Forex Trading — LaidTrades

Bullish Gap Seen on the Euro Against the US Dollar

Good day Forex friends! Last October 7, I mentioned in my post (kindly see it here) the the euro has still a lot of room to move up against the US dollar. Zooming closer to its, 4-hour chart, you will see that the EURUSD pair has been trading in a very well defined rising channel. Given the pair’s present trend and the channel’s degree of ascent (45 degrees), I’d say that the euro rise at least in the near term could be easily sustained. Furthermore, another bullish sign propped out of the pair’s charts when it gapped up to open the this week. A bullish gap is an occurrence when the opening price opens much higher than the high of the previous period. Obvious, this is a positive sign as this suggests a rapid demand for the security which in this case is the euro. So as long as the support of the rising channel or the uptrend line holds, the EURUSD or the fiber would most likely conntinue its move north. In case it weakens, the channel’s support and the bottom of the channel could keep it from falling further.

For this week, no material economic data will be reported from the euro zone. Given the lack of economic flow, the EURUSD may just resume its present trend. Then again, it’s also possible for the pair to retrace a bit as investors lock in some of their profits.

A Temporary Rally Seen in the US Dollar

Welcome to another day of Forex trading! In today’s FX feature, I present to you an update on the US dollar index (USDX). A little more than a week ago I already warned the dollar bulls of a likely take over by the bears [Read more...]

More Room to Move Up for the Euro Versus the US Dollar

Hello FX friends! Last September 24, I specifically noted the Euro’s potential to gain in valuation (kindly see that post here). At that time, the EURUSD pair or the fiber had just broken out from a cup and handle formation. So if you took my cue and went long there and then, you would have been up by almost 600 pips already! While you might have missed the first the EUR’s initial move, technically speaking, there’s still a chance to ride this train. For one, Elliot Wave Theory states that the third wave is usually the longest wave of a 5-wave cycle. In some instances, though, the third only equals the length of the first wave. But even if this is the case, notice that the present wave 3 still falls short of wave 1, suggesting that there could be more space for the pair to move higher. Secondly, the pair’s upside target (gauged by projecting the height of the pattern from the point of breakout) has not yet been met.

Earlier today, the European Central Bank (ECB) left its interest rate unchanged at 1.00% for the 17th straight month. During the global financial crisis and the recent credit troubles in the Euro zone, the ECB was forced to lends banks with cheap cash and to support this until the whole bloc recovers. While the economy has been rebounding, it remains to be fragile and pulling the central bank’s lifeline would endanger the economy once again. Despite the ECB’s decision to hold rates, the euro continues to trade strongly against the greenback because of the overall bias against the USD.

Tomorrow, the US’s NFP report will be published. Expect an increase in volatility around the time of the data’s release. In any case, firms in the US are seen to have added 3,000 jobs after they laid about 54,000 during the previous month. An increase in employment, as we know, would be beneficial for the economy and, thus, would spark some risk taking. A jump in optimism then would lead investors to more US dollar selling which in turn props up the valuation of the euro.

Canadian Dollar to Make a Comeback Against the Aussie?

Good day FX friends! Today, I present to you a look at the currency cross, AUDCAD. As you can see from its weekly chart, the pair has been trading very well since it touched a low of 0.8579 back in June this year. Since then, the Australian dollar was able to take the Loonie’s number as the pair hit parity (1.0000) and even went on to reach a high of 1.0023 last September 23. Technically, however, the pair’s recent uptrend maybe starting to reverse already. For one, it failed to completely overpass its previous high at 0.9915. The pair has also formed a shooting star candle pattern, indicating that the prior move up north maybe losing momentum. With the stochastics also in the overbought region, the pair could indeed weaken by either moving sideways or reverse. If can find support just above 0.9200 in case it does reverse. On the positive side, a successful breach above the shooting star’s high could propel the pair to its next notable high at 1.0550.

The Reserve Bank of Australia decision not to increase its interest rate from 4.50% to 4.75% caught the market by surprise. As a result, the Aussie lost some of its appeal. The rapid rise of the currency against most of the majors have prompted the RBA to postpone its rate hike. Still, the central bank remained somewhat hawkish stating that “If economic conditions evolve as the board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target.” Aside from this suprise, the weaker-than-expected growth in the country’s retail sales (0.3% versus 0.5%) also placed some selling pressure on the Aussie.

