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GBP/USD Today – Hesitation At October 5th’s resistance Level

December 18, 2012 in Forex Analysis

GBP/USD Daily chart - December 18 2012On October 5th, 2012 GBP/USD had faced a strong resistance at 1.6217 and a strong fall had taken place from there. The recent upward move had taken the currency pair as high as 1.6218 i.e. 1 pips above that level but the pair has been hesitating to cross that resistance for past 23 hours.

It’s British Pound’s Day Today

Today at GMT 9;30 we have many economic releases from U.K. namely core consumer price index and and consumer price index (year on year and month on month), we also have producer price index for input and output. Retail price index should not cause much volatility but that as well as DLCG housing price index data is also scheduled to be released at the same time. Bank of England’s quarterly bulletin for Q4 is scheduled at GMT 11:00. The other release which may cause some high volatility if Bank of England’s inflation letter.

There is slight increase expected in year on year PPI-output over the previous release and slight drop is expected in the consumer price index. The year on year retail price index is expected to remain unchanged from the previous 3.2%.

On the other side there are no major economic releases due from the U.S. today and hence any unexpected results from U.K may cause some sudden volatility.

What To Expect From GBP/USD

gbp/usd-daily ichimoku cloudThe break over that resistance was just by 1 pips but it indicates that some good possibilities are there for further gains but the long hesitation also indicates the chances of some consolidation before that.

The recent pattern the price action has been showing is a support near 5-day EMA. If any decisive break below 1.6175 takes place then it would represent a break of that support. Such an action may bring further downward consolidation towards 1.6140/1.6155 support zone. This support zone is derived from Kijun line support of daily Ichimoku cloud as well as the 38.2% retracement of the upward move since December 10th. Not only that but 1.5154 was a support during the beginning of this week.

Considering the combination of the above 3 supportive forces, a recovery is expected from this support zone. Any break above the recent 1.6218 should take GBP/USD first towards 1.6365 and then possibly towards 1.6450.

Any strong break below 1.6140 should bring another strong support near 22-day EMA i.e. near 1.6105. This support zone is also important as the psychological support of 1.6000 ranges should start acting for the currency pair from here.

Overall, out bullish outlook will remain intact till the price action remains over 1.6040.

Markets Today – EUR/USD’s Break Over The Resistance

December 17, 2012 in Forex Analysis

EUR/USD breaking the resistance - December 17 2012EUR/USD had finally broken over the resistance of 1.3172 which we had covered in the Markets Today for EUR/USD on December 14th. This break is not only a long awaited break which the currency pair has been failing to touch for past 3 months but this came as another attempt to break over the 38.2% retracement level resistance of the downward move during beginning of May, 2011 and July 24, 2012. This move certainly indicates that we can see further gains in the coming days.

EUR/USD And The Fundamentals

EUR/USD Fundamentals and Economic ReleasesThe recent developments and discussions during Economic and Financial Affairs Council meeting have brought back some optimism about the debt crisis handling for Greece as well as the joint resolution for the stability mechanism for the failing banks in the Euro zone.

Overall the economic releases from both Euro zone and U.S.A. during the last week have been overall on positive side. The Pie chart on the right hand side represents the relative strength of the last week’s economic data from these economic zones.  On Friday the CPI data from the U.S came weaker than expected but the Industrial production and Markit Manufacturing PMI showed some positive signs. The CPI data from U.S. and Euro zone came out similar and did not put either of the currency at any specific advantage. The Markit Manufacturing PMI data from Euro zone was comparatively weaker while the Markit Services PMI was better than expected and also as compared to the previous release.

Main Events To Affect EUR/USD Moves In The Coming Days:

Italy’s Prime Minister Mario Monti’s expected resignation:

Monti’s leadership during his 13-months old government has won many praises for the economic reforms for Italy. The Yield on 10-year government bond was over 7% in January 2012 and had further risen up before going down below 4.5%, The drop in the bond yield showed some improvement in the confidence in the steps for economic reforms.

Italian Prime Minister  Mario Monti has been refusing to declare whether he would run for the elections or not and overall the uncertainties for political change becomes a factor for the movement of Euro. Any declaration about Monti’s candidature may fuel the strength of Euro.

UBS and The Libor Penalty:

The Libor manipulation by UBS AG is expected to bring US$ 1.6 Billion penalty for the settlement of claims. The decision is expected tomorrow i.e December 18th, 2012. Though the markets should have already factored this but some volatile moves can be expected with any such announcements.

