A busy week expects kiwi traders, with the interest rate decision being the highlight. Here’s an outlook for events in New Zealand and an updated technical analysis for NZD/USD.

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



The kiwi enjoyed risk appetite to make some gains. This week, it depends on its own indicators. Let’s start:

1. FPI: Published on Sunday, 22:45. New Zealand exports a lot of agricultural goods, making the price of food important of its economy. The past two months have seen nice rises in prices – 1.3% and 1.6%. A more modest rise is expected this time.


2. Retail Sales: Published on Monday, 22:45. This major consumer gauge showed strength last month by a big 0.9% jump, almost double the expectations and double the previous month’s rise. Also core retail sales shot up by 1.5%, far better than expected. An unchanged result is expected this time in retail sales, and core retail sales will probably rise by 0.1%. Retail sales tend to have a strong impact on the kiwi.


3. Rate decision: Published on Wednesday, 21:00. Alan Bollard and his colleagues at the RBNZ are expected to leave the interest Official Cash Rate unchanged at 3% this time. After two rate hikes, there’s a notion that inflation isn’t a threat that needs to be handled by a higher rate. In addition, the unemployment rate leaped above 7% once again, showing that New Zealand still needs to support the economic recovery. It’s important to note the accompanying rate statement and the wording at the press conference that follows the rate decision.


4. Business NZ Manufacturing Index: Published on Wednesday, 22:30. This figure is similar to purchasing managers’ indices, with 50 being the critical line between expansion and contraction. Last month’s score of 49.9 points, just under the bar, was worrying for the kiwi. It’s now expected to rise back up above 50.


5. Westpac Consumer Sentiment: Published on Friday. This quarterly survey of 1500 consumers usually rocks the kiwi. After dropping in the first quarter, this indicator made a comeback in Q2 with a score of 119.3 points. Any figure above 100 points means economic optimism. Another rise is expected now.

All times are GMT.

NZD/USD Technical Analysis

The kiwi drifted in between 0.7160 and 0.7250 (a resistance line that didn’t appear in last week’s outlook). It later managed to rise above this level and test the 0.73 resistance line before closing at 0.7279.

This week’s high of 0.73 was also a peak in mid July, and is now a strong resistance line. Higher, the stubborn peak of 0.7356 in August provides further resistance.

Moving higher, the 0.7440 area capped the pair for a few consecutive days in January and is a strong resistance line. The next resistance line is 0.7523, the swing high back in November. It’s followed by 0.7634, another swing high back in October.

Looking down, 0.7250 was a stepping stone for the kiwi on its way up and also in April, and provides minor support. Lower, 0.7160 provided support recently and worked as a resistance line in June – it’s now a significant support line.

Below, 0.71 had a role  in July and also back in November as a support line. More serious support appears at 0.70, the round number that is closely eyed by many traders. The last support line for now is at 0.69, which capped the kiwi after the downfall in May.

I am bearish on the kiwi.

Despite the recent gains, New Zealand doesn’t enjoy the strong fundamentals of its neighbor. I believe that the pause in rate hikes will take its toll on the currency.

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.

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

The internal elections in Japan’s ruling party are the main theme this week, among other events. Here’s an outlook for the Japanese events and an updated technical analysis for the falling USD/JPY.

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



There has been a lot of talk about an intervention to weaken the yen. Only a coordinated intervention can have a long term effect. Will it happen this week? Or will the talk continue? Let’s start:

1. Revised Industrial Production: Published Tuesday, 4:30. Japanese industrial output showed a modest rise of 0.3% according to the initial release. This came after a drop of 1.1% drop in the previous month. The rise will probably be confirmed now.


2. Leadership elections: Tuesday. The Japanese prime minister, Naoto Kan, has been in office only for a few months, and is now challenged by Ichiro Ozawa,  a veteran politician. Mr. Ozawa raised the issue of the strong yen many times during his election campaign and put it high on the agenda. A victory by Ozawa means yet another prime minister for Japan, the third this year. Political uncertainty and the vow to fight the strong yen may hurt the yen. A victory by current PM Kan will boost the yen.