On Canada’s side, its latest employment figures will be out this Friday (October 8). Canadian firms are seen to have added 11,300 more jobs which would have brought the country’s jobless rate down to 8.0% from 8.1%. Improvement in the labor market, of course, would reflect positively on the economy of Canada and on the CAD at least in the short term.

Will the Australian Dollar Reach Parity With the USD?

Will the Aussie reach parity with the US dollar or even better in the months to come? Technically speaking, there’s a good chance that it would. As you can see from its daily chart, the AUDUSD pair has recently broken out from a descending right-angled broadening triangle. Having past the 0.9350 and 0.9400 hurdles, the pair could now aim for 1.0000. It could, however, encounter some resistance at its all-time high at 0.9849 which it set back in 2008. Nonetheless, a move above this level could put the AUD on track towards dollar-parity. In fact, if we project the height of the pattern from the point of breakout, its upside target is even better – 1.0600. And as long as the pair’s uptrend channel remains intact, I could say that the Aussie has some more room to move north. But with its present overbought conditi0n and the wall that it is seeing at the channel’s resistance, it could move sideways or even retrace for awhile in the near term before making its journey to the heavens.

A lot of high impact economic reports are due in Australia this week. Tomorrow (October 5), Australia’s retail sales and trade balance figures for the month of August will be on deck. Sales at the retail level are seen to have increased again by 0.5% on top of the previous month’s 0.7% gain. The country’s trade balance is likewise seen to tally handsome surplus of A$2.31 billion from A$1.89 billion due to the country’s expansion in exports to China.

Later that day, the Reserve Bank of Australia will also deliver its monetary policy decision. There, the bank is expected to raise its interest rate by 0.25% to 4.75% after 5 months of holding it at 4.50%. The 1.2% growth rate in Australia’s economy during the second quarter of the year plus the recent improvement in the country’s labor market could indeed warrant a hike in the central bank’s interest rate. A rate hike plus the overall weakness in the greenback would make the Aussie more attractive; imagine netting 4.50% (4.75% – 0.25%) just by going long on the AUDUSD.

My Top 10 Forex Resolutions for 2010

Who said that resolutions can only be made on New Year? Well, it’s still roughly 3 months from the first of January and I already made mine. I mean… the earlier I make the changes the better, right? So let me cut to the chase and tell you now what they are. Here are my top 10 forex decrees:

1) Don’t hesitate to trade the breakouts!

Chart patterns are the bread and butter of technical analysis. There are five basic must-know chart formations – triangles, head and shoulder (inverted), double bottom (tops), cup and handle, triple bottom (top). If you spot a breakout.. trade it!

2) Don’t forget the fundies!

Marry fundamentals with technicals like you’re marrying Jessica Alba. Okay, the latter does not make any sense. In any case, you should always try to execute trades that are both supported by technicals and fundamentals/sentiment as this would increase the chance of them winning.

3) Don’t gamble!

Say no to rogue trading! Trading currencies is not like in a casino where you can just do a one-time big time trade. Of course you can do that but don’t fret if you find your account down to zero the following day. If you want to gamble.. go to a casino! It’s more fun there! If you want to profit… trade forex in a systematic way!

4) Don’t revenge trade!

Did I say no rogue trading? Well, losing is part of the game. So if you do just relax, calm down, and move on. Don’t hit the entry button again and trade twice or thrice of the position that you lost in hopes of getting it back and even winning in one go. You’ll find yourself in a deeper ditch if you lose again.

5) Manage your positions wisely

Manage your positions wisely like your managing your chicks… I mean your checks. Don’t risk more than 1% of your account balance in one trade. Enough said!

6) Avoid trading in a highly volatile time

Trading during the releases of high profile reports like GDP and NFP is not my style. I got whipsawed the last time I tried to ride a sudden slide in prices from a GDP report. You cannot really gauge how much a currency will move given a report. You might get the tail end of the move if you decide to just jump in. If you miss it… then stay away.

7) Trade on retracements

This one is related to number 6. If you miss a breakout or the initial strong move in prices then don’t just jump in. Wait for it to retrace (sounds fancy, eh?) so you can get a better price. Hit the limit order function… it’s there for a reason.

