The British Pound got some great news, managed to climb. While GBP/USD stopped at a resistance line, GBP/JPY managed to break higher. Update on both pairs.

British Nationwide HPI rose by 0.7%, significantly higher than the early expectations for a 0.2%. This important house prices index showed that the dip in house prices last month was only temporary. A rise in house prices means that the economy is doing well, and prices continue to rise – this is necessary for a future rate hike. Three additional factors pushed the Pound higher:

The final GDP for Q4 was revised to the upside – a growth rate of 0.4%. GDP was better than earlier reported – 0.3%. Although the growth rate leans heavily on a downwards revision of the figure for Q3, this revision was also positive for the Pound.

The third positive indicator was the Current Account – Britain’s deficit was lower than expected – 1.7 billion. Expectations stood on a deficit of 4.6 billion. Alistair Darling hurt the Pound last week, but in his appearance today he made no damage. That’s another factor that allowed the Pound to rise.

All these good news, together with the dollar’s weakness that continued from yesterday, sent the Pound higher. GBP/USD pushed above the round number of 1.50 and climbed steadily to 1.5110 -this was last week’s high. At this point, the Pound stopped. It doesn’t have the energy to continue higher.

If GBP/USD crosses the 1.5110 line, the next line of resistance is already a very strong one -1.5350. The Pound was supported at this line before the big collapse, and afterwards this line served as a strong resistance line.

Below, 1.50 is a very minor support line that can temporarily hold the pair if it drop from the area of 1.5100. Below, the 1.4780 line is the 2010 low and provides very strong support for the pair.

GBP/JPY on the rise

The Geppy was at crossroads last week – crossroads between a downtrend and an uptrend channel. It seems that the pair picked a direction – up. GBP/JPY enjoys the Japanese Yen’s weakness to march above 140. This is the highest level in 5 weeks and a return to the prices before the collapse.

GBP/JPY will meet significant resistance at 143.70, a peak before the fall, and also a support line in December. Further above, 150 is a strong line of resistance – a round number and also a resistance line in January.

Looking down, GBP/JPY can expect support at the area of 138, followed by a stronger line of support at 134.

A break in this cross, also known as “The Dragon” can happen if USD/JPY breaks above the might line of 93.80. Japan’s Tankan Manufacturing Index, due tomorrow, will probably set the tone.

All in all, the Pound is recovering, and this is strongly felt against the Yen.

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Today’s calendar is already busier. British Final GDP and the American CB Consumer Confidence will stand out. Let’s see what’s awaiting us today.

Non-Farm Payrolls for March continue to carry high expectations. While this might boost the dollar, Monday’s trade wasn’t too favorable for the greenback. Today’s figures could set the direction:

In Australia, RBA Assistant Governor Guy Debelle will speak today and could continue his boss’ stance on interest rates being “too low”. The Aussie has slightly recovered. For more, read the AUD/USD forecast.

In Switzerland, the UBS Consumption Indicator will probably edge up once again, and could soften the Swissy’s fall.

The German Import Prices will probably rise by only 0.5% after a leap of 1.8% last time. Inflation needs to pick up for a rate hike to come. For the Euro’s technical levels, read the EUR/USD forecast and Casey Stubbs’ latest analysis.

Busy day in Britain

The events in Britain start with Nationwide HPI, an important indicator for house prices. After many months of rises, this index fell by 1% last month. A rise of 0.2% is expected this time.

Final GDP will probably confirm the 0.3% growth rate in the fourth quarter of 2010. This was revised upwards from 0.1%. The revision to 0.3% came on the back of a downwards revision of the data for the third quarter.

Together with the GDP, Britain’s Current Account will probably show the same deficit as in the previous quarter – 4.7 billion pounds. This is also an important release for the Pound.

Just after these two releases, Chancellor of the Exchequer Alistair Darling will come to parliament once again and will speak about the budget. Darling’s recent appearance, just last week, was negative for the Pound. Will Darling do it again?

At the end of the day, British GfK Consumer Confidence will probably edge up from -14 to -13, showing less pessimism. For more on the Pound, read the GBP/USD forecast.

In the US, the S&P/CS Composite-20 HPI is expected to show almost no change in year over year house prices, better than last month’s figure – -3.1%. This will show a stabilization in prices.

The more important event is the CB Consumer Confidence. This major survey dropped to 46 points last time, and is now expected to recover back to 50.2 points. Consumers aren’t confident about the economic recovery. Not yet.

In Canada, the Raw Materials Price Index (RMPI) will probably drop by 1% after a strong rise of 3.3%. This should help the loonie pick a direction. Read more in the Canadian dollar forecast.

That’s it for today. Happy forex trading!

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Every major appearance by Alistair Darling is a blow for the Pound. This time isn’t different. At the annual budget release, Darling released a few disappointing statements sending GBP/USD towards an important support level.

