USD/CAD Weekly Technical Forecast (SEP 13-17 2010)

The Canadian dollar had a busy and positive week, and will now have a lighter one – a week in which technicals will have more impact. Here’s an outlook for the Canadian events and an updated technical analysis for USD/CAD, now at lower ground.

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



The third rate hike in Canada wasn’t fully priced, and the release boosted the Canadian dollar. Employment data was also better than predicted and helped push USD/CAD lower. This week, quarterly figures will provide a long term view.

1. Labor Productivity: Published on Tuesday 12:30. This quarterly release comes rather late. Nevertheless, it’s of high importance and rocks the loonie. In Q1, productivity rose by only 0.7%, half of early expectations. This was good for the Canadian dollar, as low productivity means higher salaries – higher inflation. A similar rise in productivity is expected now – 0.9%.


2. Capacity Utilization Rate: Published on Tuesday, 12:30. Utilizing more of the available resources means a stronger economy and a chance of a rate hike to cool it down. In Q1, the utilization rate climbed to 74.2%. A similar rate is expected now.


3. Manufacturing Sales: Published on Wednesday, 12:30. Sales at the gates of manufacturers serve as a good gauge. This stable indicator rose by 0.1% last month, weaker than previous months but exceeding expectations of a drop. Another modest rise is predicted now.

All times are GMT.

USD/CAD Technical Analysis

The Canadian dollar’s week didn’t start of well – An initial drop lower failed and USD/CAD rose to test the 1.05 line (mentioned in last week’s outlook). It then made a sharp drop under 1.04 and tested 1.0280 before closing at 1.0366.

The 1.04 line was the bottom border of a long-term wide range between 1.04 and 1.0750, and now serves as a minor resistance line. Above, 1.05 capped the pair in the past week and also a few weeks ago – it’s now a strong resistance line.

Higher, 1.0680 is a double and stubborn top – it capped USD/CAD at the end of August and also at the beginning of July. Above this line, the pair will meet resistance at 1.0750 which was a resistance line in May last time, and then 1.0850, a swing high in May that also provided resistance back in 2009.

Looking down, 1.0280 supported the pair in July and was also tested in the past week – making it a strong support line. Lower, 1.02 was the 2009 low and also worked as a resistance line after the pair hit parity. It’s now a minor support line.

Lower, the 1.01 line provided support in May and in August and is a strong support line before the ultimate line – parity.

I remain bearish on USD/CAD.

This week’s excellent job figures, among other figures, showed that Canada is on the right track, and will outshine other countries.

EUR/USD Weekly Summary: Risk appetite helps Euro hold above technical support

The EUR/USD had a bearish momentum this week. Opened at 1.2892, price bottomed at 1.2643, which is the 23.6% Fibonacci retracement of 1.5140 - 1.1876, and closed at 1.2710 on Friday. On daily chart below we can see that price has been indecisive from Wednesday to Friday after dropped significantly on Tuesday. Price made some attempts to break below the trend line support but a serial of better than expected economic data from UK (Halifax HPI),  US (Trade balance, Unemployment Claims)  and Euro zone itself (French Industrial Production)  triggered risk appetite sentiment and hold the Euro above trend line support. I still believe that the major technical scenario remains bearish. Judging from the price action after the data release, the bullish reactions were short lived indicating bearish pressure is still alive and kicking. For the upcoming week, my technical focus remains to see what happen to the trend line support. Consistent move below the trend line support and 1.2643 could trigger further bearish continuation at least testing 1.2523 even lower. But if we keep seeing rejection to move below the trend line support, the bearish pressure may get exhausted and on the other hand, the upside pressure could gain some momentum testing 1.2770. Break above that area could trigger further upside pressure testing 1.2850 - 1.2930 region. Let's see what will happen and hope we can react correctly to any facts in the market.

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.

USD/CAD Weekly Technical Forecast (SEP 6-10 2010)

A very busy week expects loonie traders, including a rate decision and employment data. Here’s an outlook for the Canadian events, and an updated technical analysis for USD/CAD.