8) Be flexible

The market acts like a girl… fickle minded. You just don’t know what she wants exactly. So sometimes it is best to just adjust and be flexible. To be profitable and likable you gotta do what the woman wants.

9) Use a journal

Okay, journalizing sounds kinda gay-ish. But if you want to keep track of what’s working and what’s not in your trades then you better jot all of them down. Write down your trade ideas, what happened, what you did, what you felt… everything.

10) Go out. Drink. Chix.

Yes. You read that correctly! Forex is a tough business with all the things that you have to read and analyze. We’re just humans. We get strained too. Sometimes we have to take a break as well. So for my tenth decree… Free yourself from stress. Clear your mind. Go out. Drink. Chix.

So there you go… my top 10 forex resolutions. Currently, I’m working on the tenth (Hey Babe!). Alright. Got to head out now. Peace!

The Decade of the Philippine Peso?

A lot of people are asking, will the Philippine peso continue to strengthen against the US dollar? Based on its monthly chart, I’d say that there’s a good chance that it will especially if the USDPHP pair breaks the 43.668 support. If and when it does, the next obvious support would not be at 42.00 as some financial analyst predict but at 40.00. Say the peso buying in tandem with the dollar selling continues and the 40.00 marker gets breached as well, then the pair’s next downside stage would be at 37.50. Actually, I do not want to alarm those who are highly leverage in the greenback. Notice, however, the huge head and shoulders pattern that could be forming already. If this pattern gets validated by a break below 40.00 then it is quite possible that the peso could recover its former glory back in its hay day and trade near the 26.00 versus the USD once again.

The question is, will the Banko Sentral ng Pilipinas (Central Bank of the Philippines) allow the Philippine Peso to appreciate that much? Well, the BSP is not a rookie in protecting the peso. It already defended the peso’s increase in valuation in the past to protect the country’s export industry, foreign direct investments, and the money that the Overseas Filipino Workers (OFWs) are sending back. Hence, it is possible for the BSP to do the same. If it does, then the greenback could rally back towards 46.00 or even 48.00 versus the peso. Still, the global market has the bigger influence regarding the peso. So, continued increase in remittances, which by the way takes up a good chunk of the country’s total income, plus the broad-based weakness in the USD (this was explained in my recent post, please see it here) would benefit the PHP. Companies all over the world are expected continue to lessen their operating costs, thus, supporting the Philippines’ BPO industry and its FDIs in general. Such would also reflect positively in the peso.

Would a higher peso valuation benefit the Philippines? The Philippines is not really an export-based country so even if the country’s export sector gets negatively affected, it would not reflect badly on its overall output. For the longest time, majority of the country GDP is from domestic consumption. Hence, an increase in the peso’s valuation would even encourage more consumption as imports would then be cheaper. Cheaper imports of course would allow local companies to better access and purchase technology that were once scarce, making the processes of the local industries more efficient. Such could also allow local companies to develop their technology which would mark the country’s move from a ‘third world’ country to at least second. Now, will that scenario happen within the next decade? Only time will tell but I’m optimistic that it will.

EURO To Rise By A Whopping 1,250 Pips Against the US Dollar?

Hiyo FX peeps! Did I get your attention? Yes. I believe that its very likely that the EURUSD pair could gain by about 1,250 pips. Now that’s a lot! As you can see from its daily chart, the fiber has recently broken out from a very nice cup and handle formation. At present, the pair is trading just above the neckline of the pattern. With the stochastics in the overbought territory, it could exchange in a range-bound fashion for awhile before moving north. Now, a move past the 1.3500 resistance could send it on the way towards its minimum upside target (computed by projecting the height of the pattern from the point of breakout at 1.4750. If all go well, it could achieve this target in about 6 months which is also the time that it took to form the pattern.

Despite the recent dip in Europe’s Purchasing Managers’ Indices (PMIs), the business climate in Germany as measured in the German Ifo Business Climate Index surprisingly jumped to its highest score in more than three years this month. The index came in at 106.8 which is over the market’s 106.3 estimate. This rise indicates that German companies can withstand the weaker international demand. On the other side of the globe, in the US, the Fed’s inclination to place another set of stimulus programs to support the slowing growth in the US’s economy has of course weakened the greenback to the benefit of the other non-dollar currencies like the EUR. This plus the rally in the US equities markets have also urged investors to move away from the USD in exchange of the higher yielding assets and anti-dollars like the euro.

