Daily Market Outlook by Kate Curtis from Trader's Way

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Trader's Way, a prime online Forex and CFD broker, here offers you Daily Market Outlook by Kate Curtis, the company's expert with deep trading and analysis experience.

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Major Currencies Outlook: February 11

USD: Neutral

It seems that the focus has shifted away from the Fed's easy monetary policy stance and weak US economic data, as traders are selling off higher-yielding currencies in favor of the US dollar. Only the January retail sales and February consumer confidence data are due from the US this week and these events could spur volatility among dollar pairs in the coming days.

JPY: Bearish

Last Friday, Finance Minister Aso downplayed the yen's weakness and even said that they were surprised to see the yen drop too quickly. This resulted in a brief yen rally as traders thought that the Japanese government won't be too aggressive when it comes to keeping the yen's value low. However, these remarks may have simply been politically-motivated prior to the weekend's G20 Summit so that Japan won't be placed in the hot seat and blamed for inciting a currency war. The yen underwent a fresh selloff during the early London sesison today though as former BOJ Governor Kuroda was quoted saying that the central bank could do more to ward off deflation. This should set the stage for the upcoming BOJ rate statement later on this week.

EUR: Bearish

Political troubles in both Spain and Italy have come back under the limelight last week, weighing on the euro prior to the ECB rate statement. Draghi did mention that he will be keeping a close eye on the euro's rallies and that the recent ones aren't good for inflation. Underlying fundamentals for the euro zone still haven't changed, although there was a considerable improvement in their fiscal landscape. Plenty of risks still remain and the lack of hard-hitting data from the euro zone this week could leave traders selling euro pairs off based on last week's central bank rhetoric.

GBP: Bearish

Although upcoming BOE head Carney's upbeat comments lifted the pound during last week's trading, the BOE still remains committed to its loose monetary policy as the UK needs stimulus to keep growth afloat. Remember that the UK is still facing the threat of a triple-dip recession as the Q4 2012 GDP posted a negative reading. CPI and retail sales are coming up this week and these reports should paint a clearer picture of whether the central bank has room and reason to actually increase asset purchases or cut interest rates. The BOE inflation report and Governor Mervyn King's speech are also scheduled this week and, if these events confirm that the UK is still on weak economic footing, we might see the pound resume its selloff.

AUD: Bearish

The Australian dollar sold off aggressively lately as a downbeat RBA statement supported by weaker than usual economic figures weighed on the commodity currency. It seems that markets are pricing in their expectations for a rate cut for the March RBA statement as early as today since growth, consumer spending, and hiring have all remained weak. There are no new reports from Australia for the rest of the week so the pair could continue to move south unless risk appetite improves.

NZD: Bearish

The New Zealand dollar is being dragged down by the negative sentiment for Australia, New Zealand's closest economic neighbor. On top of that, weak jobs data is expected to result in poor consumer spending for the last quarter of 2012 and we'll see the actual figure later on this week. Traders seem to be pricing in their expectations for another decline in retail sales as the pair is currently testing significant support levels.

CAD: Bearish

Weak Canadian jobs data triggered a sharp selloff for the Loonie late last week as the figure posted a decline in hiring for the month. This could translate to weaker consumer spending and growth down the line and it doesn't help that the BOC already pushed back their interest rate hike schedule. No new reports are due from Canada this week but the change in economic outlook for this country could keep weighing on the Loonie.

CHF: Neutral

Only the Swiss CPI report is due from Switzerland this week and this doesn't usually have a huge impact on the franc's price action. Franc pairs tend to react more to news and economic updates concerning its counterparts so better keep close tabs on the goings-on in the US or euro zone if you're trading USD/CHF and EUR/CHF. Bleak demand for European currencies (EUR and GBP) stemming from last week's dovish monetary policy statements from the ECB and BOE seem to be renewing demand for the Swiss franc so far.

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#3

Forex Major Currencies Outlook (February 12, 2013)

USD: Neutral

No major reports are due from the U.S. today as dollar pairs are expected to react to country-specific events and data. Take note though that a couple of Fed officials are set to speak today and possibly talk about their take on the looming currency war among major economies. Negative comments regarding the ongoing USD/JPY rally could force the pair to retreat but U.S. economic data due later on in the week could have more impact on the currency.

JPY: Bearish

USD/JPY remains on a very strong uptrend despite comments from the Finance Minister saying that the yen selloff wasn't sharper than they anticipated. Japanese officials might be very careful with their comments this week though as the G20 summit is coming up and they'd like to avoid speculations of an ongoing currency war. In fact, the G7 is scheduled to issue a statement later on in the week reiterating that exchange rates should be kept flexible. However, the BOJ monetary policy statement is scheduled to take place in a few days and this could carry more impact depending on how the officials feel about the ongoing yen selloff. Traders might be hesitant to place huge yen positions prior to the event so watch out for some consolidation.

GBP: Bearish

U.K. annual CPI is expected to hold steady at 2.7% for this year and the lack of strong inflationary pressures could weigh on the pound today as it would suggest that the BOE has enough room to implement further asset purchases. After all, the U.K. is still facing the possibility of a triple-dip recession and the BOE is inclined to do whatever it takes to keep that from happening. The BOE inflation report is also set for release and this should shed more light on how the central bank plans to achieve price stability.

EUR: Bullish

ECB Governor Draghi is facing a lot of opposition from other European officials when it comes to keeping the euro's rallies capped. Although he didn't exactly say that the central bank is ready to intervene in the markets, his remarks did spark a huge selloff but it appears to be a mere correction. The G7 is getting ready to issue a statement committing to exchange rate flexibility and this could be enough reason for EUR/USD to resume its rally fueled by improving euro zone fundamentals. Besides, Germany isn't too bothered about euro strength for now and their Finance Minister insists that exchange rates shouldn't be manipulated. Draghi is set to deliver a speech later on today and possibly admit that the ECB isn't looking to intervene in the markets just yet.

CHF: Bullish

With all the dovish comments and threat of an intervention surrounding European currencies (euro and pound), the Swiss franc seems to be the better option for now. The Swiss National Bank seems to be on neutral monetary policy mode at the moment, rendering it one of the less dovish central banks around. Switzerland is set to print its monthly inflation report for January and possibly report a drop in consumer price levels.

