2010 February

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Good day Forex Koalas.

The weekend is upon us again and lets take a look at the developments so far.

In the previous weekly review, i mentioned that we will range between 1.3400 to 1.3800. With the price reaching 1.34+, i also felt that this cleared the path for more downside momentum.

As we see how this week came out to be, we pretty much played that out. Price action revolved around 1.36, which is a technically strong line. 1.3455 was tested again too.

This week gave us a number of worst than expected release of economic data.

The US’s housing scene seemed to be shaky as both New and Existing Home Sales performed lower than expected and lower than the previous release. This suggest that the recovery may not be as robust as what the investors have hoped. Report stated that this may be due to the “anchor” effect of the unemployment problem. When one is out of job, buying a house will probably be at the bottom of the to-do list.

Unemployment Claims increased, erasing hopes of a recovering employment market.

Core Durable Goods Orders came in much lower than expected. As this data is usually indicative of future economic activity, we may be expecting a drop to come.

FED’s Bernanke mentioned that the current poor job market and low inflation risk would probably allow the central bank to keep interest rates at very low for a long time. While this piece of comment may please traders who feel that the current economy is not ready to resume normal operations, traders looking for a high yield may move out as they seek other higher yielding investments.

Across the Alantic, the German Ifo Business Climate was worst than expected. Greece also faces new challenges as rating agencies stated that Greece’s sovereign debt rating may be cut within months unless the country meets the objectives of its fiscal deficit reduction plan. This may be tough as there are already much unhappiness among the Greek people as they feel that people needs should come before economic needs. Strikes are hampering the Greek government efforts to carry out the plans.

A cut in the rating may cause Greek government bonds to be ineligible as collateral at the ECB. This will cause problems for the nation’s borrowing needs and worsen the problem. A late week development brought some relief though as there were reports stating that Germany may assist Greece by purchasing Greek bonds through its state owned lender KfW Group. A resulting bullish push above 1.36 suggests that the Greek issue to close to the market’s heart.

Moving on to the next week, we have more important economic releases coming up. Early week brings us releases such as Euro’s unemployment rate and US ISM Manufacturing PMI. A couple of of the important releases in mid week includes the US ADP Non-Farm Employment Change and Euro’s Minimum Bid Rate. We end the week with the main event, the US Non Farm Payroll ( NFP ) and Unemployment Rate. Many investors will be focused on this releases to find clues for the state of the economic recovery. Be careful of unexpected spikes. View the Non Farm Payroll reports for more details.

It has been reported that Fannie Mae will be seeking additional help from the US government. This suggests that the effects of the Financial Crisis of 2008 is still pretty much around and one must not be complacent. Watch out for a possible reaction to this.

The Greek deficit problem remains to be solved and developments must be monitored. Risk aversion may soon be a major theme.

From a technical point of view, the price action revolving 1.36 is pretty much expected as it is a strong technical level. If we were to zoom out to previous years, we would see similar patterns exhibited. The range of 1.3400 – 1.3800 is still valid.

A word of caution though is that it is NFP week. We have tested 1.3455 twice and the 200EMA is turning bearish too. Bearish momentum is lurking around.

Check out the economic calender for the various economic releases.

Trade safely.

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The EURUSD made another indecisive movement this week. Price attempted to push higher, topped at 1.3691 on Tuesday but still closed below 1.3650 on Friday indicating limited upside corrective pressure. On daily chart below we can see that price slipped above the minor bearish channel but closed lower around the upper line of the minor bearish channel. While long term outlook remains bearish, the medium term outlook is in critical technical phase. The fact that price slipped above the minor bearish channel could open the way for further bullish correction towards 1.3850 area. However on the other hand, since the bullish momentum seems limited, also leaves the door open for possible false breakout scenario and I prefer this scenario. The Greenback should have the advantage as risk aversion has taken center stage. On the contrary, the Euro zone economy outlook remains weak. After Greece, now Spain is another problem for the Euro. Some even believe that the problem in Spain is worse than Greece.  The 1.3400 area remains the nearest technical bearish target. Break below that area should trigger further weakness for Euro towards 1.3100 area.