Just now, the US’s core durable orders for the month of August have grown by 2.0%, which is almost twice of the 0.9% forecast. The previous month’s change was also positively revised to -2.8% from -3.8%. These numbers signify that the chances of the earlier threat of a double dip recession in the US economy have gotten lesser and lesser.

For next week, the CB Consumer Confidence in September is seen to fall to 52.5 from 53.5. But given the strong rally in the global equities markets for the past two weeks which show the manifestation of consumer confidence in the markets, it is therefore possible for the index to have a better-than-expected result. A better-than-projected mark, as we know, could spur some risk taking and EUR buying.

Swiss Franc, Pausing Before Making Another Move North?

Hiyo FX friends! Here’s my short and sweet technical view on the CHFJPY pair. As you can see from its daily chart, the pair has broken out from a rare inverted head and shoulders continuation pattern. You see, an inverted head and shoulders pattern is generally a bullish reversal pattern although it can occur as a continuation from time to time as in this case. In any case, the upside target for the pair, judging by the height of the pattern and projecting it from the point of breakout, would be somewhere below 88.00. Sustained buying interest could push it over to that marker. At present, though, the pair’s move up north could take a halt given its overbought condition. Given this, it is possible for the pair to range or even retrace for awhile. If ever it weakens, the neckline of the previous formation should keep it afloat. Still, I could more or less say that things are looking up for the Swiss franc in the near term. Long Swiss franc anyone?

Australian Dollar To Rise By 10% Against the Yen?

It’s another manic week Forex friends! In today’s FX feature I present to you the daily chart of AUDJPY. As you can see, the pair has recently broken out (upside) from a nice symmetrical triangle formation. This breakout could swing the pair towards its previous high near the 88.00 marker. Projecting the base of the triangle from the point of breakout, the resulting upside target would be at 88.00 as well. The Aussie’s run, however, may be tempered for awhile because conditions are already overbought. The pair could range or retrace shortly before heading north again. And given it’s recent spike, it could potentially form a flag or a pennant pattern. At present, the AUDJPY pair is trading just above 80.00. Therefore, if it reaches 88.00, that would be a sweet 10% gain (1:1 margin).

The recent rally in the global equities market and gold’s rush towards fresh all-time high (see my recent post here) have helped the commodity dollars like the AUD. For this week, no high impact economic reports are due from Australia. The major releases, though, from the US, Canada, and New Zealand would more likely sway the Aussie’s short term movement. The US Fed, of course, will have its monetary policy decision on September 21. Building permits, new and existing home sales plus durable goods orders are due as well from the US. In Canada, the country’s CPI and retail sales accounts are on deck on September 21 and 22. New Zealand, Australia’s neighbor, will likewise publish its second quarter GDP growth. Risk appetite, resulting from one or all the these accounts could benefit the non-dollar currencies like the Aussie. The opposite, however, would weigh on it. Watch out for these reports!

Is the Euro Back on the Bullish Track?

Well, well, well. The EURUSD pair or the fiber as what traders call it in the streets appears to have broken out from a rectangle or consolidation. You see, the had been trending up from a low of 1.1876 last June 7 to a high of 1.3334 in August before correcting. All along I thought that the pair would already reverse but it did not. What it did was it only corrected to its 50% Fibonacci retracement level. It then continued to range or trade sideways until yesterday where it broke out to the upside when it finally breached the 1.2900 hurdle. However, the pair seems to be meeting some temporary resistance at 1.3000. If and when it moves past this number, chances are it would once again revisit its previous high just above 1.3300. Given the upside breakout, I can say that there is now a higher probability that the euro will move higher against the US dollar in the near term.