3. Tertiary Industry Activity: Published Wednesday, 23:50. This services sector indicator is a good gauge for the Japaneses economy. The past two months shows a decline of 0.9% and 0.1%. A rise of 0.7% is expected this time.


4. Masaaki Shirakawa talks: Begins speaking on Thursday, 6:00. The governor of the BOJ will speak at a conference in Tokyo and is likely to mention the high level of the yen. If he reiterates the words from previous appearances, the market will dismiss it. Only firmer talk can move the currency.

All times are GMT.

USD/JPY Technical Analysis

USD/JPY began the week by dropping lower, setting a fresh 15-year low at 83.34. It didn’t stay there too long and gradually climbed higher, to close at 84.16.

84.80, which was a support line in August and also a swing low in November, now serves a strong resistance line. Above this line, the next line that will cap the dollar in case of surge is the 86.30 line which was a support line twice in July.

Higher, 88 was a cushioned the pair in October, March and May. Higher, there are two lines close to each other – 89.15 was a resistance line in July and a support line in May, and 89.75, a weaker line, which provided support in March.

Downtrend channel – the recent descent of USD/JPY is characterized in an imperfect downtrend channel – the downtrend resistance was formed from the 89.15 line and continued with two perfect touches. The downtrend support that was formed earlier (in June) served as perfect support three times since then, but was also violated briefly once.

I am bullish on USD/JPY.

The talks about intervention are mounting – while they have proved fruitless up to now, there’s a chance of an intervention due to the depth this pair reached, and the internal political tensions that the currency is causing in Japan. Only a globally coordinated intervention will have a big long term impact.

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/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.

Weekly

• Last Candlesticks pattern: Hammer


• Time of formation: 27 June 2010


• Trend bias: Sideways

Daily

• Last Candlesticks pattern: Shooting star


• Time of formation: 13 Oct 2009


• Trend bias: Up

EURGBP – 0.8309

Euro’s rebound from 0.8143 is slightly stronger than expected and near term upside risk is seen for gain to the Ichimoku cloud bottom (now at 0.8363) and then 0.8383 (61.8% Fibonacci retracement of 0.8532 to 0.8143), however, the upper Kumo (now at 0.8421) should attract renewed selling interest and bring another decline later. A daily close below the Tenkan-Sen (now at 0.8235) would revive our bearishness and bring another fall towards 0.8143. Looking ahead, once this support is penetrated, this would signal the correction from 0.8067 has indeed ended at 0.8532 and bring resumption of early downtrend for retest of this level later this month.

On the upside, a daily close above the Ichimoku cloud top (now at 0.8421) would dampen our bearishness and prolong choppy consolidation, then another corrective rise towards 0.8532 resistance cannot be ruled out, however, break there is needed to bring stronger retracement of early downtrend towards 0.8608-09 (100% projection of 0.8067 to 0.8532 measuring from 0.8143 and 50% Fibonacci retracement of 0.9150 to 0.8067).

Recommendation: Exit short entered at 0.8300 and look to sell euro again at 0.8400 for 0.8250 with stop above 0.8470



On the weekly chart, despite falling marginally to 0.8143 last week, the subsequent rebound from there just brought test of the Tenkan-Sen and consolidation with mild upside bias would be seen and recovery to 0.8380/85 (61.8% Fibonacci retracement of 0.8532 to 0.8143) cannot be ruled out, however, reckon upside would be limited to 0.8400/10 and resistance at 0.8532 should continue to hold, bring another decline later. Break of said support at 0.8143 would revive our bearish view that correction from 0.8067 has ended at 0.8532 and bring resumption of medium term downtrend for retest of 0.8067, then to 0.7991-0.8000 (50% projection of 0.9150-0.8067 measuring from 0.8532 and psychological support) but reckon 0.7839 (1.618 times projection of 0.9413 to 0.8063 measuring from 0.9150) would hold from here.

