Forex Crunch

Canadian Dollar Outlook - June 22-26 2009
Forex Weekly Outlook - June 22-26 2009
Iran Election Crisis Supports Dollar

Canadian Dollar Outlook - June 22-26 2009

Posted: 21 Jun 2009 03:34 AM PDT

USD/CAD rose by 150 pips last week, but bounced at the critical 1.1470 mark. On the eve of a new trading week, USD/CAD stands at 1.1350. This week’s FOMC Statement and two Canadian events, Foreign Securities Purchases and a speech by Mark Carney will determine the direction of the loonie. Will it break the huge resistance line? Will it tumble down? Canadian dollar outlook for the fourth week of June.

Economic Indicators for USD/CAD

Foreign Securities Purchases: This measures the amount of money that’s invested in the Canadian economy by foreigners. This figure surprised in previous months, indicating trust in the stability of the Canadian economy and the Canadian dollar. Last time, it stood on 6.85B. This time, it’s expected to squeeze to 4.27B, and could surprise. This indicator is published on Monday at 12:30 GMT. The timing, at the beginning of the forex trading week and when no American indicator is published, makes this release very important for the loonie.
Mark Carney Speech: Bank of Canada governor Mark Carney will fly to Washington DC, and talk about the Canadian experience regarding the stability of the banking system. This speech will impact the USD/CAD. He’ll talk on Tuesday at 12:30 GMT, before the first American indicator is published - Existing Home Sales.
FOMC Statement: Though not a Canadian indicator, a statement by Ben Bernanke’s Federal Reserve will shake the whole market, and the loonie is no exception. He might hint that interest rate hikes are possible sooner than later or follow the BOC up north and declare that no hikes will happen in 2009. The statement, at the end of a two-day meeting, is the highlight of this week in the forex market.

Iran is also in fundamentals The ongoing and escalating crisis in Iran, following the elections, ignites fears that might strengthen the US dollar, on the expense of the Canadian dollar.

USD/CAD Technical Outlook

The major resistance line that I pointed out in last week’s Canadian dollar outlook hasn’t changed. In fact, it was tested and withstood the test - something that makes it stronger. I’m talking about the 1.1470 line, which served as a strong support line in the near past and a strong resistance line in the fall of last year.

Last Tuesday, June 15th, USD/CAD reached 1.1450 before bouncing back, and finally closing at 1.1350.

Looking down, a strengthening of the Canadian currency could meet a minor support line at 1.1250 (which served as a minor resistance line last week). Further below, 1.0940 serves as another minor support line. 1.08 is a major support line. This area will be reached only if the FOMC Statement will be very dovish, as the FOMC Statement on March 18th was, with the trillion dollar printing scheme.

Do you think that USD/CAD will break above 1.1470? Or is it set to plunge towards parity?

Anyway, for more on this week’s events, read the Forex Weekly Outlook.

Forex Weekly Outlook - June 22-26 2009

Posted: 21 Jun 2009 02:28 AM PDT

The two day FOMC meeting will draw most of the attention this week. Will Bernanke hint anything about future rate changes? Also this week, home sales figures in the US, PMI data in Europe and important British figures will shake the market. And of course, the Iranian election crisis is still with us. Here are the main events to look out for this week.

The situation in Iran becomes more dangerous as both the regime’s leaders and the opposition leaders scaled up their tone. Also protests became more violent. The ongoing turmoil in Iran supports the US dollar. Risk aversion is the name of the game.

Now, let’s get back to normal news:

Monday, June 22nd: Japan’s Tertiary Industry Activity is the first important indicator for this week. Actually, it’s published 10 minutes to midnight…After falling by 4% last time, it’s predicted to turn positive.

German Ifo Business Climate provides a strong start for the EUR/USD. Another rise is expected, to 85.1 points. Later, Jean-Claude Trichet will speak.

Canadian Foreign Securities Purchases is the only significant indicator from North America this day.

Tuesday, June 23rd: Lots of European figures today, starting with the GfK German Consumer Climate which is predicted to stay at 2.5 points. Then, French Consumer Spending is expected to slip by 0.1%.

Focus turns to European Purchasing Manager’s indices: At first, French Flash Manufacturing and Services PMI are published, then the German figures, and finally the all-European numbers. All the PMI results are expected to rise, but none of them are predicted to rise above the 50 points mark.

EU Leaders expressed optimism in their summit. Will this be reflected in these figures?