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



Canadian GDP for the second quarter, completed with the past week’s release for June, was somewhat disappointing, after two great quarters. The overall situation is still good. This week’s 7 important Canadian releases will shed a lot of light on the current situation. Let’s start:

1. Building Permits: Published on Wednesday at 12:30 GMT. This is a volatile, yet important gauge for the Canadian economy. Last month’s 6.5% rise in permits boosted the Canadian dollar and corrected the 8.2% fall that was seen in the previous month. The see-saw is predicted to continue with a drop of 5.8%.


2. Rate decision: Published on Wednesday at 13:00 GMT. There is no clear consensus about this rate decision. After two rate hikes, Mark Carney’s BOC is in a dilemma. On one hand, the economy is doing quite well, and there’s a fear of rising inflation. On the other hand, Canada’s main trader partner, the US, is suffering from a slowdown, that can undermine growth in Canada. So, both an unchanged Overnight Rate of 0.75% and a hike to 1% are equally possible. This means higher than normal volatility around the release. Aslo note the accompanying statement which will indicate future moves. A hike with a statement that there will be a pause from now on can weaken the loonie.


3. Ivey PMI: Published on Wednesday at 14:00 GMT. The Richard Ivey School of Business disappointed in its last release. The score fell to 54 points, showing that purchasing managers see less expansion. A similar number is expected this time. Only a rise above 50 points, as seen three months ago, will boost the loonie.  A rise to 55.8 is expected.


4. Housing Starts: Published on Thursday at 12:15 GMT. Complementing on the figure from the previous day, this housing figure wasn’t too good – it fell for the 4th straight month to 189K, the lowest level since February. Another curb is due now, to 185K.


5. Trade Balance: Published on Thursday at 12:30 GMT. Canada enjoyed a surplus in its trade balance up to April, but the number then turned negative, and even deteriorated to a deficit of 1.1 billion in last month’s release. This deficit will probably squeeze to 0.8 billion. Note that the American trade balance is released at the same time, making the timing very volatile for USD/CAD.


6. NHPI: Published on Thursday at 12:30 GMT. The last housing figure is an official release of the change in prices of new homes. After 3 months of a 0.3% rise, this stable indicator rose by only 0.1% last month. A stronger rise will probably be seen now. Due to the timing of the publication, together with the trade balance, the impact will probably be quite modest.


7. Employment data: Published on Friday at 11:00 GMT. The best is kept for last. After three superb months of big gains in jobs, including a surge of 93K jobs one time, last month saw a correction with a loss of 9300 jobs and a rise of the unemployment rate back to the round number of 8%. A gain of 17.6K in jobs is expected now, but the unemployment rate is likely to remain unchanged at 8%.

USD/CAD Technical Analysis

The Canadian dollar had a bad start to the week – USD/CAD failed to break below 1.05 and jumped towards the stubborn 1.0680 line (mentioned also in last week’s outlook). It then made another failed attempt to go under 1.05, but on Friday, this line finally broke and USD/CAD even extended its fall below the 1.04 line.

USD/CAD now trades between support line of 1.0280 and 1.04, which was a long-term bottom border of wide range. It’s now a minor resistance line.

Looking up, the next resistance line is at 1.05, which worked as a strong support line during most of the past week. Higher, the 1.0680 line was successfully tested for a second week in a row, making it a very strong resistance line.

Above, the 1.0750 line was the top border of a long term range, and also a swing high in May. Another swing high in May, the 1.0850 line, works as the next line of resistance, after working as such back in 2009 as well.

Lower, the 2009 low of 1.02 serves as the next line of support. Below, 1.01 capped the pair after it reached parity in April, and also was a low point a few weeks ago.

The ultimate line of support is parity – which got closer in the past week. Beyond parity, 0.98 and 0.97 provide support. They’re far now.

I remain bearish on USD/CAD.

The improvement in US jobs is good for Canada as well, as the US is Canada’s main trade partner. This week is very important for the loonie. A rate hike and positive job figures can send USD/CAD for another attempt on parity.

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.

