FX Trading Australia Market Weekly Outlook 28/03/2

FOREX Market Summary

FX Trading Australia – Weekly FOREX Market Summary

Last week was all about the Dollar and it has started this week with a bang, rallying across the board on all majors. The driving factors of this spectacular rally are set to keep the Dollar supported coming into this week. Fed remains concerned about inflationary pressures and rightly so. It’s rally has been fueled by speculation of the Fed either going for a 50 bps hike or removing the measured from its accompanying statement in its next meeting. Personal spending and consumption data this week should confirm the steady increase in consumer confidence while Payrolls if it comes above 200 K will further boost the Dollar.

Dollar’s rally has in part been fueled by the poor data from other regions and their in ability to push higher in spite of sentiment squarely against the Dollar. A Soccer analogy to recent events can be given as the Dollar being the star striker for the team and has been punished for its indiscipline while other players were given a chance. But the inability of others to seize the opportunity has seen the team go back towards its star striker i.e. the Dollar. It remains as the preferred choice thus any good or bad news is followed by extreme reactions. The Aussie especially disappointed by failing to break above 0.80, every key factor in the book was working in its favour with speculators going record long on it, but it now risks along with the rest of the Commodity bloc, deep losses while weak consumer spending in the Euro-Zone is weighing in on the Euro.

However, the market remains very fickle and would switch sides in a heartbeat once the attention shifts back to a couple of disconcerting facts for the Greenback. Trade Deficit is expected to continue to worsen with imports growing at a much faster pace than exports. The more buoyant the American Consumer gets in its outlook for the economy, the more foreign goods are sought. This recent pick up in demand and consumption provides another supporting factor for the Greenback but Trade balance data released every month reminds the market of the enormity of the problem in front of the Dollar. Another fact remains the selling of Dollars by Central Banks, in spite of their denial this is happening and should continue to do so in a steady manner throughout this year.

We are sitting at crucial levels technically, with most majors expected to go down towards their yearly low levels set around early February. For other currencies to regain the initiative the Fed would have to ease its concern on inflation while solid data is needed from their side especially from the Euro-Zone and Japan where the economy’s direction has become uncertain. The market’s focus shifting back on Deficits would start Dollar’s downtrend again but that is not likely till the Fed’s next meeting.

Economic Releases

USA – Key data starts from Tuesday with the Consumer Confidence survey, in spite of pick up in several sectors the spike in oil prices could inch confidence lower. Wednesday has the final Q4 GDP release expected to be revised higher as well as Personal Consumption while Fed’s Bernanke speaks Monetary Policy. Thursday has Personal Income & Spending both expected to increase, Factory orders should rise on increase in export demand while Chicago PMI is expected to decline. Friday has Non Farm Payrolls with a result around 200 K expected while Unemployment rate is expected to inch lower. Also on tap is ISM Manufacturing and Prices paid both expected to stay unchanged around recent levels.

Euro-Zone – Key data starts from Tuesday with French PPI expectations are for a rise on the recent spike in energy and oil prices. Wednesday has German GFK Consumer Confidence which is expected to decline on high unemployment & spike in oil prices. Thursday has German Unemployment rate expected to inch higher; Biz Climate indicator for the zone is expected to inch higher while Industrial, Consumer, Economic and Services Confidence should have a mixed reading. Also on tap is the CPI with an increase expected above the ECB’s target of 2%. Friday has German Retail sales expected to fall on slump in consumer confidence while PMI Manufacturing from across the globe is expected to inch lower.

Japan – Key data starts from Tuesday with Workers Household Spending which is expected to decline while Large Retailers sales & Retail trade are expected to fall sharply. Wednesday has Industrial Production which should decline on fall in export orders. Thursday has Housing starts with a slowdown expected. Friday has Tankan Larger Manufacturers as well as Non Manufacturing Index with a rise expected in both.

U.K. – Key data starts from Wednesday with CBI Distributive Trades survey with expectations of a decline. Thursday has Nationwide House Price survey which should continue on the declining trend. Mortgage approvals are expected to show a slight increase while GFK Consumer Confidence survey should stay unchanged. Friday has PMI Manufacturing with a slight increase expected.

FOREX Technical Scenario

EUR/USD – The pair has broken below key support levels much more than expected and is now looking to target its yearly low. First crucial support zone comes up at 1.2850-75 with a break below could accelerate losses down to 1.2750 which is around the level where the Euro rebounded back towards 1.35 a month back. On the upside mild resistance exists at 1.3025 followed by a strong resistance zone at 1.3055-70. A decisive break above brings into focus the 1.3175-1.32 resistance zone.

USD/JPY – The pair like most majors is sitting at crucial levels, with strong resistance around 106.85. A break above could accelerate losses for the Yen towards the 108 region. On the downside 105.55 holds decent bid interest for the Dollar with strong support around 104.90 with very strong Dollar buying interest on any dips down towards 104.

GBP/USD – The pair has suffered the heaviest losses & has stabilized a bit around the strong support mark of 1.8605. It remains vulnerable to further losses down towards 1.8510 with good buying interest expected to crop up around 1.8450. On the upside oversold conditions may help it rally towards 1.88 where selling pressure might increase; a decisive break above would bring into focus the strong resistance zone of 1.8925-40 a move over 1.90, if any, likely to meet with strong offers.

AUD/USD – The pair has slipped quickly with profit taking on key commodities weighing in on it. Mild support exists around 0.77 with a break below could accelerate losses down to 0.7650 with very strong support around 0.76, a decisive break below risk accelerating losses for the Aussie. For moves below this mark direction on other majors would be eyed. On the upside mild resistance exists around 0.7775 with a strong one around 0.7850.