On the upside, above 0.8415/20 would risk another test of 0.8532 but only break of latter level would signal a temporary low has been formed at 0.8067 and bring retracement of recent decline to 0.8601-09 (current level of the Kijun-Sen, 100% projection of 0.8067 to 0.8532 measuring from 0.8143 and 50% Fibonacci retracement of 0.9150 to 0.8067) but reckon 0.8740 (50% Fibonacci retracement of 0.9413-0.8067) would hold from here.

EUR/GBP Elliot Wave Weekly Forecast and Trade(SEP 6- 10)

Weekly

• Last Candlesticks pattern: Hammer


• Time of formation: 27 June 2010


• Trend bias: Sideways

Daily

• Last Candlesticks pattern: Shooting star


• Time of formation: 13 Oct 2009


• Trend bias: Up

EURGBP – 0.8309

Euro’s rebound from 0.8143 is slightly stronger than expected and near term upside risk is seen for gain to the Ichimoku cloud bottom (now at 0.8363) and then 0.8383 (61.8% Fibonacci retracement of 0.8532 to 0.8143), however, the upper Kumo (now at 0.8421) should attract renewed selling interest and bring another decline later. A daily close below the Tenkan-Sen (now at 0.8235) would revive our bearishness and bring another fall towards 0.8143. Looking ahead, once this support is penetrated, this would signal the correction from 0.8067 has indeed ended at 0.8532 and bring resumption of early downtrend for retest of this level later this month.

On the upside, a daily close above the Ichimoku cloud top (now at 0.8421) would dampen our bearishness and prolong choppy consolidation, then another corrective rise towards 0.8532 resistance cannot be ruled out, however, break there is needed to bring stronger retracement of early downtrend towards 0.8608-09 (100% projection of 0.8067 to 0.8532 measuring from 0.8143 and 50% Fibonacci retracement of 0.9150 to 0.8067).

Recommendation: Exit short entered at 0.8300 and look to sell euro again at 0.8400 for 0.8250 with stop above 0.8470



On the weekly chart, despite falling marginally to 0.8143 last week, the subsequent rebound from there just brought test of the Tenkan-Sen and consolidation with mild upside bias would be seen and recovery to 0.8380/85 (61.8% Fibonacci retracement of 0.8532 to 0.8143) cannot be ruled out, however, reckon upside would be limited to 0.8400/10 and resistance at 0.8532 should continue to hold, bring another decline later. Break of said support at 0.8143 would revive our bearish view that correction from 0.8067 has ended at 0.8532 and bring resumption of medium term downtrend for retest of 0.8067, then to 0.7991-0.8000 (50% projection of 0.9150-0.8067 measuring from 0.8532 and psychological support) but reckon 0.7839 (1.618 times projection of 0.9413 to 0.8063 measuring from 0.9150) would hold from here.

On the upside, above 0.8415/20 would risk another test of 0.8532 but only break of latter level would signal a temporary low has been formed at 0.8067 and bring retracement of recent decline to 0.8601-09 (current level of the Kijun-Sen, 100% projection of 0.8067 to 0.8532 measuring from 0.8143 and 50% Fibonacci retracement of 0.9150 to 0.8067) but reckon 0.8740 (50% Fibonacci retracement of 0.9413-0.8067) would hold from here.

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.

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.

The upcoming week consists of industrial production publications among other figures. Here’s an outlook for European indicators and an updated technical analysis for EUR/USD.

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



EUR/USD managed to cling to the uptrend channel, even through Friday’s release of US Non-Farm Payrolls, which came out better than expected. This week is rather mild regarding US releases. Let’s see the European ones:

1. Sentix Investor Confidence: Published on Monday at 8:30 GMT. This survey of 2800 analysts and investors finally turned positive last month, for the first in a few years. The positive score of 8.2 points means optimism about the economy. Another rise to 9.3 points is predicted now.