USD/CAD Weekly Technical Forecast – June 28 – July 2

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

Canadian CPI came out as expected, and this wasn’t loonie-positive. There’s no rush for speedy tightening cycle by the central bank.
RMPI: Published on Tuesday at 12:30 GMT. The Raw Materials Price Index made a leap in last month’s release – 1.7%, stronger than expected. The Canadian dollar isn’t expected to enjoy this indicator now, as the figure relates to May, a bad month in the global markets.
GDP: Published on Wednesday at 12:30 GMT. The Canadian economy grew by 0.6% in March, better than expected. This concluded a great first quarter with an annual growth rate of 6.1%, double the American growth rate. A similar growth rate is expected in April, the first month of Q2.

USD/CAD Technical Analysis

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

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

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

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

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

I remain bearish on USD/CAD.

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

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:

1. 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.


2. 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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Technical Analysis for Beginners. Dow Theory

In general, technical analysis can be defined as a method of price prediction based on mathematical calculations instead of economic reports. This method has been created for applicable needs in getting profit on stock and currency market. Initially technical analysis was divided into several techniques and only in the 70-ths all these methods were united into an integral approach with common psychology, axioms and ruling principles.

Technical analysis is a way to forecast probable price movement with the help of market movement charts reflecting the history of fluctuations. Practical usage of technical analysis determines several axioms.

Axiom 1

Every price formation factor, - economical, political, psychological has been taken into account and reflected on the chart. Once news is issued, market prices will move to reflect this new information.

Axiom 2

Price movement has got its direction. This suggestion has become a basis in all the techniques of technical analysis. The main purpose of technical analysis is defining of probable rate movement (trends in other words) and to apply acquired knowledge in trading. The definition given by Dow says that during bullish trend each consequent peak and fall is higher than the previous one. This suggestion is the main fundamental principle of technical analysis. Trends are classified into three types: bullish (upside movement), bearish (downside movement) and sideway trading (the price remains practically unchanged). Each of the given types is rarely encountered in its pure form, as straight price actions occur not very often in the market.

A certain trend is seen until some signs delivering opposite direction appear. According to Dow, trends exist in spite of market noise. However, in real practice it is not easy to determine whether a reversal is a starting point for a new trend or just a temporary movement. Contemporary technical tools permit traders to define it with easy, however, different traders interpret trend signals differently.

Axiom 3

Analysts predict if a certain rule worked in the past, this rule may be applicable in future as the price is formed mostly due to human psychology. These are the main fundamental ideas of technical analysis:

Rate takes everything into account, therefore, everything needed to master this field is to study price charts. The aim is to find out trends at their initial phases, to recognize a trend and to use the knowledge in further development making right decisions. And the last idea is that if something worked in the past, it will probably work in future.

The Dow theory denotes the "main movement", the "medium swing" and the "short swing". The "main movement" is a prevailing component as it may last for several years. The "medium swing" is a correction to the main movement and should last from ten days to three months. The "short swing" or minor movement fluctuations may last up to three weeks.

According to the theory market moving averages must confirm each other and every thend should be confirmed by volume. Dow assumed that volume confirmed every price trend.

Many modern technical analysts treat Dow Theory's definition of a trend as the main basics of contemporary technical analysis.

Related Blogs

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/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.

GBP/USD Technical Analysis (June-01-2010)

The GBPUSD had a bullish momentum yesterday, but still unable to move consistently above 1.4527 region so far. On h4 chart below we can see that price is now struggling around to bullish channel lower line indicating critical technical point. A clear break below the bullish channel could trigger further bearish momentum towards 1.4350 before re-testing 1.4240 region. On the other hand, as long as price able to move inside the bullish channel, the upside correction scenario remains intact with 1.4608 and 1.4715 as technical target.

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.

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.

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.

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 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.

EUR/USD Daily Technical Forecast ( May-25-2010)

EUR/USD's break of 1.2295 minor support suggests that recovery from 1.2143 has completed at 1.2671 already. Intraday bias is flipped back to the downside for 1.2143 low first. break will confirm down trend resumption for 1.2 psychological level next. On the upside, above 1.2415 minor resistance will delay the bearish case and bring more consolidations first. But upside should be limited by 38.2% retracement of 1.3691 to 1.2143 at 1.2734 and bring fall resumption.

