Month: March 2012

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Following significant euro movements throughout last week’s trading session, analysts are once again forecasting volatility for the common-currency in the coming days. In addition to several debt auctions out of the euro-zone and a meeting of euro-zone leaders to give final approval to the Greek bailout package, the US Non-Farm Employment Change figure is set to generate heavy market activity this week. Today, the US ISM Non-Manufacturing PMI should provide traders with a valid indicator of US economic health. A better than expected figure may boost the greenback.

Economic News

USD – Dollar Sees Major Gains to Close out Week

The US dollar moved up against virtually all of its main currency rivals last week, as poor fundamental news out of both the euro-zone and Japan sent investors to the greenback. The EUR/USD fell below the 1.3200 level on Friday, after a worse than expected German retail sales figure led to risk aversion in the marketplace. The USD/JPY closed the week at 81.78, a 9-month high, largely due to the Bank of Japan’s recent monetary easing policy.

Today, in addition to any announcements out of the euro-zone that always have the potential to impact the EUR/USD, dollar traders will want to keep an eye on the US ISM Non-Manufacturing PMI. The PMI is considered a leading indicator of economic health, and has been known to influence USD pairs. Analysts are forecasting the figure to come in around 56.2. If true, it would be a sign of industry expansion and may lead to dollar gains as a result.

Taking a look at the rest of the week, significant volatility is expected, as the US gets set to release its latest employment statistics on Friday. The Non-Farm Payrolls figure is widely considered the most important economic indicator, and consistently leads to major price shifts in the marketplace. Traders will also want to note the results of the ADP Non-Farm Employment Change figure on Wednesday. The ADP number is known to be a valid predictor of the official employment statistic on Friday, and has the potential to create a hectic trading environment.

EUR – Greek Debt Worries May Extend EUR Bearishness

The euro closed out a particularly bearish week by extending its losses against several of its main currency rivals. The EUR/USD dropped approximately 130 pips on Friday, to close out the week at 1.3197. Against the Canadian dollar, the euro dropped over 100 pips during the morning session, following the release of a worse than expected German retail sales figure. Pessimism regarding the prospects of a euro-zone economic recovery has weighed down on the common-currency. Furthermore, fears that Greece could still default on its debt have once again led to risk aversion in the marketplace.

Turning to this week, euro traders will want to pay attention to any announcements regarding the Greek bailout. Greece is unable to receive its bailout funds before it completes a bond swap with its private investors. With the due date to complete the swap on Friday, investors will be watching the situation in Greece carefully. Any signs that the bailout package will not be delivered as planned could put further pressure on the euro. In addition, the euro-zone’s Minimum Bid Rate, scheduled to be announced on Thursday could create market volatility if the figure does not come in as expected.

JPY – JPY Drops to 9-Month Low against Greenback

The Japanese yen hit a fresh 9-month low against the US dollar on Friday, as poor Japanese fundamentals caused the yen to extend its bearish trend. The Bank of Japan’s recent focus on monetary easing has created doubt in the strength of the Japanese economy. At the same time, a generally upbeat attitude regarding the US economic recovery has helped boost the dollar.

The week was not entirely bearish for the yen. The Japanese currency was able to advance on the euro after poor euro-zone news sent investors to safe-haven assets. The EUR/JPY dropped close to 90 pips on Friday before it staged a mild recovery to close out the week at 107.93.

Turning to this week, the yen is forecasted to once again see heavy volatility as significant news out of both the euro-zone and US are likely to influence risk appetite in the marketplace. Traders will want to pay attention to any announcements out of the euro-zone regarding the Greek debt crisis. Any news that indicates Greece could still default on its debt may boost the yen against the common-currency. Against the dollar, the yen may drop further if the US Non-Farm Payrolls figure shows additional growth in the US labor sector.

