What Are We Trading?
When we place a trade in the forex market, we are
buying one currency and selling the other. This is why forex is traded
in currency “pairs.” As a visual example, we can reference the image
If we buy a currency pair, like the EUR/USD,
we are buying euros and selling dollars. We place this trade when we
believe the EUR/USD exchange rate will rise and allow us to sell back
our euros for a larger amount of dollars at some point in the future.
But in the forex market, we can trade the other
direction as well. So we could sell the EUR/USD, effectively selling
euros and buying dollars. With that trade, we would want the EUR/USD
exchange rate to fall so we can buy back the euros for less dollars than
we originally sold them for.
So not only do we have a goal of buying low and
later selling high, we have the option to sell high first, and then buy
low later. There are no restrictions on short selling and we do not need
to own any euros prior to selling the EUR/USD. This is what people
refer to as a “two-way market.”
Fundamental Forecast for the British Pound: Bullish
The British Pound appears to be coiling up for
another run at the 1.6600 handle as the positive developments coming out
of the U.K. economy raises the Bank of England’s (BoE) scope to
normalize monetary policy ahead of schedule.
There’s speculation that the BoE will lower the
unemployment threshold to 6.5% from 7.0% in its quarterly inflation
report scheduled for February 12, and this theme presents the largest
risk to the bullish British Pound forecast as market participants weigh
the outlook for monetary policy. Nevertheless, Credit Suisse overnight
index swaps are starting to show expectations for higher interests over
the next 12-months as the BoE moves away from its easing cycle, and the
shift policy outlook should continue to prop up the sterling over the
near to medium-term as the central bank starts to unwind its
NZDUSD Fundamentals (based on fxempire.com article)
The NZD/USD tumbled this week to trade at 0.8260
but continued to outpace its Tasmanian cousin the Aussie. The kiwi
eased on the strength of the US dollar and concerns over China. Traders
will wait to see what Graham Wheeler has to say at the RNZ meeting. The
kiwi is heading for a 2% weekly gain against its trans-Tasman
counterpart after data showed the divergent neighboring economies which
will likely see interest rates move in New Zealand’s favor.
kiwi rose to eight-year high 94.80 Australian cents this week, trading
at 94.11. The NZD fell to 82.99. New Zealand’s economy is looking
increasingly attractive to investors, with a survey this week showing
business confidence at a 20-year high and house prices continuing to
rise, while Australian jobs data surprised analysts with a drop in
employment in December. Investors will watch New Zealand inflation
figures next week to get a sense on how early central bank Governor
Graeme Wheeler will start hiking rates.
Forex traders put the odds in favor that the New Zealand Reserve bank
will lift interest rates 118 basis points over the coming 12 months,
while the Reserve Bank of Australia is expected to cut its key rate by 7
basis points over the same period, according to the Overnight Index
Forex Fundamentals January 20 - 24 (all majors) - based on investing.com article
The dollar rose to two month highs against the euro on Friday as U.S.
data reinforced the view that the economic recovery is gaining enough
traction for the Federal Reserve to continue tapering stimulus measures.
Monday, January 20
Tuesday, January 21
Wednesday, January 22
Thursday, January 23
Friday, January 24
Fundamental Forecast for Euro: Neutral
The Euro was the second worst major performer this past week, losing -0.95% to the top US Dollar, while gaining only against the beleaguered Australian Dollar, by +1.44%. By no means was this severely negative for the Euro, but no longer are the positive fundamental drivers providing the same spark – namely speaking sustained low Italian and Spanish yields and a lack of deflation appearing in regional CPI readings.
The past week showed signs of the hope and optimism
that has helped carry the Euro starting to crack. It was a stark
reminder that the Euro-Zone remains mired in a period of stagnation when
the final 2013 German growth reading showed that the Euro-Zone’s
largest economy only grew +0.4%. Euro-Zone inflation remained near
multi-year lows in December (core at +0.7% (y/y) unch), showing that
demand across the region remains weak. Neither screamed “buy the Euro.”
GBPUSD Fundamentals January 20 - 24 - based on investing.com article
The pound rose against the dollar on Friday after data showing that U.K.
retail sales rose sharply in December bolstered the outlook on the
economic recovery, fuelling expectations that the Bank of England may
rise interest rates ahead of other central banks.