2. German Factory Orders: Published on Tuesday at 10:00 GMT. The Euro-zone’s largest economy enjoyed a fantastic leap in orders last month – 3.2%, double the expectations. Another rise is expected now, but it will probably be slower – 0.6%.


3. German Industrial Production: Published on Wednesday at 10:00 GMT. Complementing on the figure from the previous day, also here growth is expected (1.1%). But contrary to factory orders, the change in the value of the industry disappointed with a 0.6% drop last month. If both figures go in the same direction this time, it will shape the direction of the Euro.


4. German Final CPI: Published on Thursday at 6:00 GMT. Inflation isn’t a threat in the Euro-zone. According to the initial release, prices remained unchanged in August. This will probably be confirmed now.


5. ECB Monthly Bulletin: Published on Thursday at 8:30 GMT. This collection of statistical data is what the ECB sees when it comes to make a decision. The last rate decision by the ECB didn’t include a rate hike, but it did consists of interesting thoughts about the economy. We’ll now get to see what central bankers were looking at. This always rocks the Euro.


6. French Industrial Production: Published on Friday at 6:45 GMT. Europe’s second largest economy suffered from a big plunge in industrial output – 1.7% last month. A correction of 0.8% is expected now in this volatile indicator.

EUR/USD Technical Analysis

The Euro began the week with a gradual fall below 1.2722 (mentioned in last week’s outlook) and bottomed out at 1.2625. It then made a leap upwards, and after a struggle with the 1.2840 line, it managed to close just under 1.29, a weekly gain of about 150 pips.

After this move upwards, Euro/Dollar is now in a range between 1.2840, which is a minor support line and 1.2930 which was a stubborn resistance line at the beginning of August.

Above, the round number of 1.30 is the next resistance line, working as such in July. Higher, the 1.3110 line worked earlier this year as a support line and recently as resistance and now serves as a strong line of resistance.

Higher, 1.3267 held the pair before its collapse in May and also provided some resistance in the recent surge. The last resistance line for now is 1.3435, which also changed its role from support to resistance.

Looking down, the 1.2722 line is still relevant, despite being crossed several times in the past week. It’s now a minor support line. Below, 1.2610 the swing high in July and also served as support recently is a strong support line.

Lower, 1.2460 capped the pair when it was trading lower, in May and in June. Below, the “Lehman levels” – lows of 2008, continue to provide minor support.

A strong support line appears at 1.2150, which worked as a very strong line of support, and briefly as resistance. Even lower, the round number of 1.20 is the next line of support, before the year-to-date low of 1.1876.

I remain bearish on EUR/USD.

Despite the hope that came from the Non-Farm Payrolls, austerity measures in Europe still make the Euro-zone vulnerable. Range trading will probably be seen at the beginning of the week, and more price action will happen towards the end of it.

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

The upcoming week consists of industrial production publications among other figures. Here’s an outlook for European indicators and an updated technical analysis for EUR/USD.

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



EUR/USD managed to cling to the uptrend channel, even through Friday’s release of US Non-Farm Payrolls, which came out better than expected. This week is rather mild regarding US releases. Let’s see the European ones:

1. Sentix Investor Confidence: Published on Monday at 8:30 GMT. This survey of 2800 analysts and investors finally turned positive last month, for the first in a few years. The positive score of 8.2 points means optimism about the economy. Another rise to 9.3 points is predicted now.


2. German Factory Orders: Published on Tuesday at 10:00 GMT. The Euro-zone’s largest economy enjoyed a fantastic leap in orders last month – 3.2%, double the expectations. Another rise is expected now, but it will probably be slower – 0.6%.


3. German Industrial Production: Published on Wednesday at 10:00 GMT. Complementing on the figure from the previous day, also here growth is expected (1.1%). But contrary to factory orders, the change in the value of the industry disappointed with a 0.6% drop last month. If both figures go in the same direction this time, it will shape the direction of the Euro.