EUR/USD – What to Expect

EUR/USD Today- What to ecpectOverall some more strength is expected. The next resistance should come near 1.3280 which is derived from the previous resistance level during end of April, 2012. Any decisive break of this should take EUR/USD towards 1.3480/1.3486. This level does not only represent the resistance during the later half of February 2012 but such a move will also represent the 50% retrancement of the  downward move during beginning of May, 2011 and July 24, 2012.

Any move below 1.3000 will neutralize this outlook.

Markets Today – EUR/USD Hesitating Below The Previous High

December 14, 2012 in Forex Analysis

EUR/USD Daily Chart- December 14, 2012 Today’s outlook for EUR/USD: The high on September 17th war 1.3172, the subsequent high on October 17th was 1.3139 which had taken place after a drop to 1.2804. The next high on was on December 5th, which had taken place after a drop to 1.2661. This level was lower than the previous two when EUR/USD failed at 1.3126.

The recent optimism about the Greece crisis and also the progress for joint resolution for the stability of failing banks made the currency pair to have another jump over the psychological 1.3000 and the pair went as high as 1.3119, or 7 pips below the previous high, and seems to be hesitating there.


EUR/USD: Daily chart with Bollinger bands

Fundamental Highlights:

Euro zone crisis: Some optimism has come up because of the progress made for agreement for working a joint resolution for the failing bank under the leadership of ECB and also about the Greece crisis. However, the market might have already taken this optimism in account by the recent upward move. It is like nothing can change tomorrow. Euro has been moving up and down with continuous changes in the sentiments but underlying fears would still continue even when sudden optimism pops-up.

Economic Events Highlights

Today is a day of some important economic releases:
Markit PMI: The preliminary releases for purchasing managers index for manufacturing showed poor data today. It remained constantly poor for European Monetary Union, Germany and France. On the other side the PMI for service sector was came out better than the consensus form all these regions. Overall the effect of the price volatility of Euro is more by manufacturing PMI.

Other upcoming releases: We have Consumer Price Index releases at GMT 10:00 from Euro zone and also the employment change reports at the same time. The previous year on year core CPY was 1.5% and the consensus are that it will remain same. The year on year change in CPI is expected to be 2.2%, down from previous 2.5%. If these reports come better, it may give boost to Euro but any poor data may send EUR/USD for some consolidation.

Economic releases from U.S.:

Consumer Price Index releases from U.S> are due at GMT 13:30 followed by Markit Manufacturing PMI at GMT 13:58 and Industrial Production at GMT 14:15.

What to expect from EUR/USD today:

As we saw above that all subsequent highs have been getting lower since September. The current price action has been finding resistance below the previous high and overall 1.3100 region poses a high resistance. Also, as mentioned above, the upward jump might have already factored the wave of optimism and possibilities of some consolidation cannot be ignored.

Hence, overall we have the recent wave of optimism n one side and the pressure of the resistance zone on the other side. In case the pair breaks above 1.3126 and more importantly 1.3139 then it may go up to retest 1.3171 and with a break of that towards 1.3300 or more. However if these resistances hold than some consolidation towards the support zone of 1.3020/1.3040 should take place.

Markets Today – Euro Vs. U.S. Dollar

November 9, 2012 in Forex Analysis

The reports of unexpected fall in the U.S. trade deficit by a record jump in the exports added to the post election strengthening of U.S. Dollar against the Euro. The momentum of the fall continued and EUR/USD slipped down to the low of 1.2717.

United States Exports

The Exports of Goods and Services rose to record high in September to U.S. Dollar 187.0 Billion.

Let’s have a look at the historical data of U.S. Imports and Exports from 1960.

Historical Annual Trade of US - Exports and Imports

 Europe and Euro

As mentioned the previous Markets Today post, European commission has cut down the growth forecast for Euro zone to 0.1% from previous 1.0% for 2013. That makes the overall outlook for Euro further bearish.

While the bail out of Greece against the debt crisis still carries the uncertainties. Even though the austerity measure bill for cuts in the spending towards pension, wages and benefit were approved by 153 against 128 votes yesterday, the final decision on the bail will depend on the complete report of compliance to the bail out terms.

The unemployment in Greece went up record high and moved over 25% to 25.4%. The July figure was 24.8%. With further spending cuts the outlook remains gloomy. The bailout against the debt crisis is one thing but the side effects of further austerity measures of spending cuts will not help the unemployment issues and money flow at least in the near term.

Euro Vs. U.S. Dollar – The Price Action:

Let’s see some of the charts of EUR/USD to see how the currency pair has been moving:

EUR/USD Chart 1

Euro versus U.S. Dollar-1

The above weekly chart since May 2010 shows that during the first week of September the pair had broken the resistance of the price channel and had moved up strongly. The chart also shows that during a trend the support and resistances coming near the 5-week EMA. The upward move could not sustain and last to last week the 5-week EMA support was broken strongly.

