In order to read the full daily research, please go to www.fxcharts.com.au. You will need to Register, which is free, and then to Login, once you have been emailed your password.The US Dollar reversed early week strength and turned lower on Friday after poor home sales data. Commodities rallied. Equities dipped but recovered. Charts suggest we may get a bit more of the same choppy trade, early next week. A lot of data from Germany will be a key driver in coming sessions, along with US Data & Draghi, Bernanke will be speaking. Euro/Usd remains 1.30/1.33 and Usd/Jpy looks capped at 83.00 for now. Aud and Kiwi have stabilised. EU Fin meeting on Friday to build a bigger firewall to prepare for the next EU crisis. It won't be too far away. Watch this space!

AUD/USD: 1.0460

The Aud continued its recovery on Friday from the 1.0337 lows as the US Dollar weakened and some late stop loss hunting saw a brief spike to 1.0482 before it settled down for the weekend The choppy conditions look likely to continue next week with the range trading that we have been stuck in, apparently likely to carry on, albeit with the parameters about 100bp lower. 1.0330/1.0530 now looks as though it will cover it, and the 4 hour charts are now showing that early next week the pressure could we be continued mildly to the topside. The immediate resistance early in the week will be at Fridays high at 1.0482. Above here 1.0500 and more likely 1.0532 would come into play (38.2% of 1.0855/1.0337). To the downside, support will now be seen at rising trendline support off the 1.0337 base, currently at 1.0400 and then at 1.0337 but it doesn’t look at the moment as though anything too directional is likely. From looking at the DXY, further mild US$ weakness looks possible, so short term advances may be seen early next week, before weakness resumes, within the projected range. The Aud crosses that we mentioned throughout the week recovered some of the lost ground on Friday, and this looks as though it may continue in the short term as the 4 hour charts unwind. Eur/Aud stopped at Fibo resistance at 1.2760 – (38.2% of 1.3803/1.2123). This needs to be regained if we are to make further progress. Until then it looks as though 1.2610/1.2750 may cover it. Likewise Gbp/Aud has fallen back from 1.5290 to 1.5160 as the short term indicators unwind their overbought nature. Further range trading within 1.5050 (rising trendline support)/1.5300 looks likely. Au/Jpy held Fibo support at 85.30 and further range trading, with some possible Aud gains from current levels (86.10) look possible, but until the end of FY in Japan, concerted Jpy weakness is unlikely to be seen, so don’t expect too much action on the topside. 87.50, if seen, may well provide a cap. There is a large amount of data out next week to push the Aud around. Little of it is domestic though with the highlight being the Private Sector Credit on Friday.

EUR/USD: 1.3268

The Dollar eased into the weekend as US Treasury yields continue to soften a little following the spike higher earlier in the week. The euro saw a three-week high at 1.3292 on Friday as concerns about a slowdown in the EU seemed to ease a little, although I am not really sure on what grounds, given Thursdays PMI data, but bond auctions in Italy and Spain will be watched closely this week, following the way that yields climbed again in recent sessions. Spanish 10 Year bonds reached almost 5.5% on Friday. Right now it feels as though we are in the middle of a typhoon where everything is nice and calm! Hang on tight though as it is a big week for data from Germany ahead, and we also have an EU Fin Min meeting this week (Fri, Copenhagen), where an increase in the size of the firewall to avert the possibility of a repeat of Greece is to be discussed. With a supposed rescue fund of around Eur 700 bio, which wont please Germany, this will quickly put to good use when Portugal, Spain, Italy , Ireland (or Greece-again!) or any combination of the above, all fall over and come running for help! Technically there is not a whole lot to add from previous posts. The Euro currently remains within the 1.30/1.33 range as it has done all week, and this could well remain the case in sessions to come, with a very mild bias higher on the shorter term charts. The daily charts are running flat and the 4 hourlies are making a half hearted attempt to drag themselves towards 1.33. From what I hear though there are plenty of keen sellers in the 1.3300/30 range and this will take some effort if we are to make further ground towards the recent 1.3485 high. The 4 hourlies are actually showing very mild divergence, given that we made a weekly high on Friday, so it maybe that we run out of steam again on an approach to 1.3300. Of more interest is the potential Head – Shoulder formation that looks to be building. The neckline for this is at 1.3000 and the right hand shoulder looks pretty mature to me. Maybe another day or two of chopping around here, but if we are going to get any action, it ought to arrive this week. An eventual target would be 1.2515 (1.3485-1.3000 =.00485. 1.3000-0.0485=1.2515), so it is worth keeping an eye out for. It should be noted though that the DXY Index is not supportive right now of a much stronger dollar so there is a good chance that S-H-S will not come about.