Germany’s September Zew economic sentiment index came in sour, unexpectedly falling to -4.7 (vs. 10.7) from from 14.0. The same sentiment index for the entire euro zone also slipped to 4.4 from 15.8. The slide in confidence can be attributed to the wide budget cuts done by the governments that make up the economic zone. Remember that the zone was being plagued with a credit crisis. One way to plug the countries’ deficit holes would be to drastically slash their spending. A cut in spending would obviously limit the business activity in the region but given Europe’s present fiscal situation, such move is really warranted.

Despite this, the euro still managed to outmaneuver the greenback thanks to the better than expected US core retail sales. Core retail sales in August grew by 0.6% which is twice of the market’s 0.3% consensus.

No high impact economic reports are due from the euro zone for the rest of this week. The euro, however, could take its cue from the releases from the United States. Today, the Us will publish its Empire State manufacturing index and its August industrial production. The former is seen to have reached 8.7 from 7.1 while the latter is expected to have increased again by 0.3%. The expected improvement in the Philadelphia Fed manufacturing index (from -7.7 to 0.9) which will be due tomorrow and the projected jump in the Prelim UoM Consumer Sentiment (from 68.9 to 70.3) could also induce some risk taking. Watch out for these reports.

Swiss Franc Flirting With All-time High Against the Greenback

Welcome to another day of FX trading! In today’s fx feature is the weekly chart of the USDCHF. As you can see, the pair has been losing a lot ground for several weeks now. After hitting a high of 1.1731 last May 31, it has slid since then. In fact, it had already touched the parity level early today. Still, previous supports around the 1.0000 psychological level have kept the price from falling any further. If if the 1.0000 marker gets breached, the pair could revisit its 1-year low at 0.9916. A break of this low could send it towards the pair’s all time low at 0.9635. But with investors protecting the price at 1.0000 and an oversold condition, the pair could, however, stage a rally.

Renewed confidence in the global markets have weakened the dollar’s valuation against its peers as of late. Both the DJIA and the broader S&P 500 have again logged in some beautiful gains yesterday, rising by 0.78% and 1.11%, respectively. Yesterday’s jump in confidence which was reflected in the rise in the equities markets was because of the Basel III agreement that was concluded yesterday. The Basel III is an international regulatory code that requires banks to raise their common equity to 4.5% from 2.0%. This equity will be used by the banks as buffer in case they encounter liquidity problems from say investor withdrawals and the like. In the East, China’s handsome industrial production (13.9%) and retail sales (18.2%) growth further supported the market’s optimism.

The highlight of this week for Switzerland is the Swiss National Bank’s monetary policy decision on Thursday (September 16). The SNB is expected to keep its interest rate unchanged at 0.25%. The bank, though, is very notorious in intervening in the fx market to prevent the Swissy appreciation. They do so because a higher Swissy negatively impacts their export industry. With the Swissy trading at an all-time high against the euro and flirting with historical highs versus the Us dollar, the SNB could indeed meddle in the market. If it does, then a sudden spike against the Swiss franc could occur. Nonetheless, even if the SNB intervenes, its effect would just be temporary. Market sentiment is still stronger and as long as optimism remains, the Swissy could strengthen still.

The Aussie’s Due For a Retracement

Happy weekend FX people! On today’s FX feature is an update of the AUDUSD pair which I posted last September 5 (please see it here). As you can see, the pair has continued to rise within an ascending channel. And as I’ve suggested, the pair indeed rose to mark its fifth wave (wave 5). If the Elliot Wave Principle holds true and if my wave counting is correct then as the theory suggests, the pair should be due for a retracement. Remember that the EWP predicts a correction in the prices after the completion of the fifth wave, starting with wave A and ending with wave C. And given the obvious technical resistances ahead and an overbought condition as indicated in the stochastics, the pair could indeed dip or at least move sideways. If the Aussie weakens against the US dollar, the peak of the third wave around the 0.9200 level and the channel’s support should keep it from falling further.

The Aussie along with the non-dollar currencies rose this Friday due to the better-than-expected July wholesale inventories report in the US. Wholesale inventories has risen by 1.3% as compared to the 0.4% market forecast. China’s better-than-projected industrial production (13.9% vs. 13.1%) , retail sales (18.4% vs. 18.0%), new loans (545 billion vs. 500 billion), M2 money supply (19.2% vs. 17.5%), and the slower PPI (4.3% vs. 4.6%), have also helped the Aussie. Remember that Australia is one of the biggest supplier of raw materials to China. Hence, an increasing business activity means more business for Australia. A weaker PPI, in the same way, benefits the Aussie since a monetary tightening by the Chinese government would be postponed which would allow for business to go on without additional restrictions as of the moment.