Less than two months before the general elections, Britain’s budget was presented in parliament. Alistair Darling, Britain’s Chancellor of the Exchequer, defended the government’s role in dealing with global crisis, but his prospects for the future weren’t good enough. Darling has a history of hurting the Pound. Here are his actions this time:

Darling warned that confidence had not fully returned, especially in Europe. The growth forecast for 2010 stands at 1 to 1.5%, while the forecast for 2011 now stands on 3 to 3.5%. The government’s prospects were lowered, now more in line with many economists.

Even though nobody expected the British government to make painful cuts in the budget weeks before the elections, the national debt is still a great weight on the Pound. Darling didn’t address it. One of the dangers of a big debt is a credit downgrade. David Blanchflower of the Bank of England, begins to accept it:

“We have to be concerned about that, but no one has well- enumerated what it would actually mean if we did,” he said in an interview with Bloomberg Television yesterday. “I’m not so sure it would actually be quite as monumental.”

GBP/USD Reaction

The British Pound fell before Darling’s presentation, and accelerated its falls afterwards. It reached 1.4896 before climbing back above 1.49. GBP/USD approached the 1.4870 level which was the bottom two weeks ago.

A stronger point of support appears at 1.4770 – this is the line where the Pound bounced back when it made a big collapse at the beginning of March. This is also a historic line.

If GBP/USD recovers, 1.50 is the immediate resistance line, followed by 1.51. Note that the Pound also suffers from risk a stronger dollar across the board. EUR/USD collapsed earlier today and broke a very important support line.

Later in the week, British retail sales will move the Pound, as well as American figures, such as Ben Bernanke’s speech. Currently, the blow to the Pound is limited. A break under 1.4770 is necessary in order to trigger a new massive drop.

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A busy day expects forex traders. The British budget release, American new durable goods orders and new home sales, New Zealand’s GDP and lots of European figures will rock the markets today. Let’s see what’s awaiting us:

Flash purchasing managers’ indices pour in during the European morning. France starts with its manufacturing and services figures. Germany follows, and the data for the whole continent is then released. All the figures are expected to edge up slightly. This will promise a choppy morning for EUR/USD. And there’s more in Europe:

German Ifo Business Climate continues the influx of European figures with an expected rise from 95.2 to 95.8 points. This highly regarded survey has been significantly better than other European indicators so far. A drop here will hurt the Euro.

The last European indicator today is the Industrial New Orders which are expected to rise by 2% after a more modest rise last month – 0.8%.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs’ latest analysis.

In Britain, the government will present make the Annual Budget Release. Alistair Darling, the British Chancellor of the Exchequer is expected to show a big budget – meaning a big deficit – hurting the British Pound. The presentation of the budget will take time – this includes presenting economic forecasts for the years to come. High volatility is expected.

For more on the British Pound, check out the GBP/USD forecast.

In the US, Durable Goods Orders are predicted to rise by 0.6% after a drop of 1% last time. Core Durable Goods Orders, which shot up by 2.6% last month, are expected to climb by 0.8%.

Another important release is New Home Sales. After Existing Home Sales were in line with expectations, remaining almost unchanged, new sales are predicted to follow, ticking up from 309K o 318K.

Later in the US, FOMC member Thomas Hoeing will make a public appearance. He’s the only member that voted to change the tone of the FOMC statement – make it more hawkish. Will he repeat this stance now?

EUR/CHF is dropping, and the Swiss National Bank doesn’t like it at all. A member of the central bank, Thomas Jordan, will make a public appearance and might move the Swissy.

Another speech is due in Canada – the governor of the BOC, Mark Carney, will talk in Ottawa and might send some hints about the bank’s monetary policy. Read more about the loonie in the Canadian dollar forecast.

GDP in New Zealand is expected to follow its neighbor Australia with a rise of 0.8% in the fourth quarter. The economy grew by 0.2% in the third quarter. High volatility is expected in NZD/USD.

That’s it for today. Happy forex trading!

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The upcoming week in forex trading has the FOMC meeting in the limelight. In addition, British employment figures, Australian GDP and inflation data from all over the world will dominate the scene, in the last full trading week of the year. Here’s a review of the major events in the upcoming week.

American Non-Farm Payrolls, that made a big surprise on December 4th, continue to overshadow the markets, as the dollar continues to strengthen. But this strength isn’t equal against all currencies. Let’s see what’s on the menu:

Monday, December 14th: Japanese Tankan Manufacturing Index provides a strong start for the week. It’s expected to rise but stay negative.

British Rightmove HPI will continue in the early hours. The British housing sector is getting better, and support a fragile hope to get out of recession. Swiss PPI is predicted to turn positive, but still far from inflation.

European Industrial Production is predicted to drop this time, while the Employment Change, a late figure, is predicted to remain unchanged.

Tuesday, December 15th: Australian Monetary Policy Meeting Minutes will supply hints about the next RBA meeting – it looks like another rate hike is underway, especially with the improving job market in Australia.

Swiss Industrial Production is expected to rise again, but in a modest pace. German ZEW Economic Sentiment is very important for the Euro. It’s expected to drop this time.

British prices are expected to rise, with CPI at 1.8% (annualized). This should help the Pound. Also the RPI, which measures retail prices, is expected to rise after dropping for a long time.