AUD: Bearish

The Australian dollar is being weighed down by weak economic data from the Land Down Under. Just last week, Australia released a seemingly good labor report but it turns out the increase in hiring was just a result of part-time jobs and a decline in the participation rate. There are no reports due from Australia for the rest of the week but the downbeat outlook and expectations for a rate cut in their March RBA statement could keep AUD/USD on its way to the 1.0150 support.

NZD: Bearish

New Zealand is set to release its quarterly retail sales report later on this week and traders could be pricing in a weak consumer spending figure. After all, the country released worse than expected jobs data for the same quarter and the labor market weakness is expected to translate to poor spending.

CAD: Neutral

Outgoing Bank of Canada Governor Mark Carney is set to give a speech today and possibly give his final assessment for the Canadian economy. Many aren't expecting surprises from the BOC head who is set to move over to the Bank of England later on this year, so there might not be enough catalysts for a rally or selloff for the Canadian dollar.

By Kate Curtis from Trader's Way

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#4

Forex Major Currencies Outlook (February 13, 2013)

USD: Bullish

Dollar-buying resumed lately as the G7 leaders issued a joint statement saying that currency movements should reflect fundamentals and that monetary policy should be targeted at supporting growth and not devaluing the currency. This put the recent currency war talks to rest as it triggered a sharp selloff in USD/JPY prior to the upcoming BOJ statement and G20 summit. Today’s focus could be on the US retail sales report, which could post another increase in consumer spending. Both core and headline figures are expecting 0.1% upticks but an upside surprise might be in the cards as the January employment report printed strong results. The Greenback has been reacting to fundamentals these days, which suggests that a strong report could trigger dollar strength.

JPY: Bullish

The Japanese yen rallied sharply after a G7 official was quoted saying that the leaders were very concerned about the yen’s rapid selloff. He reiterated that exchange rate movements should mirror the country’s fundamentals and that monetary policy shouldn’t be used to manipulate the currency’s value. This sets the tone for a careful BOJ statement in Thursday’s Asian session, possibly resulting to more traders easing off their short yen positions. This also sets the stage for the upcoming G20 Summit this weekend, during which world leaders could criticize the yen’s depreciation.

EUR: Bullish

EUR/USD bounced off the 1.3350 area yesterday as currency war talks seem to have been put to rest by the recent G7 statement. European Central Bank head Mario Draghi also dismissed the possibility of an ECB intervention in the currency market as he said that the central bank’s job is to manage monetary policy and spur growth, not engage in exchange rate manipulation. With that, the euro could resume its ongoing uptrend against its counterparts as the central bank seems to be in no rush to change its monetary policy. An ECB member remarked that the central bank’s forecasts haven’t been changed so far as the euro zone shifts its focus from financial stability back to economic growth.

GBP: Bearish

Weaker than expected inflation data from the UK, which suggests that there is enough room for the BOE to implement further easing measures if needed. Take note that the British economy is facing the possibility of a triple-dip recession after posting negative growth in the last quarter of 2012. Since the annual CPI came in at 2.7% though, there is no need for the BOE to release its inflation report, which is required only if the inflation rate overshoots the 3% target. BOE Governor Mervyn King is set to deliver a speech today though and could have comments on the UK’s inflation outlook.

CHF: Neutral

Currency war speculations seem to have very little effect on the Swissy these days, despite the SNB’s successful implementation of its EUR/CHF peg last year. In fact, SNB head Thomas Jordan emphasized that the EUR/CHF peg would still remain this year at 1.2000. The pair barely reacted to the Swiss CPI report which came in line with consensus at -0.3% for January so it might also have a limited reaction to the PPI report due today.

CAD: Neutral

Aside from being able to take advantage of the overall U.S. dollar weakness resulting from the G7 statement, the Canadian dollar also benefitted from hawkish comments from exiting BOC Governor Mark Carney. He may have pushed back the time line for BOC rate hikes as he delivered a less hawkish statement last month but he did reiterate that higher rates are still needed sooner or later. He pointed out the improved inflation outlook in Canada and the positive developments in the euro zone as reasons for his upbeat assessment, leaving the BOC as one of the more hawkish central banks around.

AUD: Bearish

The Australian dollar was able to rebound in the recent trading sessions, thanks to the G7 statement which triggered a broad-based dollar selloff. However, the Australian dollar doesn’t have a lot of fundamental support as economic figures from Australia have hinted at a rate cut for the RBA’s March monetary policy statement. There are no major reports from Australia today, suggesting that interest rate expectations could continue to drive their currency lower.

NZD: Bearish

Just like the Australian dollar, the Kiwi was able to take advantage of the dollar selloff that took place after the G7 committed to market-determined exchange rates. Only the quarterly retail sales release is on New Zealand’s agenda for the rest of the week and, judging from the weak labor report we saw for Q4 2012, we could see a downside surprise or even a negative consumer spending report for the same period.

By Kate Curtis from Trader's Way

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#5

Forex Major Currencies Outlook (February 14, 2013)

USD: Neutral

The U.S. dollar is acting more of a counter-currency these days than actually dictating price action of the dollar pairs. Markets barely reacted to the U.S. retail sales release which came in line with expectations, as the headline figure posted a 0.1% uptick and the core figure showed a 0.2% increase. This is because traders are already accustomed to the Federal Reserve’s low interest rates pledge and aren’t expecting any changes anytime soon. Only the weekly jobless claims report is due today and this probably won’t have a major impact on price action.

EUR: Bearish

Latest euro zone GDP data revealed that the region is stuck deeper in a recession for the last quarter of 2012. Euro zone’s top three economies all posted negative GDP growth for the quarter with France contracting by 0.2%, Germany showing a 0.6% drop in growth, and Italy printing a -0.9% reading – all weaker than expected. This translated to an overall 0.6% contraction in the region’s GDP for Q4 2012, triggering a euro selloff at the start of the London session. With no other major reports due from the region, the selloff could last for the rest of the day as it suggests that the ECB could loosen monetary policy again later on.