 EUR/USD Chart 2:

Euro vs. U.S. Dollar -2

The above weekly chart of EUR/USD shows another interesting point. The currency pair had been in a downtrend for over 1 year. The trend which had started in the beginning of May 2011 and continued towards the end of July 2012 had found the support just over the strong psychological level of 1.2000. EUR/USD had a consolidation from the low of 1.2042.

Now why we still call it as consolidation is because of the resistance found almost exactly at the 38.2% retracement of the above mentioned downtrend. 38.2% retracement after such a great fall is a very common phenomenon. The above weekly chart shows the classical example of 38.2% reversal and the resistance and fall from there.

EUR/USD – What to Expect:

As mentioned in the previous outlook, the 200-day SMA support is near   1.2680. We would expect at least some more deeper moves towards that support level. In case a break of that support takes place then some deeper decline towards 1.2610 or more may take place.

Euro – U.S. Dollar Chart 3

Euro versus U.S. Dollar-Chart 3

Any decisive break over 1.2885 will neutralize the above outlook for the near term, though a better confirmation would come with a decisive break of 1.3000 psychological level and then a break over the recent high of 1.3168.

Markets Today – An Eye On EUR/USD

November 7, 2012 in Forex Analysis

Since the middle of September and more specifically from September end, a clear directional trend was missing in the markets. Any bearish move of EUR/USD has been finding support over 1.2800. The day of election results from U.S. clearly broke that pattern.

During yesterday’s analysis for EUR/USD, we had mentioned that more downward move was expected for the currency pair. CEOs around the U.S.A. and in some cases around the globe may be having a negative economic outlook with Barak Obama getting reelected as the president. However the fear of higher taxes and spending cuts and hence the weaker economic outlook does not over weigh the uncertainties of the election results, at least in the short term. The results killed those uncertainties and US Dollar showed that by gaining strength. EUR/USD fell and broke the support of 1.2800 or more specifically 1.2804.

Market Events of Yesterday and Today:

Yesterday’s economic releases from both Europe and U.S. do not give any clear picture for the short-term movement. Today also we do not have many important market events except trade balance from both Germany and the U.S. and jobless claims from the U.S. ECB’s Interest rate decision will also be there today but that is not expected to be changed from the current 0.75%.

Where does Europe leave us?

Well, the overall outlook is not good from that part of the globe. In May 2012, next year’s growth forecast for Euro zone was 1%. The European Commission cut that to 0.1% or practically now growth in 2013. The growth forecast for 2013 for Germany was cut to 0.8% from the previous 1.7%. Now at one hand the struggling economies of Euro zone i.e. Spain, Greece, Italy and Portugal, to name the main, keep the overall bearish outlook intact and on the other hand the heavyweights like Germany are adding to that bearish outlook.

As a summary we can say that Euro remains in pressure even though some market noises may bring some spikes for short-term.

What do the technical indicators and price action say?

Let’s see some charts and then talk about those:

 EUR/USD Daily Chart -1:

Markets Today EUR/USD daily Chart -1

The red line in the above chart is 55-day EMA line and the yellow one is 200-day SMA line. The recent upward jump clearly found resistance just below the 55-day EMA. Then, as mentioned above, the price action broke below the support of 1.2805 (the dashed line).  This indicates the bearish pressure. The 200-day SMA support is currently near 1.2679.

EUR/USD Daily Chart -2

Markets Today -EUR/USD-daily-Chart-2

The above chart shows the classic example of Fibonacci retracement. The price retraced to 30.2% level of the upward move during July 24th and September 17th. Why we mentioned “classical example” is because the 38.2% retracement level is clearly bringing support. If this support continues then some upward correction towards 1.2820 may take place before any further fall.

EUR/USD Weekly Chart:

Markets Today -EURUSD-weekly-Chart

The above weekly chart shows that the price action failed at the lower edge resistance of the weekly Ichimoku cloud. EUR/USD has been trying to break this resistance for 9 straight weeks but seems to be unsuccessful in doing so. This, again, is a bearish indication. The next support level here is the support of weekly Kijun line and that is currently near 1.2608.

What to Expect from the Markets:

Considering all the market fundamentals and the price actions, as mentioned above, we remain bearish and expect some deeper moves. This outlook will neutralize for short-term if any decisive break over 1.2885/1.2890 or the 55-day EMA takes place and price sustains over that.