Crude Oil – Crude Oil Retreats to close out the Week

The price of crude oil dropped more than $2 a barrel on Friday, following comments from US President Obama that signaled that the US is not ready to use military force against Iran to halt that country’s nuclear program. The news calmed investors immediate supply side fears and resulted in crude closing out the week at $106.53 a barrel.

Turning to this week, oil prices are forecasted to see additional volatility as significant news out of the euro-zone is scheduled to be released. Any negative fundamental indicators out of the euro-zone, particularly with regards to the Greek debt crisis, could lead to risk aversion which may result in crude oil dropping further. That being said, any escalation in tensions with Iran could limit oil’s bearish trend.

Technical News

EUR/USD

The daily chart’s Williams Percent Range has dropped into oversold territory, indicating that the pair could see some upward movement. That being said, most other technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach, as a clearer trend is likelier to present itself in the near future.

GBP/USD

Most long term technical indicators show this pair range trading at the moment. The weekly chart’s Relative Strength Index is at 50, while the Williams Percent Range on the same chart has dropped below -20. Taking a wait and see approach for the pair may be the best option.

USD/JPY

Long term technical indicators show this pair may have finally hit overbought territory following weeks of upward movement. The weekly chart’s Slow Stochastic appears to be forming a bearish cross, while the Williams Percent Range is currently at -10. Traders may want to go short in their positions.

USD/CHF

Technical indicators on the daily chart show this pair may move into overbought territory in the near future. The Williams Percent Range is hovering close to the -20 level, while the Slow Stochastic may be forming a bearish cross. Traders will want to keep an eye on these two indicators for signs of impending downward movement.

The Wild Card

EUR/AUD

The 8-hour chart’s Relative Strength Index has dropped into oversold territory, indicating that bullish movement could occur in the near future. This theory is supported by the Slow Stochastic on the daily chart, which has formed a bullish cross. Forex traders may want to go long in their positions ahead of a possible upward breach.

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By TraderVox.com

The dollar increased against the sterling pound after the British Chamber of commerce cut its growth forecast for the UK economy. The sterling pound was also weak against the yen after the London based business lobby lowered its growth projection for 2012 from 0.8 percent to 0.6 percent. This has been interpreted as a showing of weakness on the UK’s ability to meet its demands and may even result to dropping from the AAA status.

The forecast for the Bank of England interest rate increase was pushed back to the end of 2013 from the first quarter of 2013. Despite this, UK 10-year gilts were unchanged over period. Investors are keeping a keen eye on the economic factors in UK and any report from the region is expected to significantly affect the performance of the pound against the dollar.

The dollar increased 0.2 percent against the sterling pound to settle at $1.5792. The dollar had increased by 0.8 percent against the dollar on March second. The pound also dropped against the euro by 0.1 percent to settle at 83.46 pence per euro. The pound further declined against the yen by one percent to settle at 128.24 yen.

The dollar increase against the pound has come amidst US stock-index declining trend as China reduces economic growth targets. Investors are also seeking safe haven currencies as they prepare for the Greece’s creditors signing of the debt swap deal. The pound is weakening against major currencies as negative economic reports keeps coming out from the UK. According to some analysts, the euro-zone crisis has influenced the UK exports to the region hence affecting the pound.

According to Neil Jones, the Head of European hedge-Fund Sales at Mizuho Corporate Bank Ltd in London, investors are waiting to see whether there will be any further quantitative easing by the BoE. The speculations about the possibility of further QE has pushed the pound down against major currencies.

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USDJPY had a sharp fall last week but the support came just over the psychological level of 80.00 and the pair moved strongly upwards to go as high as 81.87 and to close for the week at 81.81. With such a move USDJPY has broken over the resistance mentioned 2 weeks back (please check usd/jpy forecast), i.e. 81.50 to 81.75. As we had mentioned this range represented Fibonacci 61.8% retracement of the downward move during April 5^th to October 30^th and also the strong resistance zone during May 31^st to July 8^th 2011.