GBP: Bearish

With the recent speech by Bank of England Governor Mervyn King committing to further monetary policy easing, whether in the form of interest rate cuts or increased asset purchases, the pound kept selling off against its major counterparts. It appears that the central bank is stuck between a rock and a hard place as they have to choose between maintaining price stability and spurring economic growth. King emphasized that they want to prioritize the latter at the moment as they pledged to keep monetary policy loose at the risk of stoking inflationary pressures further. Note that inflation is still way above the central bank’s 2% target and additional easing could eventually push the annual CPI beyond the BOE’s 3% limit, putting the country at risk of stagflation if growth does not pick up.

CHF: Neutral

No economic reports are due from Switzerland until the end of the week, leaving the franc to trade more carefully ahead of the upcoming G20 Summit. While some of the leaders seem to be fine with using monetary policy to keep their local currencies low, criticism for countries that have implemented exchange rate targeting in the past could trigger sharp selloffs for the currencies involved. Remember that the SNB has implemented a EUR/CHF peg in the past year and might also be put under the hot seat for doing so.

JPY: Neutral

The BOJ gave a very cautious monetary policy statement during today’s Asian session as though keen to avoid anything that has to do with currency manipulation. The bank gave a pretty balanced assessment of their economy as the pointed out both the positive and negative developments so far. The bank also stressed its inflation targets but steered clear of mentioning the threat of deflation so as to not stoke any sharp yen selloffs. Expect the yen to trade carefully prior to the weekend’s G20 Summit as traders would be hesitant to take any huge positions prior to the big event.

AUD: Bearish

The Australian dollar has been lifted by improved consumer confidence according to Westpac’s survey and higher inflation expectations based on the latest Melbourne Institute report. No other reports are due from Australia for the rest of the week. The upbeat reaction to the latest reports could be short-lived as fundamentals in Australia still remain weak, with hiring and spending still muted.

NZD: Bearish

Finance Minister English’s remarks saying that the recent Kiwi rallies have properly mirrored New Zealand fundamentals sparked a Kiwi run during the Asian session as this shows that their government isn’t looking to intervene in the currency market. Besides, English also mentioned the high costs that are incurred just to keep the local currency from rallying and admitted that the New Zealand government isn’t equipped with that amount of funds. The New Zealand dollar’s recent gains could be erased by a weaker than expected quarterly retail sales report though as the jobs data for the same quarter fell below consensus and showed a drop in participation rate.

CAD: Neutral

There were no reports released from Canada lately but the Canadian dollar seems to be benefitting from the rally in oil prices as crude approaches $100/barrel. No reports are due from Canada for the rest of the week but outgoing BOC Head Carney’s upbeat comments on the Canadian economy could keep providing support for the Canadian dollar.

By Kate Curtis from Trader's Way

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#6

Forex Major Currencies Outlook (February 15, 2013)

Forex Major Currencies Outlook (February 15, 2013)

USD: Bullish

The U.S. dollar seems to be emerging as a safe-haven currency once more as traders are seeking a more stable currency while the G20 Summit is going on. On top of that, profit-taking prior to the big event is also helping prop up the U.S. dollar against most of its counterparts. The University of Michigan consumer sentiment figure is set for release during today’s New York session and an improvement in confidence is expected. The figure could climb from 71.3 to 74.8 for the current month but this is just a preliminary reading, which is still subject to revisions later on. A stronger than expected figure could hint at higher consumer spending in the coming months, which could provide support for the Greenback.

JPY: Bullish

Yen bears are easing off their short positions as the G20 Summit could put Japan and its loose monetary policy on the hot seat for the next few days. Although most yen pairs are still trading carefully or consolidating for now, harsh comments on the BOJ’s alleged exchange rate targeting moves could erase the yen’s recent losses and set off some rallies prior to the end of the week. Although some countries are expected to show support for a weaker yen, be careful of possible weekend gaps moving forward.

EUR: Bearish

The euro suffered three major blows yesterday, starting from the weaker than expected euro zone GDP release which pushed the region deeper into a technical recession. The top three economies (Germany, France, and Italy) all posted a contraction for the last quarter of 2012, resulting in an overall 0.6% GDP decline for the region. An ECB official was quoted saying that negative interest rates might be an option for the central bank if growth doesn’t pick up pace this year while an S&P member announced that Spain, Italy, Portugal, and France might suffer credit rating downgrades sooner or later.

GBP: Bearish

The pound has been one of the weakest performing currencies for the week as fundamentals have been weak in the United Kingdom. Earlier this week, inflation reports came in slightly stronger than expected but the BOE stayed committed to further monetary policy easing if growth remains stagnant. This puts the country at risk of stagflation, a period of strong inflation accompanied by weak economic growth, which could further undermine the country’s economic performance.

NZD: Bullish

Stronger than expected quarterly retail sales data pushed the Kiwi to a new 5-year high against the U.S. dollar as consumer spending posted a 2.1% jump for the last quarter of 2012. The core version of the report showed a 1.5% increase, better than the consensus of a 1.4% uptick. This goes to show that the retail sector still remains strong despite the downturn in New Zealand’s employment data for the same period. NZD/USD staged a strong upside breakout above the .8450 resistance which held for the past few months and even rallied beyond the .8500 handle. Sentiment for this pair has shifted to a more bullish one especially since the New Zealand isn’t looking to intervene in the currency market and the RBNZ has expressed its upbeat outlook for the economy moving forward.

AUD: Bullish

Only minor economic reports were released from Australia this week but these were enough to keep the Australian dollar afloat against the U.S. dollar. Stronger than expected data from New Zealand, its closest economic neighbor, also boosted sentiment for Australia. AUD/USD broke above the top of the falling channel on the 4-hour chart suggesting that the downtrend could be over and that a rally could be in the cards. Be mindful of a potential weekend gap as the G20 Summit could contain some wildcards for major currency pairs.

CAD: Neutral

Only the wholesale sales report is due from Canada today and, since this is December data, it’s not expected to have a huge impact on the Canadian dollar’s price action. The rally in oil prices has been lifting the Canadian dollar so far but traders might want to take profits off ahead of the weekend.

