbers and employment figures just 90 minutes before the NFP. If Canadian numbers are OK, USD/CAD could fall.
Scenarios for surprises – dollar strength expected.
A disappointing outcome of the Non-Farm Payrolls or a rise of the unemployment rate above 10% could trigger risk aversive trading across the board, hurting also stronger currencies. We’ve seen the dollar rise after weak GDP and weak jobless claims last week. In these chaotic days, bad news, even if they come from the US, trigger dollar buying.
The opposite scenario, of a big drop in the unemployment rate and an even-higher gain in jobs, the dollar will stand out against all the currencies, and will fully justify its safe haven status.
We have lots of other major events before Friday’s NFP. How do you see the Non-Farm Payrolls unfold for forex trading?
It’s important to stress that the Non-Farm Payrolls release is the most volatile event in forex trading, and causes very high volatility. I suggest you read my 5 notes for Non-Farm Payrolls trading. The comment regarding the risk factor is very important these days. OK, let’s see what’s special this time:
The decennial government census already had an impact on previous Non-Farm Payrolls releases. The impact will come to a climax in June 4th’s report. Previous months were dedicated for preparations, and this reported month, May, is when the census was held.
So, a big bulk of the gain in jobs comes from the government. Private sector hiring is only a small part of this month’s report, but it’s of high importance, as it serves as the core value, only slightly affected by the census, and supplying a long-term value.
The markets will pay less importance to the headline number, but rather focus on hiring in the private sector, which is expected to reach 180,000.
Contradicting rise in the unemployment rate
Last month saw a huge leap of 290K jobs, far better than expected. The figure for the previous month was also revised to the upside. But the unemployment rate jumped from 9.7% to 9.9%, very close to the scary 10% figure.
Despite the huge gain expected in jobs in the public sector, and the neat gain in jobs in the private sector, the unemployment rate is expected to drop by only 0.1% to 9.8%. The best explanation for last month’s rise and this month’s expected small dip is that the deep crisis sent many people off charts. As they stopped being part of the workforce, they didn’t contribute to the unemployment rate.
Now that they’re starting to get back, they enlarge the total workforce in a similar scale to the gain in jobs, thus leaving the unemployment rate almost unchanged.
Impact on forex trading
Yet again, this seems to be another win-win situation for the dollar, especially in the Euro/Dollar and the Pound/Dollar. If the results come as expected, it will be another sign of the American economy’s strength. This strength stands out against the great European weakness and against the Pound that follows it.
On the other hand, the Canadian and Australian economies are also doing quite well, and could still rise after this result. AUD/USD has lots of room to rise after the recent falls, driven mostly by risk aversive action. A good NFP will trigger risk appetite behavior and send the Aussie up.
Canada expects a busy week, with a possible rate hike, GDP numbers and employment figures just 90 minutes before the NFP. If Canadian numbers are OK, USD/CAD could fall.
Scenarios for surprises – dollar strength expected.
A disappointing outcome of the Non-Farm Payrolls or a rise of the unemployment rate above 10% could trigger risk aversive trading across the board, hurting also stronger currencies. We’ve seen the dollar rise after weak GDP and weak jobless claims last week. In these chaotic days, bad news, even if they come from the US, trigger dollar buying.
The opposite scenario, of a big drop in the unemployment rate and an even-higher gain in jobs, the dollar will stand out against all the currencies, and will fully justify its safe haven status.
We have lots of other major events before Friday’s NFP. How do you see the Non-Farm Payrolls unfold for forex trading?
GBP/USD Weekly Technical Analysis (May 31- June 04 2010)
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:
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:
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%.
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.
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.
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.
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.
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.
GBP/USD graph with support and resistance lines marked. Click to enlarge:
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:
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%.
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.
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.
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.
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.
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.
GBP/USD Weekly Technical Analysis (May 31- June 04 2010)
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:
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:
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%.
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.
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.
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.
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.
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.
GBP/USD graph with support and resistance lines marked. Click to enlarge:
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:
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%.