The failure of the break below the psychological level of 80.00 and then the resistances mentioned keep the bullish outlook intact for USDJPY. On the upside, with a support over 80.80 intact, we will expect some resistance near 82.22 which represents the resistance during May 19^th to 25^th, 2011. With a break of this the currency pair should move towards 83.10 i.e. the next Fibonacci retracement level of the above mentioned downward move. A decisive break over 83.20 should bring frequent resistance near 84.20, 84.60 before a move towards the psychological level of 85.00 takes place.

On the downside if the pair breaks below the support over 80.80 then we would expect further correction towards 80.00 psychological level.

Please note that for USD/JPY a decisive break over 85.52 is important for the rally to continue.

Further Readings:

1) Daily technical USD/JPY Analysis.

2) Trade discussions on forex forum.

GBPJPY had found some resistance slightly below 130.00 psychological level but after dropping down to 126.69, the pair jumped upward strongly to break the 130.00 resistance and closed down for the week at 129.55.

For the next week initially we may see some sideways movement below 130.20 but a break of that level should bring further upward gains towards 131.15 which is Fibonacci 61.8% retracement of the downward move during April 8^th, 2011 to September 22^nd, 2011. Any firm break over 131.20 should target the next resistance near 134.50.

Though it is not expected but in case any downward correction makes GBPJPY to break below the recent 126.68 (which will also represent a break below 22-day EMA) then we would expect a support at the Kijun line level of daily Ichimoku cloud i.e. near 125.85 and any break below 125.80 should target further correction towards 124.20/124.30 which is the current 55-day EMA. But is such cases also we would expect an upward rebound.

Please note that even with the above outlook, our overall outlook is not bullish and we remain in favor of another fall from one of the mentioned resistance levels.

Further readings:

1) GBP/JPY Forecast taking into account the fundamental and technical factors.

2) Daily technical gbp/jpy analysis.

3) Changing currency correlation: comparision of past one week vs. one month and one year.

GBPUSD has been moving as indicated 2 weeks back (please check gbp/usd forecast). The pair moved as high as 1.5993 during last week but could not break the psychological resistance of 1.6000 and fell strongly to 1.5823 to close for the week at 1.5835.

The sharp of Friday to the 22-day EMA level can be considered as natural, considering the resistance of 1.6000. For the next week initially we would expect some sideways move but if GBPUSD does not break below 1.5795 strongly, we would expect a retest of the recent 1.5993 and over that a break of 1.6000 should take the currency pair towards 1.6165 resistance.

However if the pair breaks below 1.5795 decisively then it should move first towards 1.5750 support of 55-day EMA and any strong break of that should take it towards 1.5650. Only a break below 1.5644 will indicate that the recent upward rally has ended and the focus can be turned back towards downside and towards 1.5000 psychological level and possibly more.

Overall our longer-term outlook stays bearish and it will only change with any decisive break over 1.6165.

Further Readings:

1) GBP/USD forecast: Including technical and fundamental factors.

2) Daily technical gbp/usd analysis.

AUDUSD tried to break above the range by moving to 1.0856 but fell again in the range it has been trading since February 8^th.

The fall on Friday did found support slightly above the 22-day EMA and did not break it. This level is also the Kijun line support of daily Ichimoku cloud.

Overall we need a break of this long sideways move to have a directional move on either side but our focus stays for an upward break. This will remain true as long as AUDUSD does not break below 1.0597 which was the recent low on February 22^nd. Such a break will also represent a decisive break below 55-day EMA. Even though such a move will only be 38.2% retracement of the upward move during January 8^th to February 29^th but may cause further consolidation towards 1.0490 for the pair.

As mentioned we expect further upward gains, with a break of the recent 1.0856 and then some resistance near 1.0900, we would expect AUD/USD to move that towards 1.1000 resistance and with a break over 1.1000, further towards 1.1079 high.

Please also check:

1) Detailed AUD/USD forecast considering fundamental and technical factors.

2) Daily technical aud/usd analysis.