CHF: Bullish

There are no reports due from Switzerland for the rest of the week but the Swiss franc could be due for a rally, especially against the euro, if the G20 leaders criticize the SNB’s EUR/CHF peg. The G20 Summit is expected to focus on exchange rate intervention and possibly emphasize that this shouldn’t be the mandate of central banks. If that’s the case, the Swiss franc could have a chance at rallying against the euro as the Swissy appears to be the more stable European currency compared to the euro and pound.

By Kate Curtis from Trader's Way

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#7

Forex Major Currencies Outlook (February 18, 2013)

USD: Bullish

The U.S. dollar gapped higher against most of its major counterparts over the weekend as traders were relieved to see the results of the recently concluded G20 Summit. As it turns out, the G20 leaders didn’t have any strong criticism for Japan’s currency devaluation strategies, allowing USD/JPY to gap up and reach the 94.00 mark right after the official communiqué was released. Now that the G20 Summit is over and there have been no resulting restrictions on currency manipulation, the major currencies could resume trading on fundamentals or economic reports, as well as central banks’ willingness to intervene. With the Fed not explicitly stating any intention to keep the U.S. dollar down, traders could buy the U.S. dollar up as a counter currency for weaker currencies.

JPY: Bearish

Following the G20 Summit conclusion, it seems that there is nothing stopping the yen from selling off further as the leaders didn’t specifically mention any restrictions on currency devaluation. USD/JPY gapped higher over the weekend and traded until the 94.00 handle during today’s Asian session as Japan was also able to dodge strong criticism during the G20 Summit. In short, this means that traders have the go signal to keep selling the yen as the BOJ is still on track to implement further easing measures. Take note that BOJ Governor Shirakawa is set to step down soon and that Japan’s Prime Minister Shinzo Abe will appoint the next central bank leader, who is likely to favor yen weakness as Japan tries to combat deflation. Financial expert Toshiro Muto is being hailed as the top candidate for the BOJ Governor position.

EUR: Bearish

The euro has somewhat held steady against the U.S. dollar so far as euro zone leaders seem to be on the fence when it comes to currency devaluation. While ECB head Mario Draghi has mentioned that the central bank is keeping a close eye on the euro’s movements, he has also stressed that currency manipulation is not in the ECB’s mandate. Other European leaders and countries have echoed this sentiment but the latest GDP reports seem to indicate that the euro zone’s top economies can no longer afford anything that could threaten overall economic growth. Euro zone has just entered another quarter in technical recession and European leaders might be keen to implement a fresh round of easing or engage in currency devaluation just to keep demand afloat. ECB head Draghi is set to deliver a speech today and talk about his outlook for the euro zone.

GBP: Bearish

It seems that there is no stopping the pound’s slide these days as the U.K. just released another weaker than expected report last Friday. The retail sales report for January posted a surprise 0.6% decline instead of the projected 0.5% rebound in consumer spending. This marks the fourth consecutive monthly decline in retail sales, which would definitely weigh on the U.K.’s GDP reading for the first quarter this year. Take note that the economy already posted a negative GDP report for Q4 2012 and another contraction could place them back in recession. The BOE just announced last week that they would not hesitate to implement further easing measures despite the risks posed by strong inflationary pressures, which means that the central bank is willing to face stagflation for the sake of spurring growth which might be a difficult feat.

CHF: Neutral

USD/CHF is currently stuck in consolidation despite the G20 Summit developments and the stronger than expected U.S. consumer sentiment reading released last Friday. This reveals that traders are still hesitant to take huge bets on the Swissy. Only the ZEW economic expectations figure is due from Switzerland this week so USD/CHF could see further consolidation until the report is released on Wednesday.

Commodity Currencies: Bearish

It seems that the Australian dollar, Canadian dollar, and New Zealand dollar have retreated from the rallies they made earlier during the week. The Kiwi was unable to sustain its gains resulting from the stronger than expected retail sales figure as the pair made a complete turnaround on Friday after reaching fresh highs. Meanwhile, gold prices have been weighing on the Aussie, which is also suffering from weak underlying fundamentals in Australia. The Canadian dollar is also having a tough time maintaining its lead against the U. S. dollar as Canada printed a weaker than expected manufacturing sales figure for December. The actual figure printed a whopping 3.1% slide instead of the estimated 0.4% downtick. The main events for the commodity currencies this week are the RBA monetary policy meeting minutes due tomorrow and Canada’s CPI and retail sales data due Friday.

By Kate Curtis from Trader's Way

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#8

Forex Major Currencies Outlook (February 19, 2013)

USD: Bullish

Liquidity was a little low at the start of the week so price action was limited. Now that U.S. traders are back from their President’s Day holiday, we might see bigger moves across the charts for the rest of the week. No reports are due from the U.S. today though, which means that dollar pairs could still see further consolidation unless there are currency-specific events that could move its major counterparts. It seems that the odds are tilted for a EUR or GBP selloff so the U.S. dollar could act as a safe-haven currency in exchange for these weaker currencies.

EUR: Bearish

Germany is set to print its ZEW economic sentiment figure for the current month and, after the country printed weaker than expected Q4 2012 GDP last week. Being the euro zone’s largest economy, an economic contraction is a huge blow to Germany and the rest of the region, which slumped deeper into recession. An improvement is expected for the ZEW economic sentiment reading though, at least according to most analysts surveyed, but a downside surprise both from Germany and the euro zone could trigger a downside breakout from EUR/USD’s consolidation. Italian elections are coming up and with polls suggesting the possibility of a political stalemate, the euro might not be able to climb any further by this additional element of uncertainty.

GBP: Bearish

No reports are due from the U.K. for today as the pound continues to trade carefully against the U.S. dollar and the Japanese yen. Sentiment still remains bearish though as BOE Governor King committed to looser monetary policy if needed despite the strong inflationary pressures in their economy. The monetary policy meeting minutes of their latest rate decision are set for release later this week and could provide more direction for the pound, although the bias is still to the downside.

JPY: Bearish

Japan managed to escape criticism from the G20 Summit so yen selling resumed this week. There is still a bit of uncertainty surrounding future monetary policy as Shirakawa is set to step down and Abe still hasn’t hinted at who he plans to appoint as next BOJ head. For now, it seems that the USD/JPY uptrend is set to continue and the yen weakness could continue to affect other pairs.

