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Weekly Forex Outlook

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Greenback surging on Global slowdown

Fri, Aug 15 2008, 06:58 GMT
by Easy Forex Team

Easy Forex

Last week’s currency trading review

The Dollar staged one of its biggest rallies of the year as the global economy look set for a significant slowdown and the decoupling theory was thrown out the window. High yielders such as AUD and NZD were hurt the most as falling commodities provided a second incentive to sell. US data continued to impress with only the Weekly Jobless claims surprising with a jump to 455K. The big market event was the FOMC rate decision on Tuesday where the Fed held at 2.00% and accompanied with a neutral statement highlighting Inflation concerns and downgrades to growth. June Core PCE jumped to 0.3% vs. expectations of 0.2% and Personal spending at 0.6% also impressed. June factory orders greatly exceeded forecasts of 0.7% coming in at 1.7%. The Euro fell heavily this week as the 1.5300 level gave way leading to a mass exodus of long positions. Eurozone PPI jumped to 8.0% in June but many see this as the cycle high and are anticipating the fall in Oil to relieve pressure in the coming months. Eurozone Retail Sales fell 0.6% but the big market mover was the ECB Presidents post Rate meeting comments on slowing Eurozone growth. The Euro closed down 3.6% at 1.5005 having opened at 1.5562. The Japanese was also sold heavily against the USD but managed to eek out gains against most other currencies. The Japanese government warned the Economy may be heading for a Recession and this prompted a trimming of carry trades. The USD/JPY gained 2.2% closing at 110.19, after opening the week at 107.68. The GBP was under sustained pressure as the USD strengthened hitting year lows on a break of 1.9400. UK Industrial production fell -1.6% Y/Y and the Halifax House Price Index showed a decline of -1.7% m/m. The Bank of England held rates at 5.25%. The GBP/USD lost 2.8% closing at 1.9209 after opening at 1.9750. The AUD weakened the most of the G10 currencies for the second week running as commodities weakened considerably. The RBA held rates at 7.25% on Tuesday but in the accompanying statement opened the window for cuts next month. Unemployment data surprised to the upside but could do little to alter the bearish sentiment that had engulfed this pair. The AUD/USD closed down -4.4% at 0.8887 after opening at 0.9290.

The forex trading week preview

In the States; June Trade Balance kicks off Tuesday expected at -61.8B. Tuesday we have the keenly awaited July Retails Sales are expected at -0.1% as government stimulus checks wear off. On Thursday Core CPI is expected at 0.2% and the Weekly Jobless claims are seen at 432K. Finally on Friday we have the Empire State Manufacturing Index forecast at -4.3. TIC net long term Transactions are seen at 55B out on Friday and the Preliminary UoM Consumer Sentiment seen at 62.0. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; Industrial Production on Wednesday is seen at 0.3% for June. On Thursday German Preliminary GDP is seen at -0.8% along with French Non Farm Payrolls forecast to fall-0.1% and the ECB bulletin. Also on Thursday we have CPI for July seen at -0.1%m/m and 4.1%y/y along with a Preliminary Q2 GDP for the Eurozone forecast at 0.2% In the UK; July PPI is seen at 1.0% on Monday along with the June Trade Balance forecast at -7.4B. On Tuesday July CPI is seen at 4.4% and the DCLG House Price Index is seen at 1.5% Y/Y. On Wednesday we have the Claimant Count forecast at 17.5K along with the Average Earning Index forecast at 3.6% Y/Y. Wednesday also sees the release of the BoE Inflation Report. Europe has a Holiday on Friday. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; Wednesday Preliminary Q2 GDP is keenly awaited as it is expected to be negative -0.6% the first leg of a possible recession. On Thursday we have the Tertiary Activity Index forecast at -0.3%. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; light data week with the RBA Monetary Policy Statement on Monday expected to confirm a more dovish stance and the WPI index out on Wednesday expected at 1.0%. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

• Euro – 1.4890
  
  Initial support at 1.4842 (Aug 13 low) followed by 1.4715 (Aug 12 low). Initial resistance is now located 1.4981 (Aug 13 high) at followed by 1.5084 (Aug 11 high).

• Yen – 109.40
  
  Initial support is located at 108.22 (Aug 6 low) followed by 107.29 (Aug 7). Initial resistance is now at 109.39 (Aug 13 high) followed by 110.40 (Aug 11 high).

• Pound – 1.8670
  
  Initial support at 1.8619 (61.8% retrace 1.7048 to 2.1161) followed by 1.8518 (Oct 11 2006). Initial resistance is now at 1.9036 (Aug 13 high) followed by 1.9123 (Aug 12 high).

• Australian Dollar – 0.9695
  
  Initial support at 0.8593 (Aug 13 low) followed by 0.8513 (Jan 22 low). Initial resistance is now at 0.8743 (Aug 13 low) followed by 0.8846 (Aug 12 high).

• Gold – 830
  
  Initial support at 803 (AUG 12 low) followed by 789.9 (61.8% retrace 640.00 to 1032.5). Initial resistance is now at 846 (May 2 support) followed by 865 (Aug 11 high).

Published on  Fri, Aug 15 2008, 07:04 GMT