4. German Final CPI: Published on Thursday at 6:00 GMT. Inflation isn’t a threat in the Euro-zone. According to the initial release, prices remained unchanged in August. This will probably be confirmed now.


5. ECB Monthly Bulletin: Published on Thursday at 8:30 GMT. This collection of statistical data is what the ECB sees when it comes to make a decision. The last rate decision by the ECB didn’t include a rate hike, but it did consists of interesting thoughts about the economy. We’ll now get to see what central bankers were looking at. This always rocks the Euro.


6. French Industrial Production: Published on Friday at 6:45 GMT. Europe’s second largest economy suffered from a big plunge in industrial output – 1.7% last month. A correction of 0.8% is expected now in this volatile indicator.

EUR/USD Technical Analysis

The Euro began the week with a gradual fall below 1.2722 (mentioned in last week’s outlook) and bottomed out at 1.2625. It then made a leap upwards, and after a struggle with the 1.2840 line, it managed to close just under 1.29, a weekly gain of about 150 pips.

After this move upwards, Euro/Dollar is now in a range between 1.2840, which is a minor support line and 1.2930 which was a stubborn resistance line at the beginning of August.

Above, the round number of 1.30 is the next resistance line, working as such in July. Higher, the 1.3110 line worked earlier this year as a support line and recently as resistance and now serves as a strong line of resistance.

Higher, 1.3267 held the pair before its collapse in May and also provided some resistance in the recent surge. The last resistance line for now is 1.3435, which also changed its role from support to resistance.

Looking down, the 1.2722 line is still relevant, despite being crossed several times in the past week. It’s now a minor support line. Below, 1.2610 the swing high in July and also served as support recently is a strong support line.

Lower, 1.2460 capped the pair when it was trading lower, in May and in June. Below, the “Lehman levels” – lows of 2008, continue to provide minor support.

A strong support line appears at 1.2150, which worked as a very strong line of support, and briefly as resistance. Even lower, the round number of 1.20 is the next line of support, before the year-to-date low of 1.1876.

I remain bearish on EUR/USD.

Despite the hope that came from the Non-Farm Payrolls, austerity measures in Europe still make the Euro-zone vulnerable. Range trading will probably be seen at the beginning of the week, and more price action will happen towards the end of it.

The Pound showed weakness in the past week, and is now facing important tests. The upcoming week consists of a rate decision among other important releases. Here’s an outlook for the British events and an updated technical analysis for GBP/USD.

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



When the dollar strengthened on Friday’s Non-Farm Payrolls, the Pound suffered. When the dollar later retreated on the disappointing services PMI, the Pound only partially recovered. This is a sign of its weakness. Will it continue downwards this week? Let’s see:

1. Halifax HPI: Publication time unknown. Delayed from last week. This house price index, is one of the most accurate available, as it’s based on internal data from HBOS, one of the biggest banks in Britain. According to the bank, a three month slump in house prices stopped last month with a neat 0.6% rise. But this time, a 0.3% drop is predicted.


2. BRC Retail Sales Monitor: Published on Monday at 23:00 GMT. This indicator serves as hint for the official retail sales figure. It measures the change in volume of sales, but only for the members of the BRC. The index rose nicely in the past three months, but could dip this time, especially after last month’s growth was weak.


3. Manufacturing Production: Published on Wednesday at 8:30 GMT. Manufacturing output disappointed is the past three months by falling short of expectations, or even dropping. This gauge of the economy always rocks the Pound. Last month’s 0.3% rise will probably be followed by a similar rise this time. Note that manufacturing is part of the wider industrial production figure (expected to rise by 0.4% after dropping by 0.5% last time), but manufacturing is in the limelight.


4. NIESR GDP Estimate: Published on Wednesday at 14:00 GMT. The National Institute of Economic and Social Research publishes its highly regarded estimate of GDP every month, filling in the gap for the official government releases. The estimate for the three months that ended in July stood on 0.9%,  lower than the official 1.2% growth seen in Q2. We’ll now get news about the three months that ended in August – more information about the third quarter.


