Weekly Snapshot - August 22, 2011

Analysis by Pepperstone

U.S. Dollar. Our bias BULLISH, we’ll be looking to buy on dips

• U.S. Dollar closed last week lower by 0.63% after Philadelphia Fed survey which plummeted to -30.7 vs the expected 4.0
• End of week Jackson Hole Symposium will determine Greenbacks fate for 2011
• Dollar Index rally from 9,323 suggests that at least one more bull leg should unfold
• Expectations are for a test of 9,680 and possibly 9,765
• We maintain a bullish Dollar bias in the week ahead and will look to buy dips.

Euro. Our bias BEARISH, we’ll be looking to sell on rallies

• Last week, the Euro squeezed out some modest gains against the weakening U.S. Dollar despite the German DAX being nearly 30% off its multi-year highs
• French, German, Euro PMI and ZEW surveys due Tuesday and the German Ifo Business Climate report due on Wednesday
• Friday’s price action saw a failed test of 1.4450 and the trend line connecting the May, June and July highs
• Near term price action, the picture is confused
• A failed rally to 1.4500 levels would be a sell signal for setbacks to 1.4000 key support before the eventual push to 1.5000
• We maintain a bearish Euro bias in the week ahead and will look to sell rallies

Japanese Yen. Our bias NEUTRAL, on the sidelines till a clearer picture develops

• Last week, the Japanese Yen rose against the Kiwi, Franc, Loonie and U.S. Dollar, while depreciating against the Sterling, Euro and Aussie
• The week ahead has no significant Japanese economic data, apart from Thursdays CPI report for July
• Looking forward, an intervention is becoming an increasingly likely scenario
• Friday’s price action saw USDJPY touch new record lows at 79.95
• The looming threat of BoJ intervention will see us on the sidelines with Yen pair’s until a clearer picture develops.

British Pound. Our bias NEUTRAL, on the sidelines till a clearer picture develop

• Last week, saw Sterling strength against most of its major counterparts mainly due to a large £7B
acquisition of British firm Autonomy
by
American giant Hewlett Packard
• Sterling remains significantly correlated with the S&P 500 - a proxy for investors’ risk appetite
• The longer term bullish bias remains valid but near term GBPUSD weakness is expected
• Weakness to 1.6290-1.6250 levels would offer buying opportunities
• We maintain a neutral Sterling bias in the week ahead.

Canadian Dollar. Our bias BEARISH, we’ll be looking to sell on rallies

• Weak U.S. growth forecasts taking a toll on Canadian Dollar
• Canadian economic data implies zero to negative activity rates for Q2 2011 as a whole
• End of week Jackson Hole Symposium is expected to have a significant impact on the Loonie for the remainder of 2011
• Last weeks price action stalled shy of a trendline that extends off of the 2010 highs
• We maintain a bearish Loonie bias in the week ahead and will look to sell Loonie rallies.

Australian Dollar. Our bias BEARISH, we’ll be looking to sell on rallies

• RBA minutes last week, revealed a dovish outlook
• Australian economic data is turning soft
• Expectations are for a test of the recent low by 0.9930 levels
• 1.0435-1.0475 is key resistance and rallies to these levels would offer selling opportunities
• We maintain a bearish Aussie bias in the week ahead and will look to sell on rallies

New Zealand Dollar. Our bias BEARISH, we’ll be looking to sell on rallies

• Last
 week
 saw 
NZ milk 
powder 
prices 
fall 
back
 to a 
1 
year 
low 
as
 supplies 
rose 
and
 bullish
growth 
projections
 were
 scaled
 back
• NZ commercial deposit rates signalling that the next move in rates is not higher, but lower.
• Expectations are for a test (or break) of the 9th August low at 0.7960
• 0.8300-0.8340 is near term resistance and rallies to these levels would offer selling opportunities
• We maintain a bearish Kiwi bias in the week ahead and will look to sell rallies.

PepperStone
Pepperstone is an Australian Forex brokerage that serves traders worldwide with both standard Forex trading and ECN trading capabilities. Pepperstone offers their traders excellent market analysis and competitive trading conditions for all account types.