For the coming week, no market moving events are scheduled in Australia. Given the lack of economic reports from the country, investors could take this as a chance to pocket some of their profits from their long Aussie positions.

Canadian Dollar Remains Weak Versus the Yen Despite BOC Rate Hike

Good day FX peeps! To cap the week I present to you an update of the CADJPY. You see, the pair has consolidated within a small symmetrical triangle after it broke down from a bigger descending triangle formation. As of the moment, the pair is already nearing the apex of symmetrical triangle. This suggests that a break out whether to the upside or to the downside is imminent. But given the pair’s general trend (downtrend) and its recent break down from a descending triangle formation, I can say that it has a higher chance of moving south than north. Even it breaks the resistance of the small triangle, a solid resistance is still present at the 82.00 marker which incidentally is also the former support of the previous descending triangle to push back down. In any case, a move below the support of the present triangle could send it back to the previous low at 78.41. A move above the 82.00 level, on the other hand, could change the pair’s course to at least sideways.

In my post last September 6 (please see it here), I mentioned that it’s possible for the Bank of Canada (BOC) to hold its interest rate unchanged rather than hiking it. However, I was proven wrong when the central bank actually raised its benchmark interest rate as expected by the market by 0.25% to 1.00% from 0.75%, making the interest rate differential between the Canadian dollar and the Japanese yen wider. This decision, though, was not enough for the CADJPY to break key resistances at its long term downtrend line and at 82.00 as it only increased from an opening of 79.93 to close at 80.96. Yesterday’s weaker-than-projected housing starts number (183k vs. 185k) and the worsening of Canada’s trade balance figure to -C$2.7 billion from -C$1.8 billion did not help as well.

Canada’s employment change and unemployment rate for the month of August are on deck today at 11:00 am GMT. Canadian firms are seen to have added about 30,800 jobs in August after laying about 9,300 during the previous month. The country’s jobless rate, though, is still projected to remain the same at 8.0%. Generally, an improvement in Canada’s labor market is bullish for the economy and the Loonie. But is the expected increase in employment or better enough for investors to push the CADJPY above 82.00? Let us see.

Singapore Dollar Trading At An All-Time High Versus the US Dollar!

Good day Forex friends! In today’s FX special, I present to you the monthly chart of the US Dollar versus the Singapore Dollar (USDSGD). As you can see, the USDSGD pair has been sloping downwards for quite some time now. Last Friday, however, it was able to cross below the psychological 1.3500 support, marking a new all-time high for the Singapore dollar. With an oversold condition (as indicated in the stochastics), the pair could still rally. Though the long term downtrend line should keep it from rising further. A potential descending triangle could be forming if that scenario occurs. In any case, a clear break below the 1.3500 support could send the USDSGD pair lower by about 4,000 pips! Long SGD anyone?

Last week’s better-than-expected employment and housing figures in the US have sparked some risk taking among investors, causing them to leave the safety of the greenback for the like of the SGD. Singapore is actually a highly developed economy in Asia despite its size which makes it a prime place of investment. Everyone knows about the double digit growth in China but Singapore is actually the fastest growing economy in the world, expanding by 17.9% for the first half of 2010! In any case, some analyst say that the Monetary Authority of Singapore (MAS) would intervene in the market to prevent the SGD’s rapid appreciation in order to protect the country’s export industry which is its main source of revenue. But if risk taking persists, a higher valuation of the Singapore dollar could be very well tolerated.

British Pound Weakening Against the Swiss Franc

Hiyo FX peeps! Here’s a weekly chart of the GBPCHF pair. As you can see, the pair has been trading sideways after hitting a low of 1.5118 back in December 29 back in 2008. Just recently, however, the Swiss franc was able to hurdle below the 1.5825 marker against the British pound. Given this price action, the next support that I see for the GBPCHF pair is the low that it marked in 2008 (1.5118). Hence, the pair could fall back to around the mentioned low unless it is able to climb over the support-now-turned-resistance at 1.5825.