5. Trade Balance: Published on Thursday at 8:30 GMT. Britain’s deficit fell from 8 to 7.4 billion last month, boosting the Pound. This time, it’s expected to slip back up to 7.5 billion. A big disappointment can definitely hurt the Pound, as it happened when trade balance deficit jumped in May.


6. Rate decision: Published on Thursday at 11:45 GMT.  There’s still only a single member of the MPC that voted for a rate hike – Andrew Sentance. This came in response to the rising inflation, which has weakened recently, as Mervyn King had expected. So, the chances of a rate hike are lower now. The British Official Bank ate will probably stay at 0.50% once again. The wording of the MPC Rate Statement will be interesting to watch, as it may signal the roadmap for an exit strategy.


7. PPI: Published on Friday at 8:30 GMT. PPI Input, the secondary indicator of inflation was negative in the past three months, showing a significant drop in prices. The surprising drop of 1% last month will probably be followed by a 0.2% rise this time. Only a big leap will send a signal that also consumer inflation is on the rise, but this is unlikely – it will probably remain contained – showing that there’s no pressure for a rate hike. PPI Output is also expected to post a small gain – 0.1%.


8. CB Leading Index: Published on Friday at 9:00 GMT. This composite index of 7 economic indicators is based on data that has already been released. Nevertheless, it still has an impact on cable. Last month it rose by 0.5%, and the rise will probably be more moderate now.

GBP/USD Technical Analysis

The Pound began the week with a failed attempt to stabilize above 1.5520 (mentioned in last week’s outlook). After this failed, GBP/USD lost 1.5470 and continued downwards, supported by the 1.5350 line. A recovery on Friday found it struggling with the 1.5470 line from the other side, and it closed at 1.5450.

The Pound fell to a lower range – between 1.5470 which also capped the pair in July, and 1.5520, which was a peak in April and now serves as minor resistance.

Looking up, 1.5720, which supported the pair back in 2009 is the next line of resistance. Above, 1.5833, which provided support at the beginning of the year and later worked as resistance, is the next line. Higher, the psychological round number of 1.60 proved to be a tough barrier and is the highest level in 6 months.

Higher, 1.6080 is the next minor resistance line, after working as support in January. It’s followed by 1.6270, but that’s quite far at the moment.

Looking down,  1.5230 was a stubborn resistance line in July and is now a major support line. Lower, 1.5120 will provide further support after having this role in July.

The 1.5050 line capped the pair on a recovery attempt in May, and is now a minor support line. Lower, 1.4950 provided support in July and is the final line for now.

I remain bearish on GBP/USD.

Inflation has softened and doesn’t support a rate hike. Together the pause in employment improvement, the Pound is vulnerable to further losses.

GBP/USD Weekly Technical Forecast (SEP 6-10)

The Pound showed weakness in the past week, and is now facing important tests. The upcoming week consists of a rate decision among other important releases. Here’s an outlook for the British events and an updated technical analysis for GBP/USD.

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



When the dollar strengthened on Friday’s Non-Farm Payrolls, the Pound suffered. When the dollar later retreated on the disappointing services PMI, the Pound only partially recovered. This is a sign of its weakness. Will it continue downwards this week? Let’s see:

1. Halifax HPI: Publication time unknown. Delayed from last week. This house price index, is one of the most accurate available, as it’s based on internal data from HBOS, one of the biggest banks in Britain. According to the bank, a three month slump in house prices stopped last month with a neat 0.6% rise. But this time, a 0.3% drop is predicted.


2. BRC Retail Sales Monitor: Published on Monday at 23:00 GMT. This indicator serves as hint for the official retail sales figure. It measures the change in volume of sales, but only for the members of the BRC. The index rose nicely in the past three months, but could dip this time, especially after last month’s growth was weak.