Have a great weekend and see you guys next week!

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Good day Friday Koalas!

Are you ready to cash the pips for beer?

The currency pair received a late week boost, testing the resistance of 1.3680.

The S&P 500 shot back up above 1100 yesterday and is currently holding so. Should the week close above 1100, it will be the second week in a row. This suggest positivity.

Oil is currently holding well, trading around $77.

Gold currently values at around $1114.

***

We had a mixed release of economic data today but of concern to me, would be the US Existing Home Sales. Suffering a double setback of lower than expected and lower than the previous release. This suggest that the recovery may be stalling as people hold back from their home purchases. Furthermore, home sales spur economic activities. The lesser of it, the more negative impact may be expected to surface.

Now why did the EUR/USD shoot up to the top?

There were reports stating that Germany may be coming to Greece’s aid by purchasing Greek bonds through its state owned lender KfW Group. This probably eased risk aversion as investors were relieved of their apprehension towards the Greek deficit crisis.

Having said so, do remember that the root of the problem must be solved. Greece must take concrete actions to reduce the deficit. It will be a tough job though as the strikes may hamper progress.

With the weekend upon us, watch out for profit taking.

Bullish pressure may move above 1.3680.

If the sentiments turn cold, bearish pressure may see us testing 1.3600.

Stay tuned for the EUR/USD Weekly Review over the weekend.

***

Ah koalas! The weekend is here. I am going to catch up on my sleep and do a few articles. Probably not too much of play for me. L4D2 practice is due though. So many things to do but so little time. Lets get started now!

Trade Safely.

Read more Forex Articles and Views by The Koala at www.thegeekknows.com

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EURUSD Forecast:
The EURUSD attempted to push lower yesterday, bottomed at 1.3451 but closed higher at 1.3549. On h1 chart below we can see that price has slipped above the minor trendline resistance (yellow) indicating potential upside correction testing the upper line of the minor bullish channel. The main scenario should remain bearish but the fact that price already in oversold area may produce some minor upside correction. Immediate resistance at 1.3625 area. Break above that area and violation to the minor bullish channel could trigger further upside momentum but note that overall the pair is still in a bearish mode. After Greek debt and financial problem, traders now concern about the potential economic problem in Spain which could continue to pressure the Euro in longer term. Initial support at 1.3500 area. Break below that area could trigger further bearish momentum testing 1.3400 region.

EURJPY Forecast
The EURJPY attempted to push lower yesterday, bottomed at 119.64 but closed higher at 120.71 and keep moving higher around 121.04 at the time I wrote this comment. The bias is neutral in nearest term and I think we are in no trading zone area but the main outlook should remain bearish. On h4 chart below we can see that price is testing the upper line of the minor bearish channel. Although the main trend should remain bearish, violation to the minor bearish channel should trigger further upside correction testing 123.00 area.

GBPJPY Forecast
The GBPJPY had a significant bearish momentum yesterday, bottomed at 134.95 , closed higher at 135.99 and keep corrected higher around 136.23 at the time I wrote this comment. This fast should keep the bearish scenario intact with technical target around 131.50 area. The nearest bias is neutral as price already in extreme oversold area and show some signs of potential upside correction but as long as price stay below 137.30 I still prefer a bearish scenario today.

AUDUSD Forecast
The AUDUSD attempted to push lower yesterday, bottomed at 0.8801 but closed higher at 0.8881. The bias is neutral in nearest term but overall I still prefer a bearish scenario at this phase. Immediate resistance at 0.8910/20 area. Break above that area should trigger further bullish correction testing 0.9040. Initial support at 0.8801 – 0.8780 area. Consistent move below that area should trigger further bearish scenario targeting 0.8576 area in longer term.