The main event of this week for the UK will be the will be the monetary policy decision of the Bank of England (BOE) on Thusday (September 9). Last month, the bank’s MPC kept its monetary policies unchanged. It left its interest rate at 0.50% and its asset purchase facility at 200 billion. The UK’s economy began to grow during the last quarter of last year. It even expanded by 1.2% during the second half of this year. The bank, however, views that there is still a big chance that this recovery will not be sustained. It said that there are still a lot of uncertainties and risks surrounding the UK’s market.

From then until now, the UK’s economic environment remains mixed. While the country’s retail sales came out with a 1.1% growth against the 0.7% consensus, the country’s home prices remain subdued. In fact, the UK’s HPI is on a 3-month losing streak, dipping by another 0.9% during the last month. Both manufacturing and services PMI also showed weakness during the last couple of periods. Switzerland, on the other hand, showed surprising 4.8% jump in their retail sales, more than doubling the 2.3% market estimate. So between the UK and Switzerland, the later appears to be the less fragile.

The Bank of Canada Could Hold Its Rate Unchanged

Welcome to another week of forex trading! In today’s FX feature is the daily cast of the CADJPY. As you can see from the chart, the pair broke down from a descending triangle pattern. Since then, it has been trading between 78.60 and 81.70. Last Friday, we the Canadian dollar rallied against the Japanese yen to push the CADJPY pair closer to where the former support of the triangle. In my view, there is still some room for the pair to move higher although it could turn back when it hits a resistance at this former support. If it does, it could fall back to around 78.60.

The Bank of Canada will hold its monetary policy decision this coming Wednesday (September 8). The bank is expected to raise its interest rate to 1.00% from 0.75%. But like what I said in my title, there’s an outside chance that the BOC could surprise the markets by not hiking its benchmark interest rate.

Let’s us check Canada’s recent economic data to see why. First of all, the country’s unemployment rate unexpectedly rose to 8.-% from 7.9% with firms cutting about 9,300 jobs. Its Ivey PMI, which gauges the activity of both manufacturing and sercies industry through the eyes of purchasing managers, also dipped by several notches to 54.0 from 58.9. More importantly, Canada’s wholesale and retail sales have continued to suffer with the former slipping by 0.3% and the core retail sales sliding again by another 0.5%. As a result, the country’s core CPI for the month has also slipped by 0.1%.

The above data shows that the situation as of the moment does not merit a rate hike as of yet especially with the unexpected slide in the latest month-ever-month CPI. The Loonie would almost surely take a hit if the BOC surprises the market by not raising its interest rates. But in case it does, the Canadian dollar could still trade on a range bound fashion or even fall since a rate hike is already forecasted and priced in by the market.

Australian Dollar’s Silent Rise

Good day to you my fellow FX men and women! Today I present to you the daily chart of the AUDUSD. As you can see, the pair has been trading within an ascending channel since the middle of May 2010. Of course, the pair would more like trend higher as long as the channel’s support does not buckle. The Aussie, however, could meet some resistance at the pair’s previous high near the 0.9200 level. With the stochastics in the overbought area, it could rest for a while before making another move to the north. A move past the 0.9200 level could push it towards 0.9300. The Elliot Wave Principle (EWP) also seems to confirm this potential price action. If my wave counting is correct, the AUDUSD could already be in its fifth wave. This then suggests that the next short term up-move would more likely surpass the peak at 0.9200.

Recent economic data in Australia goes to support the positive sentiment towards the Aussie. For one, the corporate profits of Australian firms for the second quarter of the year have unexpectedly soared by 18.9% compared to the market’s 5.9% growth forecast. The firms’ 1Q scores were also positively revised to 4.3% from 3.9%. The country’s building approvals have also expanded for the first time in 5 months. The account surprisingly rose 2.3% in July after dipping by 3.4% during the previous month. Retail sales for the same period have also shown some good figures, expanding by 0.7% in July and 0.4% in June. More importantly, the country’s second quarter gross domestic product (GDP), has surpassed the market’s 0.9% forecast with a 1.2% growth. the first quarter’s overall output expansion was also revised upwards to 0.7% from 0.5%.