Next week we get:

German IFO, Draghi, Bernanke speeches, US Pending Home Sales. (Mon)

German/ US Consumer Confidence, Case Schiller Home Price Index, more Bernanke (Tues).

German CPI, US Durable Goods (Wed)

German Unemployment, US GDP, Jobless Claims, yet more Bernanke (Thur).

German Retail Sales, EU Fin Min Meeting, EU CPI, US Personal Consumption Expenditure (Friday).

Should keep us on our toes! It looks like a busy one. Have a good week.

GBP/USD: 1.5860

Sterling looks as bid today as it looked offered on Friday morning, following its quick trip down to 1.5770, before reversing itself up to the top end of the recent range and taking a look at 1.5910 resistance, prior to settling in for the weekend at 1.5870. I would not imagine anyone is having too much joy in Cable right now and there have to be better things to look at.Above 1.5930, Sterling should have a run at 1.6000, while below 1.5770 ought to see 1.5700. The indicators are as confused as I am though and not able to give much of a hint in either direction. For now, use the 1.5770/1.5930 range as a guide, or even better sit on your hands and save yourself the grief and some cash!

EUR/USD: 1.3200

A tough week for the Euro with potential for more to come; the Greek standoff looks to be running rapidly out of time.

Res 1.3250 1.3300 1.3350

Sup 1.3150 1.3100 1.2950

USD/JPY: 81.78

Becoming overbought in the short term and a correction may be due. Long term looks as though we may be commencing a major move higher. 81.00/82.20 for now.

Res 82.00 82.220 82.77

Sup 81.40 80.80 80.77

GBP/USD: 1.5832

Looks choppy with a short term downward bias; suspect 1.5750/1.5900 early in the week. BOE Thursday

Res 1.5880 1.5900 1.5940

Sup 1.5810 1.5755 1.5700

USD/CHF: 0.9138

Rallied close to resistance and short term progress may prove difficult to sustain. It looks as though some consolidation may be in order and 0.9100/0.9220 may well cover it. Watch EUR/CHF. Given the Greek situation, it could get awfully ugly further out.

Res 0.9155 0.9180 0.9205

Sup 0.9115 0.9110 0.9070

AUD/USD: 1.0730

Same old story; still range bound but a heavy data week may shake things up a little (not to mention Greece). Charts have minor downside bias, but that could easily reverse on good economic numbers

Res 1.0800 1.0855 1.0870

Sup 1.0700 1.0650 1.0590

NZD/USD: 0.8288

Similar to AUD. Still range bound but looking mildly heavy. RBNZ on Thursday.

Res 0.8320 0.8400 0.8475

Sup 0.8260 0.8235 0.8150

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AUD/USD Forex Trading Forecast

The bright spot in the economy last month were the outstanding employment figures, with the employment change indicator posting its best reading in over two years. The Australian dollar did not show any net movement for the week, testing 1.0798 on Friday and failing before closing just above 1.07. The upcoming week has four economic releases including the RBA Minutes on Tuesday and HSBC China PMI on Wednesday but machinations in Greece and the effect on risk sentiment will determine where we go this week. Despite a strong open, the dailies are pointing lower and 1.0650 is the first line of support followed by 1.0585, which was tested earlier this month. Below that is the round number of 1.05, which served as support in May and June and has now resumed that role. It is followed by the 1.0383 line, which has acted as a support level since January. The round number of 1.03 was tested in January, but has now become a major support level as the Aussie continues to stay strong against the US dollar. My next lines are at 1.0250, 1.02 and 1.0080 on the way to the all important parity. In early trade we have already seen my pivot line at 1.0750 breached with a bounce off 1.0790. Should we head directly higher again from here the important level of 1.08, which was breached earlier this month, will be the litmus test for any continuation higher. This is followed by strong resistance at 1.0884 then 1.1009, just above the psychologically important level of 1.10. My final resistance line on the topside is 1.1090, which was last tested in August of 2011.

