Daily Currency Forecast: Weak Economic Prospects Hurt the Pound

EUR/USD Commentary and Trade Ideas

Both the bulls and the bears are getting a little feisty, and the price of the pair, currently 1.3933, is down from 1.4020 early and up from a Friday morning break of 1.3880. There are some mixed economic numbers from both sides of the Atlantic but these are probably not as important as projections of economic activity going forward. Lower oil prices are cited as evidence of slackened economic activity by some, while others claim economic activity has contracted because of the recent higher oil prices. We are currently trading oil and equities lower which is helping the yen and the dollar. US Treasuries are yielding a few basis points less as investors move toward perceived safety. Further weakness in equities caused by faltering recovery expectations should help the USD, but this strength can be easily dispelled if the Washington spendthrifts begin to hype a new "stimulus package." My inclination is to be short above 1.40, but the recent trade, to a lower swing low, followed by a higher swing high makes me think it is best to take a weekend trading break.

• Bias: Neutral
• Bias Term: Medium
• Support: 1.3870 1.3770 1.3620
• Resistance: 1.3980 1.4060 1.4110

GBP/USD Commentary and Trade Ideas

Currently we are trading at 1.6190, about the middle of the trading range for the last two days. We did manage to sell off to 1.5980, but quickly went back up 400 points to 1.6380. Realization that economic recovery will likely be weak and probably deferred may be hurting the pound. The daily charts have the appearance of a rounded top, but we probably need some trades under 1.5950 for confirmation the bull party is over. With the advantage of 20/20 hind sight, the 1.60 area was a buy and above 1.6350 was a sell. I prefer to be a seller on strength back in the 1.6350 area, but I am inclined to wait until Monday.

• Bias: Lower
• Bias Term: Medium
• Support: 1.6170 1.6090 1.5970
• Resistance: 1.6260 1.6340 1.6430

USD/JPY Commentary and Trade Ideas

Friday once again the yen enjoyed the most favored currency status. We wonder if this represents unwinding of previous carry trades, or is this move discounting future global economic weakness. The 92.30 level where we are currently trading is the level we were trading back in early February. If you assume economic conditions were worse then than now, this break may just be liquidating trades and can probably be bought once the selling abates. The trouble is no one tells you when the selling is over. Stand aside for now.

• Bias: Lower
• Bias Term: Medium
• Support: 92.20 91.60 90.80
• Resistance: 93.40 94.60 95.20

USD/CHF Commentary and Trade Ideas

Too bad Thursday's buy recommendation 1.0740 was 10 pips to low to get filled. The market rallied to 1.0925, and is currently trading at 1.0860. The SNB has alerted they will interfere should the franc get too strong, and commercials in the franc futures market have a history of front running the central banks activity. Was today's run up caused by commercial buying? With the market trading in the middle of the range on a Friday, we have no trading suggestions.

• Bias: Neutral
• Bias Term: Medium
• Support: 1.0840 1.0760 1.0700
• Resistance: 1.0890 1.0940 1.1010

USD/CAD Commentary and Trade Ideas

Friday morning's economic reports suggest that economic conditions may be modestly improving, but lower equities and oil keep the CAD on the defensive. We have been trading sideways in a 1.14 to 1.17 range for the past three weeks, as the strength of the USD against the CAD seems to be waning. My preference is to be a seller of this pair on a revisit to the 1.1700 level, or consider selling the AUD/CAD in the vicinity of .91. The current trade is at .9024.

• Bias: Lower
• Bias Term: Long
• Support: 1.1590 1.1470 1.1400
• Resistance: 1.1675 1.1740 1.1790

AUD/USD Commentary and Trade Ideas

The AUD is grudgingly giving up ground to the USD, and is now trading at .7775. Our preference is the short side in the .7850 to .7900 level. Part of the bull AUD story is the proximity and importance of the Chinese trade. Friday it was reported that Chinese exports were down for the 8th month in a row, and are down 21% to year ago comparisons. This indicates that the Chinese, by central planning direction, can order production of items but that does not mean the demand will be there. The bulls need confirmation stories almost every day. Without these stories look for some selling from stale longs.

• Bias: Lower
• Bias Term: Long
• Support: .7750 .7670 .7510
• Resistance: .7810 .7930 .8010

NZD/USD Commentary and Trade Ideas

This pair is currently trading at .6275 as it continues to meander sideways. The pair is now trading under the 40 day moving average, clearly an indication that bullish momentum has abated. The UBS Bloomberg CMCI commodity index has sold off about 8% from the high. When will some of the macro commodity currency money start to flow out of of New Zealand? My preference is this short side, but this is a slow mover.

• Bias: Lower
• Bias Term: Long
• Support: .6250 .6210 .6160
• Resistance: .6330 .6400 .66530