USDCHF broke out of the range after failing to break below the support at 89.30. 89.30 was a little below the Fibonacci 61.8% retracement of the upward move during October 27th, 2011 to January 8^th, 2012. During the last week the pair went up to 91.49 before closing for the week at 0.9141, which was little below the 55-day EMA resistance i.e. 0.9168.

On the upside if USD/CHF breaks above the 0.9168 (55-day EMA) and then 0.9205 minor resistance then for the next week we would expect some more upward gains after a possible sideways move. Such a move should again bring resistance in the range of 0.9260 to 0.9300. A break above 0.9300 and then the resistance of the upper edge of the daily Ichimoku cloud i.e. 0.9350 will indicate that the recent downward consolidation is over and we can expect upward gains first towards 0.9400 and possibly more.

On the downside we would expect support over 0.9020 and in case there is a strong break of that support then our short-term focus will again turn towards downside for a retest of the recent 0.8930.

Please also check the detailed usd/chf outlook and daily technical analysis for usd/chf.

EURJPY found an expected resistance just below the strong psychological level of 110.00 and went into sideways move.

We will keep a note of the following for next week’s outlook:

1)      110.00 represent a strong psychological resistance.

2)      EURJPY was not able to break below the 5-day EMA support, continuously for 8 trading days but that support has been broken for past 4 trading days. The same point is true with the break of the support of Tenkan line of daily Ichimoku cloud.

Considering the above points we would expect some more downward consolidation. On the downside, a break below 107.19 i.e. the low of Feb 27^th should take the currency pair towards 105.85/105.90. This zone represents the Fibonacci 38.2% retracement of the upward move during February 1^st to 26^th. Not only this but this is also the current support of the Kijun line of daily Ichimoku cloud and slightly below the current 22-day EMA.

The above mentioned correction will be considered as natural and will not be changing the focus towards downside. We would expect further upward move after some consolidation for a retest of the 110.00 psychological level, specifically 109.85. A decisive break of that should take EUR/JPY towards 111.20 to 111.60 resistance zone (end of October 2011).

Further readings:

1) EUR/JPY Forecast for details outlook considering fundamental and technical analysis.

2) Daily technical outlook at eur/jpy analysis.

EURUSD failed to break the strong psychological resistance of 1.3500 and fell strongly from 1.3486. The currency pair went as low as 1.3187 and closed for the week at 1.3198.

A couple of points to be observed about the recent price action:

1) The upward move could not break the psychological 1.3500 level.
2) The move took the pair a little higher than 50% retracement of the downward move from October 27, 2011 to January 13, 2012. Such retracements after such a strong downward move are quite normal.
3) The resistance also came little below the upper trend line resistance of the trend line channel.
4) The current price is little above lower trend line support of the short-term channel.
5) The current price is also trying to break the 55-day EMA support.

For the next week our outlook remains on bearish side for a move towards 1.3165/1.3160. Any decisive break below this level will represent a break of the above mentioned short-term channel and also a confirmation of break of 55-day EMA support. Please note that the current price is also slightly below the 55-day EMA level. In such case we would expect further downward move first towards 1.3135 I.e. the upper edge support of the daily Ichimoku cloud and then the psychological support of 1.3000. A break of 1.3000 should take the currency pair towards 1.2974 which was the support of February 16th and also a little above Fibonacci 61.8% retracement of the recent upward move during Jan 15th to Feb 28th. Any strong break below this will confirm that the recent upward move was just a correction. Any strong break below 1.2974 should take EUR/USD towards 1.2930 and any firm break below 1.2920 should lead the way towards 1.2840 support and possibly further down.

On the other side if the above mentioned decisive break of the short-term channel does not take place then on the upside we would expect a resistance near 1.3360. Any decisive break of that will turn our focus back towards upside first towards 1.3420 and then towards the recent 1.3486 and with a break of that towards 1.3550.

Further Readings:

1) Euro-US Dollar forecast.

 2) Daily technical analysis: EUR/USD analysis.