On Tuesday (September 7), the Reserve Bank of Australia will have its monetary policy decision. While the bank is still expected to hold its benchmark interest rates at 4.5%, the bank’s tone would more likely lie towards the hawkish end of the spectrum given the improvements economy. Any positive outlook regarding the country would of course be bullish on the Australian dollar as well.

The Aussie Bears’ Return – August 25, 2010

It’s a bad day for the Aussie bulls since it seems that the bears have just taken over the trading driver seat. As you can see from the AUDUSD’s 4-hour chart, the pair appears to have broken down from a head and shoulders pattern. Remember that the Australian dollar had risen to as much as 0.9200 over the greenback early this month after touching a low of just above 0.8100 in June. though, by the looks of it, it’s luck has already turned. Yesterday’s movement pushed the prices below the pattern’s neckline and also under the previous resistance-turned-support. Given this, the price could head all the way down to 0.8500 though the previous support at 0.8600 could possibly halt its descent. In any case, things still look bearish for the AUD unless it is able to move back up above the neckline.

Due tomorrow (August 26) at 00:00 GMT and at 1:30 am GMT are Australia’s Conference Board leading index for the month of June and the country’s second quarter private capital expenditure. The CB leading index had risen by 0.3% in May though it could print a lower gain or even a contraction given Australia’s weak home loans figure and the country’s high unemployment rate. In case you do not know, home loans have fallen by 3.9% in June after posting a jump of 3.0% during the other month. Unemployment rate has also jumped to 5.3% from 5.1%. The country’s private capital investments for the 2Q, on the other hand, is projected to have expanded by 2.3% after dipping by 0.2%. Capital investments take up about 28.54 of Australia’s overall GDP or output. Hence, an increase in this number could push the Aussie higher in the near term. Though in my opinion, a hike of 2.3% or lower is not enough to push the Aussie back on the bullish track unless of course the figure prints a much stronger score. Watch out for the report tomorrow!

EURO Breaks Out! But to the Downside! – August 24, 2010

Good day FX friends! Here’s an update on the EURUSD which I posted last August 17 (please see my previous blog here). In that post, I mentioned the possibility of the euro breaking out to the upside. It turns out that I was wrong as the EUR, instead of moving north, slid and broke down. As you can see from its chart, it appears that the euro’s recent rally over the greenback is over. After breaking out from an inverted head and shoulders pattern, the fiber or the EURUSD pair managed to achieve its minimum target and more. It then continued to rise and it even marked a new 3-month high at 1.3334 before dipping again. After its drastic slide from its 3-month high I though that it would reverse and turn up as suggested by what appeared to be another inverted head and shoulders. However, a break out from this pattern did not materialize. Its price then formed a head and shoulders (bearish and not to be mistaken with the inverted version) pattern. Its price action during the first days of this week proved costly as it pierced through and below its uptrend line and the formation’s neckline. Given this, the pair could now fall all the way to the 1.2150 area. Even if it rallies, the head and shoulders neckline at 1.2750 would prevent it from rising any further.

The euro lost its appeal on fears over Europe’s economy. The services PMI of France, manufacturing PMI of Germany, and the euro zone’s overall manufacturing purchasing manager index all failed to meet the market’s consensus. The French services PMI fell to 59.9 (versus 60.7) from 61.1. Germany’s manufacturing index also weakened to 58.2 from 61.2 which resulted into a broader fall in the euro zone’s number to 55.0 from 56.7. Note that the index can be used to gauge the business activity of the respective sectors in the economy. Why? Well, purchasing managers hold perhaps the most current and relevant insight into company’s view of the economy. For example, if the company is starting to pile up their invetory then perhaps it is expecting a uptick in its business in the near future. In any case, a drop in these figures suggests that the recovery in the euro zone’s economy could have slowed down.

On tap on August 25 and 26, respectively, are the German Ifo business climate index and the GfK German consumer climate index. Ifo’s account is seen to have retreated to 105.8 from 106.2 while the GfK index is projected to have increased to 4.1 from 3.9. But given the weaker-than-expected PMIs in the euro zone and the recent tentativeness in the global markets, business climate in Germany and the euro zone could have dipped as well.Such could very well reflect in the upcoming business and consumer climate surveys. If this is the case then the euro could once again take another hit.