3. Manufacturing Production: Published on Wednesday at 8:30 GMT. Manufacturing output disappointed is the past three months by falling short of expectations, or even dropping. This gauge of the economy always rocks the Pound. Last month’s 0.3% rise will probably be followed by a similar rise this time. Note that manufacturing is part of the wider industrial production figure (expected to rise by 0.4% after dropping by 0.5% last time), but manufacturing is in the limelight.


4. NIESR GDP Estimate: Published on Wednesday at 14:00 GMT. The National Institute of Economic and Social Research publishes its highly regarded estimate of GDP every month, filling in the gap for the official government releases. The estimate for the three months that ended in July stood on 0.9%,  lower than the official 1.2% growth seen in Q2. We’ll now get news about the three months that ended in August – more information about the third quarter.


5. Trade Balance: Published on Thursday at 8:30 GMT. Britain’s deficit fell from 8 to 7.4 billion last month, boosting the Pound. This time, it’s expected to slip back up to 7.5 billion. A big disappointment can definitely hurt the Pound, as it happened when trade balance deficit jumped in May.


6. Rate decision: Published on Thursday at 11:45 GMT.  There’s still only a single member of the MPC that voted for a rate hike – Andrew Sentance. This came in response to the rising inflation, which has weakened recently, as Mervyn King had expected. So, the chances of a rate hike are lower now. The British Official Bank ate will probably stay at 0.50% once again. The wording of the MPC Rate Statement will be interesting to watch, as it may signal the roadmap for an exit strategy.


7. PPI: Published on Friday at 8:30 GMT. PPI Input, the secondary indicator of inflation was negative in the past three months, showing a significant drop in prices. The surprising drop of 1% last month will probably be followed by a 0.2% rise this time. Only a big leap will send a signal that also consumer inflation is on the rise, but this is unlikely – it will probably remain contained – showing that there’s no pressure for a rate hike. PPI Output is also expected to post a small gain – 0.1%.


8. CB Leading Index: Published on Friday at 9:00 GMT. This composite index of 7 economic indicators is based on data that has already been released. Nevertheless, it still has an impact on cable. Last month it rose by 0.5%, and the rise will probably be more moderate now.

GBP/USD Technical Analysis

The Pound began the week with a failed attempt to stabilize above 1.5520 (mentioned in last week’s outlook). After this failed, GBP/USD lost 1.5470 and continued downwards, supported by the 1.5350 line. A recovery on Friday found it struggling with the 1.5470 line from the other side, and it closed at 1.5450.

The Pound fell to a lower range – between 1.5470 which also capped the pair in July, and 1.5520, which was a peak in April and now serves as minor resistance.

Looking up, 1.5720, which supported the pair back in 2009 is the next line of resistance. Above, 1.5833, which provided support at the beginning of the year and later worked as resistance, is the next line. Higher, the psychological round number of 1.60 proved to be a tough barrier and is the highest level in 6 months.

Higher, 1.6080 is the next minor resistance line, after working as support in January. It’s followed by 1.6270, but that’s quite far at the moment.

Looking down,  1.5230 was a stubborn resistance line in July and is now a major support line. Lower, 1.5120 will provide further support after having this role in July.

The 1.5050 line capped the pair on a recovery attempt in May, and is now a minor support line. Lower, 1.4950 provided support in July and is the final line for now.

I remain bearish on GBP/USD.

Inflation has softened and doesn’t support a rate hike. Together the pause in employment improvement, the Pound is vulnerable to further losses.

AUD/USD Weekly Technical Forecast (Sep 6-10 2010)

After a great week, another busy one expects Aussie traders. The RBA’s rate decision and employment figures are the highlights. Here’s an outlook for Australian events and an updated technical analysis for AUD/USD.

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



The Aussie enjoyed lots of good figures, with the Q2 GDP growth of 1.2% being a great positive surprise. The better-than-expected retail sales figure and especially building approvals, showed that also in Q3, the Australian economy is warming up once again. Will this lead to a renewal of rate hikes?