GBP/USD rose to highs of 1.6457, the strongest since January 14 and was last up 0.42% to 1.6420. For the week, the pair rose 0.20%.
Cable is likely to find support at 1.6308, Friday’s low and resistance at 1.6500.
Markets in the U.S. are to remain closed for the Martin Luther King Day holiday.
The U.K. is to publish a private sector report on industrial order expectations.
U.K. is to release official data on the change in the number of people
unemployed and the unemployment rate, as well as data on average
earnings and public sector borrowing. Meanwhile, the Bank of England is
to publish the minutes of its most recent policy setting meeting.
GBP/USD in consolidation mode after Friday’s huge gains
GBP/USD is trading around 200SMA at 1.6417, rebounding from Friday’s high at 1.6457, but not ready to go below 1.64.The Pound may get some more fuel, but laterThe
pair got huge support from the recently released UK retail sales adding
almost 150 pips during the hour of the release. Nevertheless, we
wouldn’t be too optimistic about the record rise of the numbers.
According to ONS, there might be the case of seasonal effect, thus we
may see significant revisions next month. As for this week, we will get
some quite important reports for digestion, and the labor data scheduled
for Wednesday is one of them. We expect quite positive developments in
this sector, thus, the pair has good potential to go higher. The
released today Rightmove house price index met the expectations, and
there is no more UK data scheduled for today, thus we expect tight
ranges during the whole Monday close to 1.6420 area.What are today’s key GBP/USD levels?Today's
central pivot point can be found at 1.6393, with support below at
1.6359 (S1), 1.6318 (S2) and 1.6277 (S3), with resistance above at
1.6511 (R1), 1.6552 (R2), and 1.6594 (R3). Hourly Moving Averages are
largely bullish, with the 200SMA at 1.6417 and the daily 20EMA flat at
1.6410. Hourly RSI is neutral at 55.
NZD/USD outlook down this week
Weak NZ inflation and housing data plus broad US dollar strength should
hurt NZD/USD this week, notes Imre Speizer, FX Strategist at Westpac.Key Quotes"NZ’s
Q4 CPI release may alarm some with its low headline quarterly rate,
although familiar observers will note Q4 is seasonally weak.""Similarly, a fall in the pace of house sales may cause a rethink regarding the expected date of the first RBNZ rate hike." "We expect housing weakness to be temporary and not dissuade the RBNZ from proceeding.""Still,
NZD markets may take a negative view of the above and sell NZD/USD,
particularly against a backdrop of US dollar strength.""The
0.8400 area last week provided a formidable obstacle, unlikely to be
broken in the near term. Rather it should provide the launching pad for a
multi-day period of NZD selling, down to 0.8165 and possibly 0.8110.""Looking
further ahead, though, by mid-2014 NZ’s strong fundamentals should be
even more evident, increasing interest rate differentials taking NZD/USD
towards 0.8600. The main risk to this outlook is that US fundamentals
exceed our expectations, causing the US dollar to outperform instead."
2013-01-20 02:00 GMT (or 03:00 MQ MT5 time) | [CNY - GDP]
if actual > forecast = good for currency (for CNY in our case)
China's Economic Growth Slows to 7.7%
The nation's economy grew 7.7% in the fourth quarter from a year ago,
slower than the 7.8% it posted in the third quarter, according to data
released Monday by China's National Bureau of Statistics. For the year
it also posted 7.7% growth, matching the revised pace it recorded in
"There was steady economic progress [last year] and this was no small
achievement," the bureau said in a statement. But it added that the
Chinese economy still faces imbalances, while "fundamentals of the
economic recovery are still not stable."
The fourth-quarter increase was higher than a median 7.6% gain forecast by 13 economists in a Wall Street Journal survey.
"We don't see any areas that would support an economic rebound in the first quarter," said Ma Xiaoping, economist with HSBC Holdings PLC.
E&Y Item Club Urges BoE To Tie Rate Hike To Real Wage Growth (based on rttnews article)
The Ernst and Young Item Club on Monday urged the Bank of England to tie interest rate hike to real wage growth as unemployment target is set to be achieved this year.
In the latest quarterly forecast, the think tank said unemployment will fall below the threshold 7 percent in the first half of the year.