GBPUSD Forecast:
The GBPUSD had a significant bearish momentum yesterday, bottomed at 1.5189 but closed higher at 1.5263. The nearest bias is neutral but the main trend should remain bearish with technical target around psychological level 1.5000 in longer term and I am still in bearish mode for this pair. However CCI in oversold area and heading up on h4 chart suggesting potential upside correction testing 1.5347 and the upper line of the bearish channel. Only violation to the bearish channel could be seen as a serious threat to the current bearish scenario testing 1.5560 area. Immediate support at 1.5189 (yesterday’s low). Break below that area should trigger further weakness for the Sterling.

USDJPY Forecast:
The USDJPY continued its bearish momentum yesterday, bottomed at 88.79 and closed at 89.09 and corrected higher around 89.23 at the time I wrote this comment. This fact should keep the bearish scenario intact with nearest technical target around 88.50 before aim for 87.40 area even 85.00 region in longer term. Immediate resistance at 89.50. Break above that area should lead us into no trading zone as we might have further upside correction testing 90.50 area but I still prefer a bearish scenario at this phase.

USDCHF Forecast
The USDCHF failed to continue its bullish scenario yesterday. On h4 chart below we can see that price break above the triangle but whipsaw to the downside and now back in the triangle area indicating a false breakout which could trigger some bearish pressure. The bias is neutral in nearest term and I think we are in no trading zone but the main outlook should remain bullish. Immediate support at 1.0750 – 1.0700 area. Break below that area should trigger further bearish correction testing 1.0600 region.

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Good day to all!

The US Dollar strengthens.

With the renewed momentum of strength for the US Dollar, the currency pair takes another hit at the 1.3455 support. I LOVE IT WHEN MY CHART WORKS!

S&P 500 is taking a beating now. This suggest sentiments are negative.

Oil is trading at $76+. I will be concerned if it falls below $70 as oil can be a measure of the economy’s health.

Gold currently trades at $1096, remaining resilient despite the great pressure from the stronger US Dollar.

***

I love forex. I really do.

In the testimonial by FED’s Bernanke yesterday, he stated that the economy still requires low interest rates to spur demand. A low interest rate normally weakens a currency as traders seek other currencies with higher yields.

However as of now, the US Dollar is strengthening. Why is that so?

Risk aversion strikes again!

For starters, i mentioned that the Greek deficit problem will not be solved easily and we should be careful. Indeed and indeed! Greece’s ratings are in danger of a downgrade. In a report, Moody’s stated that Greece’s sovereign debt rating may be cut within months unless the country meets the objectives of its fiscal deficit reduction plan. This may be a challenge as citizens strike in protest against the actions proposed to fix the problem. A cut in the rating may cause Greek government bonds to be ineligible as collateral at the ECB. This will cause problems for the nation’s borrowing needs.

Next, the Core Durable Goods Orders and Unemployment Claims of the US came out worst than expected, sending the signal to investors that the recovery remains fragile. With the unemployment problem in the US, any adverse release concerning employment strikes worries across traders.

With FED’s Bernanke testifying again today, be careful of unexpected spikes due to comments made.

Tomorrow brings us more important releases such as Germany’s Prelim CPI and US’s Prelim GDP and Existing Home Sales. Monitor the performance closely to see if more “fuel” is added to the “flames” of risk aversion.

Bullish relief may bring us back to 1.3550/600.

More bearish assault may result in a retest of 1.3455. A break here may bring us to 1.3400.

***

Ok. As much as i want to continue to write and do my research, i am going to try to make peace with Ms Sleep. I am starting to become like a zombie from Left 4 Dead. I need rest!!!!

Trade safely dear koalas!

Read more Forex Articles and Views by The Koala at www.thegeekknows.com

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EURUSD Forecast:
The EURUSD attempted to push higher yesterday, topped at 1.3625 as a temporary reaction after The Fed decided to keep the interest rate low but further bullish momentum was rejected as price closed lower at 1.3539. This fact should keep the bearish scenario intact. On h4 chart below we can see price is now testing the minor trendline support (yellow). Break below that trendline should trigger further bearish momentum testing 1.3444 – 1.3400 area. Immediate resistance at 1.3580 area. Break above that area could trigger further bullish correction but overall I still prefer a bearish scenario with sell on rallies strategy.