1. MI Inflation Gauge: Published on Monday at 12:30 GMT. The Melbourne Institute’s inflation gauge fills in for the government, that publishes an official inflation figure only once per quarter. According to MI, inflation slowed down from 0.5% three months ago, down to 0.1% last month. A similar 0.1% rise is expected this time.


2. ANZ Job Advertisements: Published on Monday at 1:30 GMT. The amount of jobs published in the media serves as a good indicator for the official employment figures released 3 days later. Last month saw a smaller growth in ads, only 1.3%, and indeed, the gain in jobs was slower than previous months. This time, the rise in ads is expected to slightly stronger.


3. AIG Construction Index: Published on Monday at 23:30 GMT. The Australia Industry Group showed that the construction sector is slowing down, even contracting in the past two months. The index was under the critical 50 point mark, and this shows an economic squeeze. This goes hand in hand with the slowdown in other housing sector figures – a result of the rate hikes. It’s expected to recover, but remain under 50 points this time.


4. Rate decision: Published on Tuesday at 4:30 GMT. 4 months have passed since the last rate hike, the sixth since the financial crisis. The hikes took their toll on the economy, and especially on real estate, so Glenn Stevens and his colleagues at the RBA decided to pause on recent months. Also now, the Cash Rate is expected to remain unchanged at 4.50%. The focus will be on the accompanying statement which will hint about future moves.


5. Home Loans: Published on Wednesday at 1:30 GMT. This important housing sector figure always rocks the Aussie. After a sharp fall of 3.9% last month and many bad months beforehand as well, the number of loans is expected to grow by 1.1% this time, boosting the Aussie.


6. Employment data: Published on Thursday at 1:30 GMT. After months of excellent figures, last month’s employment numbers were somewhat mixed. Employment Change rose by 23.5K, slightly better than expected, but the unemployment rate jumped to 5.3%, which was a quite a disappointment. A similar gain in jobs, 25.3K is expected now. The unemployment is expected to fall back down to 5.2%. Any result will rock the Aussie.


7. Guy Debelle talks: Starts speaking on Thursday at 3:00 GMT. RBA deputy governor Dr. Guy Debelle might say more about the fresh rate decision, and add prospects about the future. It’s important to note that in a speech last week, Debelle didn’t mention anything related to monetary policy.


8. Chinese Trade Balance: Published during Friday. Australia’s main trade partner has a strong impact on the Aussie. This time, the trade balance of the world’s second largest economy will be closely watched. This figure is also sensitive for the value of the Chinese yuan, which is closely monitored by the US. China’s surplus is expected to squeeze from 28.7 to 26.9 billion.

AUD/USD Technical Analysis

The Australian dollar dropped gradually at the beginning of the week, and found support at the 0.8870 line (mentioned in last week’s outlook). It then made a sharp recovery, crossing 0.90 easily, struggling with 0.9080 and finally jumping above 0.9135 to close at 0.9143.

The Aussie is now bound between the 0.9135 line which worked as support back in April, and 0.9220, which was a support line in March and also capped the Aussie at the beginning of August.

Looking down, 0.9080 is the next support line. It was a double top in July and the Aussie leaped above it during a weekend. Lower, the round number of 0.90 provides support. This psychological number was also a swing low in March.

The 0.8870 line was tested in the past week and also capped the pair twice in recent months. It now serves as strong support. 0.8735 was a low point in December 2009 and also in July – minor support now.

Lower, 0.8567 was a support line back in 2009, and also worked as resistance in May. Below, 0.8316 was a double bottom in July and provides strong support. The final line is the year-to-date low 0f 0.8066.

Looking up above 0.9220, the next line is a very strong one – 0.9327. It capped the Aussie many times in the past year. A break above this line will send the pair towards immediate resistance at 0.9366, which was a stubborn line in April.

The 2009 high of 0.9405 is the next resistance line, and it’s followed by 0.95, which was last reached only in 2008.

I remain bullish on the Aussie.

The past week’s strong GDP figures, and a good outcome from the job figures on this busy Australian week, should provide the basis for further gains.