EUR/USD Forex Trading Forecast

Last week the Euro dropped to the lowest levels in the month to date before making a correction in what was a very choppy week. If everything goes well, the current chapter in the Greek saga will be sealed with the launch of the second bailout program. In latest news Greece has approved budget cuts, but there is strong talk that Germany wants Greece to declare bankruptcy amid more signs that a Greek bankruptcy announcement is coming. A Greek default will see the Euro plunge. Having tested and held the important 1.2970 support level last week the Euro has corrected and reached resistance 1.3201 in early trade, before retreating a little. With 1.3200 taken out there is the potential for a move on to 1.3240 and then the 9 Feb high at 1.3320. Above here, 1.3450 was support in November and has switched to resistance. 1.3550 capped the pair in November and December and 1.3615, which provided support in November has now switched to resistance. Above that I have lines at 1.37 and 1.38. On the downside I have last week’s 1.2970 low and beyond here the 29th December low at 1.2853. Below this, the 13th January low at 1.2623 is the last line on my daily chart. In other economic news, the euro-zone contracted in Q4, as expected. Nevertheless, the contraction is lower than expected, at 0.3%, and France surprised by posting growth. Purchasing managers’ indices will shed light on the current economic situation on Wednesday and we will also see German IFO and German GDP later in the week but all economic data is being overshadowed by developments regarding Greece.

GBP/USD (Cable) Forex Trading Forecast

The Cable had a busy trading week starting the week at 1.5777, with the dollar gaining ground early on and the pair dropping to a low of 1.5644. It then changed direction, rising as high as 1.5862 on Friday’s strong Retail Figures that suggested that the economy might actually be recovering quite a lot faster than previously expected. The Cable closed the week slightly higher, just above the 1.58 level. However, with unemployment stubbornly high at 8.4% and weak activity in the manufacturing and housing sectors, the UK economy is still in trouble. Despite the lackluster economic data coming out of the UK, the pound has had a spectacular 2012 so far, and the upward swing against the dollar could well continue if one of tests of the topside actually breaks through and closes above 1.5862. If this happens the line of 1.59 is next to provide resistance to the pair followed by strong resistance at the psychologically important figure of 1.60. Next resistance is at 1.6065 on the way to 1.6132, which has provided strong resistance since November last year. This is followed by resistance at 1.6265 then at 1.6426 on the way to stronger resistance at the level of 1.6472. On the downside support is found at 1.5780, 1.5765 then 1.5663 and on any move lower I would think we might even see a move back towards the important 1.5640 support line. There are 6 economic indicators this week but again sentiment will rule so choppy conditions are likely to continue and much will depend on Greece.