CHF: Neutral

There are no reports due from Switzerland today but SNB head Thomas is set to give a speech later on. If he talks more about the EUR/CHF peg, the Swiss franc could sell off against the euro and also the U.S. dollar. Now that the G20 leaders didn’t impose any explicit restrictions on currency devaluation, the SNB could still decide to step up its game when it comes to keeping the franc low.

Commodity Currencies (AUD, NZD, CAD): Bearish

Market correlations seem to be non-existent for now as there have been no general patterns for higher-yielders or safe-havens, but it seems that the comdoll bloc is still moving as one. Underlying fundamentals for Australia are all weak and these were emphasized at the release of the RBA’s monetary policy meeting minutes. At that time, central bankers decided to wait and see but we’ve seen a lot of weak reports from the Land Down Under after that, which ups the odds for a rate cut next statement. As for the other commodity currencies, weak demand for raw materials such as iron ore have been weighing them down.

By Kate Curtis from Trader's Way

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#9

Forex Major Currencies Outlook (February 20, 2013)

USD: Bullish

The U.S. dollar could be in for a bit of consolidation against its major currency counterparts until the big reports are released during the New York session. The first set is the U.S. building permits and PPI reports, which are both expected to show improvements for January. Building permits are projected to climb from 0.91M to 0.92M for the month while producer prices are expecting a 0.3% rebound, which could help boost overall inflation later on. After these reports are released at 1:30 pm GMT, the Fed will print the minutes of its latest monetary policy meeting at 7:00 pm GMT. This could contain clues on what the policymakers plan to with the rest of their asset purchases and if they are considering shortening the timeline of these easing programs. If that’s the case or if the FOMC members turn out to be a little more upbeat with their assessment, the U.S. dollar could rally on expectations of sooner than expected monetary policy tightening.

JPY: Bullish

The yen’s selloff seems to have lost steam lately as USD/JPY made several failed attempts to break past the 94.00 handle. The minutes of the latest BOJ monetary policy decision appear to be providing support for the Japanese yen as the policymakers were less dovish with their economic assessment lately. The minutes also explained the reasoning behind the new inflation targets and how the policymakers plan on driving deflation out of the country in the longer run. Japan just released weaker than expected trade balance data during the Asian session though but this doesn’t seem to be dampening the yen’s rallies as the deficit still narrowed from 0.78 trillion JPY to 0.68 trillion JPY.

CHF: Neutral

USD/CHF is still somewhere around the middle of the falling channel on the 4-hour time frame, which means that the pair could go either way. Switzerland will be printing its ZEW economic expectations report for January at 10:00 am GMT today and could record another improvement for the month. Recall that the reading climbed from -15.5 to -6.9 for December as it has been steadily rising for the past five months. A stronger than expected report could trigger franc buying while a weaker than expected reading could push USD/CHF to the .9250 resistance.

EUR: Bullish

Stronger than expected ZEW economic sentiment figures from both Germany and overall euro zone triggered an upside breakout for EUR/USD, which rallied until the 1.3400 mark. The German ZEW figure jumped from 31.5 to 48.2 while euro zone’s reading climbed from 31.2 to 42.4, suggesting that an economic rebound could still be underway. This was enough to erase the negative vibes brought about by weaker than expected euro zone GDP, which pushed the region deeper in recession, as market watchers anticipate stronger growth moving forward. Only the German PPI release and the German 10-year bond auction are on tap for today and these reports aren’t expected to have a huge impact on euro pairs, unless they turn out significantly better or worse than expected.

GBP: Bearish

The pound is the weakest performing currency this week as it continues to get bogged down by downbeat monetary policy expectations and poor economic figures. The U.K. is set to print its claimant count change report for January, which could show that the number of claimants dropped again, this time by 5.1K. If that’s the case, it could reflect a recovery in the jobs sector, which would hint at stronger consumer spending and growth down the line. Another major mover for the pound today is the BOE meeting minutes which would show what policymakers think the BOE should do next. Take note that the U.K. is facing the possibility of a triple-dip recession and central bankers are likely to express their concern. On top of that, BOE Governor King’s recent speech revealed that the central bank is willing to implement further easing if needed despite the strong inflationary pressures.

Commodity Currencies (AUD, CAD, NZD): Neutral

It seems that the commodity currencies are managing to stay resilient against the U.S. dollar as their central banks still remain the more hawkish ones among the major economies. Earlier this week, the RBA monetary policy meeting minutes showed that central bankers were in no rush to cut rates. However, Australia suffered a round of weak economic data after the previous RBA monetary policy meeting, which suggests that they might change their mind later on. A few hours ago, RBNZ head Graeme Wheeler talked about a potential intervention in the currency market as the Kiwi has been too strong lately. Meanwhile, the Canadian dollar lost a bit of ground to the U.S. dollar as foreign securities purchases and manufacturing sales missed expectations.

By Kate Curtis from Trader's Way

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#10

Forex Major Currencies Outlook (February 21, 2013)

USD: Bullish

The minutes of the latest FOMC meeting caused quite a ruckus in the currency market as policymakers showed signs of hawkishness for the U.S. economy. In fact, some policymakers even suggested that they might overlook the previously mentioned inflation and employment targets, as they considered withdrawing asset purchases sooner. The U.S. unemployment rate still stands at 7.9% and is miles away from the specified 6.5% target yet Fed officials remarked that they might at least slowly reduce or taper off their quantitative easing moves as the economy shows signs of a rebound. Additionally, some policymakers warned against the dangers of easing too much, especially since the U.S. government is nearing its spending cuts deadline. While President Obama keeps reassuring markets that the U.S. economy won’t crash during the first of March, which is the sequestration deadline, this still poses a threat to the ongoing recovery. Nevertheless, interest rate expectations continue to drive markets and the recent turnaround in the FOMC’s rhetoric could provide support for the dollar in the near term.