In Switzerland, Trade Balance surplus is predicted to squeeze to 1.86 billion.

British BBA Mortgage Approvals are expected to rise to 29.5K. It’s hard for the British housing sector to get better.

In the US, housing is getting better - American Existing Home Sales are predicted to rise to 4.82 million.

Near the end of the day, Japanese Trade Balance is expected to turn positive after slipping last month.

Wednesday, June 24th: Current Account in Europe is expected to show a smaller deficit than last time, at 4.6 billion.

British CBI Realized Sales is a major figure for the Pound. It’s expected to remain unchanged, at -17. Inflation Report Hearings will also shake the Pound. Is inflation lifting its head? BOE Governor Mervyn King might shed some light on a speech later on.

In the US, Durable Goods Orders are expected to fall by 0.6%, while the Core figure is expected to fall by only 0.2%. Both indicators rose last month. American New Home Sales are expected to improve to 360K, following the path of Existing Home Sales.

These American figures are usually very important, but the market will be awaiting the FOMC Statement in the evening. While the Federal Funds Rate isn’t expected to move from a maximum value of 0.25%, the statement by the FOMC members is very important.

Will they see the economy recovering, and hint that an interest rate hike is close? Or will they state that the rate will stay unchanged till end of the year? The greenback will shake after the statement.

Current Account in New Zealand is expected to show a deficit, just before the day ends. For traders of the kiwi, this is important.

Thursday, June 25th: British Nationwide HPI is predicted to fall by 0.4% after rising last time. Will also British housing improve?

American Unemployment Claims are expected to stay stable, and still above 600K. The American job market has stabilized, but hasn’t significantly improved. Not yet.

American Final GDP is expected to stay with the Prelim figure, and show a drop of 5.7% in the first quarter of 2009.

Less than 24 hours after the FOMC Statement, Ben Bernanke will testify in Washington. His words will probably move the market.

New Zealand closes the day again, with the GDP for the first quarter. It’s predicted to show a contraction of 0.7%, continuing a long recession.

Just before the day ends, Tokyo Core CPI is predicted to fall by 1% in Japan, deepening Japan’s deflation.

Friday, June 26th: German Prelim CPI will be published throughout the day, and it’s expected to show a very modest rise of 0.1%.

In the US, Personal Spending is expected to get back up, and rise by 0.3%. The Revised UoM Consumer Sentiment is expected to be better than the prelim printing, and rise to 69.2. It’s quite a quiet Friday, once again.

These are the major events for this week. I’ll publish daily outlooks as usual, and also special coverages on a small selection of currencies…

In the meantime, here’s a post about forex trading hours. There are times that we should stay out of the markets…

Iran Election Crisis Supports Dollar

Posted: 20 Jun 2009 02:10 PM PDT

The ongoing crisis in Iran is worrying the whole world and ignites fears. Risk aversion may cause investors towards the US dollar, especially after the escalation in the situation this weekend.

Escalation in Iran Election Crisis

Iran’s election on June 12th had a very controversial outcome, to say the least. The authorities quickly announced Mahmoud Ahmedinajad as the winner in the first round, by a landslide victory. Severe problems on election day, and the unbelievable results, especially in the regions dominated by the opposition, sent Iranians to the streets.

These protests have dominated world news in the past week, but have been treated by many as an internal Iranian issue that would be resolved one way or another.

Stakes became much higher this weekend, when the Supreme Leader of Iran, Ayatollah Ali Khamenai spoke and threatened to crack down the protests. Opposition leader Mir Houssien Mousavi didn’t step back and said that he is ready to die for this cause.

It seems that whole Islamic Republic is struggling. Protests on Saturday became more violent, and US President also stepped up his words and said that Iran must allow freedom of speech.

Iran Election Crisis and Forex Trading

Iran is one of he world’s largest oil producing countries. It also has nuclear ambitions that threaten the world. When the regime there is in trouble, the whole world feels it. Turmoil in Iran endangers oil production and ignites fears that the extreme religious leaders will “go crazy” and take wild measures.

In times of trouble, the dollar is the safe haven currency. Risk aversion sends the dollar higher and weakens higher yielding currencies such as the Euro. Also the Yen enjoys the safe haven prestige, but not in the scale of the dollar.

So, as long as the crisis in Iran continues, and especially if it escalates, the dollar will enjoy strong back wind..