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:

1. 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.


2. 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.


3. 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.


4. 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.


5. 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.

AUD/USD Weekly Technical Forecast (June 28-July 2 2010)

Retail Sales as well as building approvals are the highlights in a busy Australian week. Will the Aussie continue north? Here’s an outlook for the Australian events and an updated technical analysis for AUD/USD.

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



The Chinese move on the yuan is great for Australia, that exports commodities to China. With a stronger yuan, the Chinese can buy more. As the dust settled from  this move, the political problems in Australia hurt the Aussie. With the new Prime Minister sworn in, the focus returns to fundamentals:

1. HIA New Home Sales: Publication time unknown at the moment. The Housing Industry Association showed a bit leap in prices last month – 6.2%. This comes despite the rate hikes that partially cooled the Australian housing sector. A smaller rise is expected this time.


2. MI Inflation Gauge: Published on Tuesday at 00:30 GMT. The official inflation figures are released only once a quarter. So, this unofficial release from the Melbourne Institute tends to moves the Aussie. After rises of 0.4% or 0.5% in recent months, a weaker rise in prices is predicted this time.


3. Private Sector Credit: Published on Wednesday at 1:30 GMT. More lending means more economic activity, but last month’s small rise of 0.2% was quite disappointing for the Aussie. This followed 4 stronger months. A return to higher growth rates will probably be reported by the RBA this time.


4. AIG Manufacturing Index: Published on Wednesday at 23:30 GMT. The Australia Industry Group publishes a PMI-like indicator that has been above 50 in the past 5 months. This means expectations for economic expansion. The drop from the high 59.8 points to 56.3 last month is expected to be followed by a stable number this time.


5. Chinese Manufacturing PMI: Published on Thursday at 1:00 GMT. China is Australia’s main trade partner. Growth in Chinese manufacturing translates into more imports from Australia. After peaking at 55.7 points, this Chinese indicator fell to 53.9 points this time. A rise is expected this time.


6. Retail Sales: Published on Thursday at 1:30 GMT. This major consumer-related indicator rose by 0.6% last month, showing confidence for a second month in a row, despite the rate hikes. A smaller rise is expected this time.


7. Commodity Prices: Published on Thursday at 6:30 GMT. Australia’s commodity-oriented economy enjoyed a recovery in commodity prices in June. This will be reflected in this  indicator that is expected to show a year-over-year growth rate of over 50%, boosting the Aussie.


8. Building Approvals: Published on Friday at 1:30 GMT. This indicator is very volatile, and tends to have a strong impact on the Aussie. A drop of almost 15% was reported in approvals last month, but this was merely a correction for a 17% rise beforehand. A rise in approvals will empower the Aussie.

AUD/USD Technical Analysis

The Aussie’s crazy week began with a temporary jump above 0.8735 and then 0.88, but this changed quickly. The pair deteriorated quickly and dipped below 0.86 before recovering and settling slightly higher than last week – at 0.8741. Note that most lines haven’t changed since last week’s outlook.

Looking up, 0.88 continues to be a minor line of resistance, and the break above it was false. Higher, 0.90 is a round psychological number and also was a swing low in March.

Higher, 0.9135 was a very strong line of support when the pair was trading higher, and now works as resistance. The next important line far above is 0.9327, which was a strong line of resistance many times in the past.

Looking down, immediate support is found at 0.8735, which was December’s low, and worked as a line of resistance in the previous week. Lower, 0.8360 was a pivotal line a few weeks ago.

Lower, 0.8240 was a strong resistance line in 2009 and worked when the pair was trading lower recently. Below, the year-to-date low of 0.8066 provides strong support. That’s quite far now.

I remain bullish on the Aussie.

The political crisis that rocked the Aussie is over, with a new Prime Minister, Julia Gillard, quickly assuming office. With the revaluation of the Chinese yuan, a high interest rate and strong economy, the Australian dollar continues to have good reasons to rise.

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.

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.

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?

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.