EUR: Neutral

The euro lost a lot of ground to the U.S. dollar during yesterday’s trading as the change in the FOMC’s rhetoric sparked strong demand for the latter. EUR/USD is still hovering around the 1.3250 to 1.3300 support zone and trend line though, which suggests that traders are on the fence when it comes to this pair. Last week, the region printed weak GDP reports and slumped deeper into recession but recent economic surveys seem to be hinting at a good rebound. German and euro zone ZEW both came in stronger than expected for February and the upbeat sentiment could trickle to strong business spending and hiring. Euro zone PMIs are on tap today and this could set the tone for euro trading for the rest of the week.

GBP: Bearish

Perhaps the most divergent of interest rate expectations are those from the BOE and the Fed. While the former has expressed its willingness to implement further stimulus, the latter just hinted that a withdrawal of easing measures could be imminent. This explains why GBP/USD just broke below the major support area around 1.5300 to 1.5350. Not even the stronger than expected claimant count change was able to provide support for this pair as the MPC meeting minutes showed that the number of dovish members increased. The 10-year bond auction and CBI industrial order expectations are on tap today and weak outcomes could push GBP/USD even lower.

CHF: Neutral

Switzerland just released stronger than expected trade balance, which showed that the surplus widened from 0.90 billion CHF to 2.13 billion CHF for January. This was spurred by an increase in exports while imports dipped by 0.5%, according to their Federal Customs Office. However, the franc could continue to sell off against the dollar and the euro, which are both enjoying improved interest rate expectations.

JPY: Neutral

USD/JPY has been trading sideways for a while as markets await Abe’s appointment of the next BOJ head. The 94.00 handle has held as strong resistance since the pair made several failed attempts to break beyond that level. The consolidation has been getting tighter, suggesting a potential breakout either back to 92.00 support or until the 95.00 resistance.

Commodity Currencies (AUD, CAD, and NZD): Bearish

Shaky fundamentals of the commodity currencies’ economies have been weighing on these higher-yielding ones so far. Traders are cautious of buying the Kiwi, which was said to be overvalued, according to RBNZ head Graeme Wheeler. Traders are also uneasy about buying the Aussie, as the RBA could implement a rate cut in their next policy decision during the first week of March. Meanwhile, the Loonie has been selling off as BOC head Carney, who has been one of the most hawkish central bank officials, is set to exit soon.

By Kate Curtis from Trader's Way

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#11

Forex Major Currencies Outlook (February 22, 2013)

USD: Bullish

While some traders booked profits after the FOMC sparked a strong dollar selloff, it seems that most of the anti-dollar rallies that took place yesterday were mere retracements. For instance, GBP/USD managed to pull back to the 1.5250 area not because of strong data but most likely because of profit taking at 1.5150. This could be a chance to catch the ongoing downtrend at a much better price as the Fed stays committed to its idea of withdrawing asset purchases soon. There are no major reports due from the United States today so the FOMC’s sudden turnaround in monetary policy could continue to lift the Greenback. Take note that Fed official and FOMC voting member Powell is set to give a speech today and, if he confirms the Fed’s change in bias, we could see more dollar rallies towards the end of the week.

EUR: Bearish

Weaker than expected euro zone PMI figures triggered a fresh round of euro selling during yesterday’s trading. The French manufacturing PMI came in at 43.6, lower than the 43.9 estimate, while the services PMI landed at 42.7 instead of climbing to 44.5. Germany’s manufacturing PMI rose from 49.8 to 50.1, but fell short of the consensus at 50.4. Their services PMI slipped from 55.7 to 54.1, way below the estimate at 55.5. Overall, the region’s manufacturing PMI dipped to 47.8 from 47.9 while the services PMI slumped from 48.6 to 47.3 instead of rising to 49.2. This pushed EUR/USD to a new monthly low as traders speculated that the contraction in both manufacturing and services sectors of euro zone’s largest economies could translate to a deeper economic slowdown. The German Ifo business climate figure is set for release today and this could provide a clearer assessment of the business conditions in euro zone’s top economy. Another weak figure, or one that is lower than the estimated 104.9 reading, could trigger a stronger euro selloff.

GBP: Bearish

While the pound seemed to be able to recover against the U.S. dollar during yesterday’s trading, this may have been simply a result of profit-taking at the 1.5150 area. Fundamentals remain weak in the U.K. as the BOE is still committed to increase asset purchase if necessary, even at the expense of stronger inflationary pressures. There are no reports due from the U.K. today, which suggests that pound pairs could resume their downtrend if traders view the retracement as a chance to hop in at better prices.

CHF: Neutral

Bleak European sentiment seems to be weighing on the Swiss franc so far as euro zone and the U.K. have been showing signs of a slowdown. This seems pleasing to the SNB as they have expressed their commitment to keep the franc’s value down. However, as other countries in Europe are slowing down, the Swiss franc could once again emerge as the safe-haven currency in the region.

JPY: Bearish

USD/JPY is nearing the bottom of its range from 92.00 to 94.00 as the pair is currently trading close to 92.50. This could inspire a fresh round of yen-selling as traders might want to close off their long yen positions while waiting for Abe to appoint the next BOJ head. If the next central bank governor shows an inclination for further asset purchases or actual intervention in the currency market, the yen could rally back up to the 94.00 mark and beyond. No reports are due from Japan today.

Commodity Currencies (AUD, CAD, NZD): Bearish

While commodity currencies struggled to hold ground against the U.S. dollar, the sentiment for these higher-yielders is still bearish as their central banks seem to favor loose monetary policy. Australia suffered a bout of weak economic data lately and traders could keep pricing in expectations of an RBA rate cut for the first week of March. Meanwhile, RBNZ head Wheeler talked about the damaging effects of the Kiwi’s strength on New Zealand’s export-driven economy. Lastly, BOC Governor Carney retracted most of his hawkish remarks during the previous BOC rate decision. In addition, his upcoming exit could leave the BOC with one less hawk, possibly tipping the scale to a more bearish BOC rhetoric.

By Kate Curtis from Trader's Way

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#12

Forex Major Currencies Outlook (February 25, 2013)

USD: Neutral

There are a few major U.S. economic releases due this week, such as the CB consumer confidence data and the ISM manufacturing PMI, and these could either confirm or reverse the pro-dollar bias that the FOMC meeting minutes resulted in last week. Recall that the monetary policy committee members suggested overlooking the previously set inflation and unemployment targets and considered a gradual withdrawal or tapering off of their asset purchase program. Federal Reserve Governor Ben Bernanke is also set to give a speech towards the middle of the week and, since this is a semi-annual testimony, it could have a huge impact on price action. Indications that the Fed will soon start to reduce their asset purchases could continue to fuel the dollar rally while retractions or opposite signals from economic data could force the Greenback to return its recent gains.