American PPI is predicted to rise by 0.8% – a higher rise might help bring a rate hike. TIC Long-Term Purchases, which represent cash flow, are expected to rise significantly and help the dollar.

Also in the US: Empire State Manufacturing Index, Capacity Utilization Rate and Industrial Production are released, with expected improvements on all fronts.

Wednesday, December 16th: Australian GDP is expected to show a quarterly rise of 0.4%, less than last month’s 0.6%. This will be the third straight quarter of growth. Australia was never in recession.

In Britain, important employment figures are due: the Claimant Count Change – the earliest of employment numbers, is expected to rise once again to 14.2, after last month’s surprise. The Unemployment Rate, a delayed figure, is expected to rise from 7.8% to 8%. These releases will shake the Pound.

In Europe, initial PMI reports will be released: first in France, then in Germany and finally for the whole continent. Most numbers are expected to advance.

European CPI is expected to remain unchanged at 0.6%, and so is Core CPI at 1.2%. Stronger figures are necessary to push EUR/USD higher, after being hit by many figures.

On the other side of the Atlantic, American CPI is rpedicted to rise by 0.4%, while Core CPI is predicted to remain stable at 0.2%.

Two housing figures are published as well: Building Permits and Housing Starts, which are both predicted to get close to 600K. Also note the Current Account, which is predicted to show a bigger deficit.

The more important event comes in the evening: The Federal Reserve is expected to leave the interest rate unchanged once again, despite the excellent Non-Farm Payrolls. Bernanke downplayed this option. While the Federal Funds Rate won’t move from 0.25%, the FOMC Statement will be of interest to traders, as future plans about the rate are expected to be heard.

Thursday, December 17th: Kiwi traders will be interested in the NBNZ Business Confidence which will be published early in the day.

British Retail Sales are predicted to rise again, this time by 0.5%. CBI Realized Sales are also expected to advance.

Canadian CPI will probably turn positive and rise. Core CPI is expected to stay stable at 0.1%.

American Unemployment Claims retreated last week, and are predicted to edge up this time. Also note the Philly Fed Manufacturing Index which is expected to drop.

Friday, December 18th: The rate decision in Japan isn’t expected to bring a change in the Overnight Call Rate, but the accompanying Monetary Policy Statement may lay out the policy for intervention, after the emergency BOJ meeting that was held about two weeks ago.

German Ifo Business Climate is another important survey for the continent, and it’s expected to edge up once again.

British Public Sector Net Borrowing is expected to double to 23.1 billion. This comes on the background of Alistair Darling’s problematic budget.

That’s it for the major events for this week. I’ll later post specific currency coverages. Stay tuned!

Any here they are:

• For the Euro, read the EUR USD forecast.
• For the British Pound, check out the GBP/USD forecast.
• For the Australian dollar, look into the AUD/USD forecast.
• For the Canadian dollar, read the USD CAD Forecast.

Alistair Darling’s pounded the Pound once again. The “supertax” on bank bonuses distracted the markets for a short time, until the pre-budget was fully digested. The gloomy picture drawn in the report sent the Pound down across the board, a day before the rate decision.

The Distraction

Alistair Darling, the Chancellor of the Exchequer in Britain (or treasury minister if you wish), went to parliament to present the annual budget for 2010. The big news was the news “supertax” on bank bonuses – a 50% taxation on bonuses above 25,000 pounds.

This announcement addresses public anger about the huge bonuses taken by bank managers. The public rage continues also across the Atlantic, where senior American bankers take home a lot of bonus money while their institution begs for taxpayers money.

While this announcement easily caught the ears of the press, and is interesting, this super tax isn’t that important for forex traders.

Darling on the British economy and debt

Darling also addressed the whole economy. The first headline was that the growth forecast for 2010 would remain 1-1.5%. No change means no news, right? This was followed by a forecast for 2011 – 3.75% growth rate. Wonderful! But Darling may be out of office by then. Elections are due in Britain next year, and he may need to search for another job, even if the Labor Party forms the next government.

The news is in the near future: Darling downgraded the forecast for 2009, which is about to end – a contraction of 4.75% is the new forecast, replacing the 3.75% forecast. This was one weight on the Pound.

The second weight on the Pound is the budget. He didn’t address the growing deficit problem. It’s hard to do that on an election year. The market expected him to address this issue and spend less. More spending means a devalued British Pound.

Market Reaction – Pound is pounded, but slowly

GBP/USD fell from 1.6350 to a 1.6223 at the time of writing. It took some time for this move happen, about three hours. Below 1.6260, the next support line for cable is at 1.6110.

GBP/JPY fell from 144 to 1.42.50. GBP/CHF fell from 1.6775 to 1.6634. EUR/GBP rose from 0.9010 to 0.9085. This is especially notable since the Euro also has it’s own troubles: Greece and Spain are both suffering.

Tomorrow, the focus moves to Mervyn King, governor of the BoE. More about the rate decision and a deeper technical analysis can be found in the British Pound forecast.

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