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After opening at 1.0654 and dropping to a low of 1.0526, the Australian dollar broke through the important 1.0764 resistance line (mentioned last week) and continued to strengthen against the USD, reaching just sort of the 1.08 level before closing at 1.0755, for a gain of 100 pips for the week. Further gains are a possibility this week, barring any major disasters from Europe that would see a turnaround in risk sentiment, but the daily charts are looking increasingly overbought and we are overdue for a correction. The Australian economy, with its dependence on exports, has been hit by the global economic slowdown, but is well-prepared for an improvement in the global economy, especially that of the US. From the current price, the line of 1.0775, which was breached this week, is providing initial resistance to the pair. If this is breached again and the uptrend channel continues, next resistance will be at 1.0800, then the 11th May high at 1.0880, followed by the resistance level of 1.0990, which was last tested in August 2011. Above here the psychologically important level of 1.10, is the top line on my daily charts. Economic fundamentals in the US are looking much better following Non-Farm Payroll last Friday and this makes a correction in the Aussie seem well overdue. If we see that this week, price will need to fall through immediate support at 1.0750, then 1.0685 and break below here. We could then see quite a few key support lines being broken including weak support at 1.0610; the round number of 1.05; and the 1.0383 line, which recently served as resistance, and is now acting in a support role. The round number of 1.03 has been tested throughout January, and is strengthening in support as the Aussie continues to rally. Below here I have 1.0250, 1.02 and 1.0080 providing support on the way to the all-important parity level. There are nine economic indicators being released this week with the highlight being the RBA rates announcement on Tuesday, where it looks pretty certain that the RBA will cut rates. How much the Aussie reacts to any rate cut will depend on global risk sentiment at the time. Key trading partner, China’s CPI is due on Thursday and the Chinese Trade Balance is due on Friday with the markets predicting a sharp drop which could hurt the Aussie at the end of the week.

EUR/USD Forex Trading Forecast

The Euro started the week with a drop to the 1.3060 line before bouncing to the 1.3212 line. Both lines were temporarily breached at times, with the pair ending the week lower at 1.3143 having broken both the downtrend channel and the uptrend channel. US unemployment surprised the market and dropped to 8.3% while the Non Farm Payroll data improved by 243K. Risk currencies breathed a sigh of relief but for the euro, one of the main drivers higher was the chance of QE3 in the US, and with such a strong jobs report, the chances of USD printing are now significantly lower so this will weaken the Euro. In Europe the main economic indicator this week is the interest rate decision, but developments in Greece could make this look like minor news. Pressure is growing on Greece’s politicians to accept harsher measures regarding the labor market and time is running out with Greece getting closer to default every day. It isn’t clear if the blame is on the Greeks or on the harsh pressure from IIF, IMF, ECB (et al) but as time passes, a solution seems further away and more money leaves Greek banks. And with any Greek default, orderly or otherwise, Portugal is likely to follow quickly in Greece’s footsteps. For now the Euro continues to consolidate in early trade between the Fibonacci levels of 1.3005 and 1.3240. Above 1.3240, next resistance is at 1.3330 then 1.3450 on the way to 1.3550 which capped the pair in November and December. Above here I have 1.3615, 1.37 and the round number of 1.38, which capped the pair in September. A break below 1.3005 could see an attempt on 1.2925, and even 1.2873, a very strong line separating ranges. If this is breached expect to go through 1.2760 on the way to 1.2660 which was a double bottom during January. But really, technical analysis is being trumped by developments in Greece every day, so keep your stop losses tight.

GBP/USD (Cable) Forex Trading Forecast

The Pound rallied against the US Dollar last week, gaining slightly against the greenback and closing the week at the 1.58 level. Despite stronger US growth, the pound has had an amazing run, rising over 500 pips against the dollar since the middle of January. The Purchasing Managers’ indices in the UK were generally better than expected in January, the economy may at long last be picking up, and an official recession now seems less likely, further lessening the chance of any more quantitative easing from the BOE. The upcoming week has seven economic releases with the highlight being the BOE interest rate decision on Thursday. The dailies are still tending towards higher levels but there is resistance at 1.59 which acted as a support line back in October 2011, but is now in a resistance role the top of the channel before the psychologically important round number at 1.60. Next, 1.6132 has provided strong resistance since November and this is followed by resistance at 1.6265, 1.6426 and the strong resistance level of 1.6472. Below the current price of 1.5804, 1.5758 is providing weak support for the pair. The round number of 1.57, which just last week was a resistance line, was breached and now finds itself providing weak support. The round number of 1.55 is strengthening in support as the pair continues to move upwards. Next, 1.5469 has been a weak line for much of January, and is currently in a support role. The round number of 1.54, which served as strong support in November and December of 2011, is again providing support to the pair but I do not expect to see this level this week. Expect instead sideways choppy trade with an upward bias as long Greece does not implode.