EUR: Bearish

Italian elections are still going on in the euro zone and it seems that the odds are tilted towards a less favorable outlook. If early polls show increased chances of a political stalemate, the resulting uncertainty and unstable leadership could keep weighing on the euro. Additionally, ECB Governor Draghi has a speech later this week and he could comment on the recent weaknesses in the euro zone. The other week, the region printed weaker than expected GDP then suffered a bout of poor PMI figures last week. The European Commission also remarked on the possibility of worse than expected economic performance in the region for the entire year. EU officials believe that the economy will shrink by 0.3% in 2013 and that unemployment will keep going up.

GBP: Bearish

The U.K. just received a debt rating downgrade from credit rating agency Moody’s on Friday. As a result GBP/USD gapped down over the weekend as Asian session and London session traders will start to incorporate their reactions today. According to the statement from Moody’s, the U.K. is likely to face weaker growth in the near term and that the BOE might need to expand their asset purchases just to keep the economy afloat. BOE Governor King already expressed the central bank’s willingness to do so, which has already been weighing on the pound for the past trading weeks.

JPY: Bearish

Yen pairs have been moving more cautiously these days as traders await Prime Minister Abe’s appointment of the next central bank head. If he appoints one that favors a weak currency in the country’s battle against deflation, the yen could resume its selloff against its counterparts. Among the three candidates touted to take the BOJ helm is Muto, who is expected to be the most bearish for the yen.

CHF: Neutral

There are several medium-tier data due from Switzerland this week. With the euro and the pound suffering sharp selloffs as their central banks favor loose monetary policy, the franc has been emerging as the safer currency in Europe. However, SNB head Jordan already talked about keeping the franc down, which explains why traders are still hesitant to park their money in the Swissy.

Commodity Currencies (AUD, CAD, NZD): Neutral

There are no major economic reports due from Australia, Canada, or New Zealand this week, which suggests that these currencies could trade sideways against the dollar, unless there are market-moving data from the U.S.

By Kate Curtis from Trader's Way

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#13

Forex Major Currencies Outlook (February 26, 2013)

USD: Bullish

Federal Reserve Chairman Ben Bernanke will deliver his semi-annual testimony in Congress during today’s US session and possibly talk about the previously released FOMC meeting minutes, wherein the policymakers showed an inclination for an early tapering off of asset purchases. At that time, they considered overlooking inflation and unemployment rate targets, but Bernanke could have more to say on the issue. If he confirms the Fed’s change in monetary policy bias, the dollar could be in for further gains. But if he decides to manage market expectations and downplay the potential withdrawal of asset purchases, the dollar could retreat against its counterparts and resume trading mostly on economic data. The CB consumer confidence and new home sales data are due today and both are expecting improvements.

JPY: Neutral

Yen traders are still waiting for Japanese Prime Minister Abe’s appointment of the next central bank head. It looks like Kuroda is being touted most likely to get the position and his aggressive ideas for combatting deflation could be very negative for the Japanese yen. Japanese retail sales are due at the end of the New York session and a huge decline is expected, which might trigger a quick yen selloff. The pair tumbled sharply yesterday after gapping over the weekend as a number of large hedge funds decided to liquidate their positions prior to the actual BOJ head appointment.

EUR: Bearish

Early exit polls in the Italian elections aren’t looking too good as some are showing mixed winners for the Lower House and Senate. Other polls are hinting at the possibility of Berlusconi grabbing majority of the seats in parliament, which will be definitely negative for the euro. After all, Berlusconi is known for his political and sex scandals, which ushered in government instability for Italy. In addition, if different parties win majority of the seats, it could result force the lawmakers to make a political coalition, which would also be messy in terms of policy and political direction.

GBP: Bearish

Bank of England Governor King is giving a speech today. He just voted in favor of further easing, according to the minutes of the latest monetary policy meeting. The last few times that happened in the past five years, the central bank actually implemented further asset purchases in their next interest rate decision or within the next three months. Also, the impact of Moody’s credit rating downgrade is still weighing on the pair as it led market participants to worry about rising debt costs in a country that’s already dealing with a problematic budget.

CHF: Bullish

With all that’s going on in the euro zone and the UK, the Swiss franc seems to be the safer European currency to buy. However, the SNB’s stance of keeping the franc down and defending their peg with utmost determination is keeping traders from buying the Swissy. The employment report for Q4 2012 is due today and is expected to show a decrease from 4.12 million to 4.11 million in the number of employed people.

Commodity Currencies (AUD, NZD, CAD): Bearish

Sentiment for the commodity currencies is still bearish, although AUD/USD, USD/CAD, and NZD/USD all seem to be approaching significant inflection points. AUD/USD looks ready to move towards 1.0200 support while NZD/USD is inching close to .8300. USD/CAD seems to be stalling close to 1.0300, which could cap off the pair’s recent rallies. Chinese HSBC PMI came in below consensus yesterday, although it did point at an expansion. No major releases are due from Australia, Canada, and New Zealand today so the downbeat monetary policy expectations from their respective central banks could keep rallies at bay.

By Kate Curtis from Trader's Way

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#14

Forex Major Currencies Outlook (February 27, 2013)

USD: Bearish

Based on the tone of Ben Bernanke’s semi-annual testimony in front of the U.S. Congress yesterday, the Federal Reserve is in no rush to withdraw stimulus. He mentioned that they’d like to see some improvements in economic data, particularly in the employment sector, before considering reducing their asset purchases. According to him, the benefits of monetary policy stimulus outweigh the risks for now, which suggests that the expected tapering off of bond purchases won’t take place anytime this year. This statement had a muted effect on most dollar pairs but it was enough to keep further rallies at bay, hinting that traders could be changing their minds about buying up the dollar. Bernanke has another speech during today’s New York session, along with the release of U.S. durable goods orders data and pending home sales figures.