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.
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.
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.
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.
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.
EUR/JPY Weekly Technical Analysis and Trade (May 31 - June 4 2010)
Weekly
Last Candlesticks pattern: Evening star
Time of formation: June 2009
Trend bias: Sideways
Daily
Last Candlesticks pattern: Shooting star
Time of formation: 14 Aug 2009
Trend bias: Up
Although the single currency resumed medium term downtrend as suggested in our previous update and reached our indicated downside target at 110.49 and 109.12, as the currency pair has rebounded from this week’s low of 108.83, suggesting a minor low has possibly been formed and consolidation with mild upside bias is seen for retracement to 114.40/50, break there would bring stronger rebound towards 116.13 (38.2% Fibonacci retracement of 127.95 to 108.83) but reckon the Kijun-Sen (now at 119.15 would remain intact.
On the downside, expect pullback to be limited to 111.50 and reckon 110.00 would hold and bring such a rebound later. Only below yesterday’s low at 109.20 would risk a retest of 108.83 and break of latter level would signal medium term downtrend is still in progress, then weakness to 108.35 (100% projection of 139.26-119.66 measuring from 127.95) and possibly 107.00 would follow before prospect of another rebound.
Recommendation: Buy towards 111.00 for 115.00 with stop above 109.00.
On the weekly chart, although euro fell marginally to 108.83 this week, lack of follow through selling and the rebound from there suggest a possible ‘hammer’ candlestick pattern formation is under way and if price close around current level today, this would add credence to this reversal pattern formation. Having said that, we need to see a long white candle to be formed next week in order to provide confirmation of a temporary low and bring retracement of recent decline towards the Tenkan-Sen (now at 118.37) but reckon the Kijun-Sen (now at 121.69) would hold.
On the downside, expect 110.40/50 to contain pullback and bring such a rebound. Only breach of this week’s low at 108.83 would signal downtrend is still in progress and extend weakness to 107.00 and 106.00 but reckon downside would be limited to 105.00 and 103.48 (61.8% projection of 169.97 to 112.08 measuring from 139.26) should hold.
Last Candlesticks pattern: Evening star
Time of formation: June 2009
Trend bias: Sideways
Daily
Last Candlesticks pattern: Shooting star
Time of formation: 14 Aug 2009
Trend bias: Up
Although the single currency resumed medium term downtrend as suggested in our previous update and reached our indicated downside target at 110.49 and 109.12, as the currency pair has rebounded from this week’s low of 108.83, suggesting a minor low has possibly been formed and consolidation with mild upside bias is seen for retracement to 114.40/50, break there would bring stronger rebound towards 116.13 (38.2% Fibonacci retracement of 127.95 to 108.83) but reckon the Kijun-Sen (now at 119.15 would remain intact.
On the downside, expect pullback to be limited to 111.50 and reckon 110.00 would hold and bring such a rebound later. Only below yesterday’s low at 109.20 would risk a retest of 108.83 and break of latter level would signal medium term downtrend is still in progress, then weakness to 108.35 (100% projection of 139.26-119.66 measuring from 127.95) and possibly 107.00 would follow before prospect of another rebound.
Recommendation: Buy towards 111.00 for 115.00 with stop above 109.00.
On the weekly chart, although euro fell marginally to 108.83 this week, lack of follow through selling and the rebound from there suggest a possible ‘hammer’ candlestick pattern formation is under way and if price close around current level today, this would add credence to this reversal pattern formation. Having said that, we need to see a long white candle to be formed next week in order to provide confirmation of a temporary low and bring retracement of recent decline towards the Tenkan-Sen (now at 118.37) but reckon the Kijun-Sen (now at 121.69) would hold.On the downside, expect 110.40/50 to contain pullback and bring such a rebound. Only breach of this week’s low at 108.83 would signal downtrend is still in progress and extend weakness to 107.00 and 106.00 but reckon downside would be limited to 105.00 and 103.48 (61.8% projection of 169.97 to 112.08 measuring from 139.26) should hold.
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