In the bigger picture, the break of 1.2329 low confirms that whole down trend from 2008 high 1.6039 has resumed. Such down trend should now target 1.1639 key support level and possibly further to 100% projection of 1.6039 to 1.2329 from 1.5143 at 1.1433. On the upside, break of 1.3266 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.

EUR/USD Daily Technical Forecast ( May-25-2010)

EUR/USD's break of 1.2295 minor support suggests that recovery from 1.2143 has completed at 1.2671 already. Intraday bias is flipped back to the downside for 1.2143 low first. break will confirm down trend resumption for 1.2 psychological level next. On the upside, above 1.2415 minor resistance will delay the bearish case and bring more consolidations first. But upside should be limited by 38.2% retracement of 1.3691 to 1.2143 at 1.2734 and bring fall resumption.

In the bigger picture, the break of 1.2329 low confirms that whole down trend from 2008 high 1.6039 has resumed. Such down trend should now target 1.1639 key support level and possibly further to 100% projection of 1.6039 to 1.2329 from 1.5143 at 1.1433. On the upside, break of 1.3266 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.

Forex Intra-Day Trading Strategy

Overview

This forex day trading strategy will focus on one of the best analysis method for forex trading - the use of multiple time frames.

Basically, in this strategy, we will use the longer timeframe (chart #1) to define our support and resistance price levels and the shorter timeframe (chart #2) for our trading entry, stop-loss and exit levels.

Also, for confirmation and momentum measurement we will use slow stochastic oscillator indicator (one of the best momentum indicators).

Forex day trading strategy rules:

1. We use two time frames, long time frame - 4 hour and short time frame - 15 minute.


2. We identify the support and resistance price levels on the longer timeframe a day before.


3. We apply the stochastic indicator in both time frames to determine if we enter long or short position in our next intraday trading.

Case study - Forex (Foreign Exchange) USD/JPY Multiple Time Frame Bar Charts

USD/JPY 4 Hour Bar Chart (Chart #1)



Indicators and Parameters:

Support and Resistance Price Levels (Gray) - we use the swing pivot points of the previous day (yellow rectangle); 116.15,116.27,116.43,116.70 and 116.76.

Slow Stochastic Oscillator (lower window) - we set the stochastic indicator parameters for both time frames, as follow: %K period = 8, %D period = 3, Slowing = 3 (optional).

Forex day trading strategy practical analysis:

Chart #1 displays the 4 hour timeframe for the previous day (14 August).
What we can learn from this chart?

1. Resistance and Support price levels for the next day, our trading day, 15 August.

• 
  
  High = 116.73 (bar 6)


• 
  
  Low = 116.15 (bar 1)


• 
  
  The High of the swing move 0-1 = 116.43 (also the high of 11 August)


• 
  
  The High and Low of the swing move 4-5 = 116.70 (high) and 116.27 (low)

Note: as an opposite from calculated pivot points our price levels are generated from actual swing trading on this day.

2. What type of trading position we will favor the next day; short or long?

As you can see, the stochastic oscillator create diversion with this currency pair price (green line), i.e. the momentum is weakening; plus the stochastic indicates on an overbought situation (above 80 level). So, the next day (15 August), we will try to find conditions to enter a short position.

USD/JPY 15 Minute Bar Chart (Chart #2)



Forex day trading strategy - our trading day, 15 August:

At Chart #2 we can see the previous day - 14 August (yellow rectangle), our support and resistance price levels that we already identify, and the open price of our trading session at 116.62 (bar 1).

Because the open price of this day (116.62) is contained within a support/resistance horizontal channel, 116.43-116.70, and we want to place a short position, we have two options:

1. 
   
   We can enter short at 116.70, when the price retrace toward the resistance line.


2. 
   
   We can enter short at 116.38, when the price penetrate the support line (5 pips to confirm breakout).

In this case, USD/JPY currency price carried out the 116.70 short order (point A). As always, we placed immediately a stop-loss order at 116.81, 5 pips above the upper resistance price level; and a profit target order at 116.43, the next support level (point B).

Forex Day Trading Strategy Implementation

You can implement this forex day trading strategy on any fx currency pair. The mentioned setup and rules can be found almost everyday in the foreign exchange market. Good trading...