JPY: Neutral

For now, yen pairs are still on neutral ground as traders await Abe’s nomination of the next central bank head. USD/JPY has been moving sideways around the 91.50 region and consolidating even more tightly. If Abe decides to nominate Kuroda, who is a known yen bear, we could see USD/JPY break to the upside. Otherwise, the yen could resume its rally and break below 91.00. Japan is set to release manufacturing production and industrial production during the latter half of the U.S. session.

EUR: Bearish

There is still no clear indication of who the Italian election winners are but it seems that markets are pricing in the idea of a Berlusconi-Bersani coalition. This could be bearish for the euro in the longer run as political stalemates like these tend to lead to tension and uncertainty, making it more difficult to implement fiscal reforms. As a result, European stocks sold off reflecting investors’ uneasiness about the potential outcome of the Italian elections. Only medium-tier reports are due from the euro zone today, including the German GfK consumer confidence figure, which aren’t expected to have a huge impact on euro pairs’ movement. Keep an eye out for any updates on the Italian elections to figure out whether EUR/USD could break below 1.3050 or bounce back up to 1.3300.

GBP: Bearish

There is a long-term bearish sentiment for the pound as the BOE has already expressed its willingness to implement further quantitative easing. However, it seems that traders have already closed off some of their positions and booked profits around the 1.5100 mark. The second estimate for the UK Q4 2012 GDP is set for release today and, although most analysts aren’t expecting any revisions from the 0.3% contraction reported, a downside surprise could put pound pairs back on their downtrend. Business investment data and a speech from monetary policy committee member Bean are also on tap for today.

CHF: Neutral

Switzerland’s employment level managed to hold steady at 4.12 million for Q4 2012, higher than the estimated dip to 4.11 million. This caused a slight rally for their yesterday but it appears traders are still cautious about buying up the franc. The UBS consumption indicator and KOF economic barometer are due today and strong figures could usher in further demand for the franc.

Commodity Currencies (AUD, CAD, NZD): Bullish

AUD/USD, USD/CAD, and NZD/USD are trading right on significant inflection points and are showing signs of a potential reversal since the selloff among commodity currencies might be already overdone. AUD/USD is finding support at the 1.0200 major psychological level with a bullish divergence and oversold stochastic on the daily time frame while USD/CAD formed a doji also on the daily time frame. NZD/USD, on the other hand, has already broken below the 0.8300 handle but appears prime for a retracement.

By Kate Curtis from Trader's Way

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#15

Forex Major Currencies Outlook (February 28, 2013)

USD: Bullish

The U.S. dollar may have lost some ground against most of its major counterparts during yesterday’s trading but this was mostly a result of a rebound in risk and profit-taking at key levels. U.S. data came in mixed with durable goods orders showing a 5.2% decline, worse than the estimated 4.8% drop, while the previous month’s figure was revised down from 4.6% to 4.3%. Core durable goods, on the other hand, chalked up a 1.9% increase. This was much better than the estimated 0.3% uptick and the previous month’s 1.0% growth. Pending home sales also came in stronger than consensus as the report printed a 4.5% jump, outpacing the predicted 1.7% increase. For today, economic data could drive dollar pairs as the U.S. has the preliminary GDP reading and weekly jobless claims on tap. The U.S. economy is expecting to see an upward revision from -0.1% to 0.5% in its Q4 2012 GDP reading and, if that happens, demand for the U.S. dollar could rise as this could bring the Fed closer to tapering off its asset purchases.

EUR: Bearish

The Italian bond auction surprisingly turned out better than many expected, although most market participants were actually expecting the worst. Yields didn’t spike as sharply as the 10-year Italian bond yield landed at 4.83% from 4.10%, still below the 5.00% threshold. However, political uncertainty still lingers in Italy as Bersani refuses to form a coalition with Grillio or Berlusconi, upping the odds for another election in the country. Another factor that could weigh on the euro is ECB head Draghi’s comments on the central bank being far from thinking about a withdrawal of monetary policy stimulus.

GBP: Bearish

The pound managed to escape a strong selloff during yesterday’s trading as their GDP figure didn’t undergo any negative revisions from the initially estimated 0.3% contraction. However, the quarterly business investment report revealed that investors aren’t looking to park their money in the U.K. as the figure came in at 1.2%. This was way worse than the estimated 2.2% uptick for the period and the previous quarter’s 0.5% uptick. There are no major reports due from the U.K. today as pound pairs could trade sideways, awaiting further catalysts. Sentiment for this currency remains bearish though as the BOE has committed to loose monetary policy.

JPY: Neutral

Yen traders continue to sit tight awaiting the nomination of the next BOJ head, but it seems that Japanese economic data has been leading to a few moves here and there. The Japanese manufacturing PMI posted a slight improvement from 47.7 to 48.5, still in the contractionary zone. Preliminary industrial production came in weak at 1.0%, lower than the consensus at 1.6% and the previous 2.5% increase. Earlier today, Japan reported a 5.0% annual increase in housing starts, lower than the estimated 8.9% growth and the previous 10.0% reading. However, Japanese officials claim that the economy is bottoming out but that it will be a long road to recovery. Japanese inflation reports are on tap for later today and weaker than expected figures could be bearish for the yen as it would imply the BOJ has to step up its game when it comes to warding off deflation.

CHF: Neutral

There haven’t been any major reports from Switzerland lately, leaving most franc pairs moving sideways. Although the franc emerged as the safer European currency compared to the euro and pound, the SNB’s commitment to keeping the franc’s value down is preventing traders from buying up this currency.

Commodity Currencies (AUD, CAD, NZD): Bearish

Commodity currencies have broken through key inflection points but seem to show signs of retracing at the moment. AUD/USD dipped below the 1.0200 major psychological support and may be on its way to the 1.0150 mark as Australia printed weaker than expected private capital expenditure and private sector credit data earlier today. Meanwhile, the New Zealand dollar was able to benefit from an improvement in ANZ business confidence data, as the reading climbed from 22.7 to 39.4. As for the Canadian dollar, the selloff seems overdone as USD/CAD has retreated from its recent highs, but Canadian current account data could push it back up.

By Kate Curtis from Trader's Way