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The Aussie dollar continued higher last week, reaching a peak of 1.0687 and now faces a tough test at the twice-rejected level of 1.0764 dating back to September and October 2011. The US dollar weakened against most major currencies following Bernanke’s announcement that interest rates will likely remain near zero until late 2014. However, the global slowdown has taken its toll on the Australian export sector, and the Aussie may run out of steam as a result. Last week the December quarter CPI showed that core inflation is bang in the middle of the Reserve Bank's 2–3% target range and it was virtually unanimous among forecasters that the next cut in official interest rates would happen in February, but with things settling down in Europe, many are now pushing this out to March. This will help the housing market, which is already looking stronger in 2012, and therefore lift consumption - but despite any rate cut, money is pouring into Australia looking for higher relatively safe yields, which could continue pushing up the Australian dollar. It is a busy news week with 9 economic indicators released so check for news items on www.forexfactory.com . The Aussie looks as though it might want to test the line of 1.0667, which was breached last week and if it closes above here it should test the important 1.0750/65 area. This is followed by the strong resistance level at the July highs of 1.0884 then 1.0990, which is also strong resistance, and just below the psychologically important level of 1.10. On the downside the round number of 1.05, which served as support in May and June, is now back in that role. A more serious correction is likely if the Aussie closes below 1.05 with the next target the low of January 24 at 1.0428. The round number of 1.03 has been tested throughout January, and now finds itself providing weak support with the next serious support then at 1.0249.

EUR/USD Forecast

Bernanke’s new rate pledge and talk about QE3 in the housing sector definitely weakened the USD and the positive economic signs from Europe have helped the single currency, but the Greek saga is far from being over, and could still weigh on the Euro. It looks like the dire warnings of the IMF and the World Bank scared those negotiating the Greek debt restructure to do a deal and there is a good chance it will be announced very soon; private bondholders seem ready to accept an interest rate of less than 4% on their new bonds, as well as a new face value that is 68% less than they have now – that is some haircut! This would prevent an immediate Greek default, with all the bank write-downs and potential insolvency that would come with it. Once the Greek debt deal has been bedded down, attention will focus on Italy. So far the ECB has coughed up €489 billion and the Fed has provided $US100 billion in swaps, most of which has found its way into Italian, Spanish and French bonds. The result is that Italy and France are unlikely to reduce their bloated public sectors, the trade deficits that caused the problem in the first place will not be reduced, and there will be another balance of payments crisis. If the euro is true to its form of late, then the gains could top out this week or next and then resume the downtrend channel that started some time ago. In early trade the Euro is already heading south, with a move below the 1.3145 line, on the cards. 1.3085 provided support back in December 2010 and the round number of 1.30 is psychologically important too. The 1.2945 line then provides support on the way to 1.2873, the previous 2011 low set in January and a very strong line separating ranges. 1.2660 was a double bottom during January and any move below this line would see us move towards the 1.2587 trough of August 2010.

GBP/USD (Cable) Forecast

Another week of gains for the Cable saw it finishing on its highs at 1.5732 climbing almost 200 pips against the US dollar even though economic fundamentals clearly favor the US over the UK. The USD weakened against the Pound following Bernanke’s announcement that interest rates will likely remain near zero until late 2014. This was despite solid economic data coming out of the US; real US GDP growth has come in at 2.8% for the fourth quarter, the fastest pace of growth since the first half of 2010; and consumer spending remains relatively strong. The Cable is now within the range of multiple resistance dating back to the peak of November 30 at 1.5779. If it can bust through this level next resistance is at the lows of November 3 at 1.5876 followed by the peak of October 31 at 1.6156. The outlook remains bullish unless there is a move below Wednesday’s low of 1.5533. Next, 1.5469 has been a weak line for much of January, and is currently in a support role. The round number of 1.54, which served as strong support in November and December of 2011, is again providing support to the pair. Below, The final line for now is at 1.5360

Knowledge to Action forex traders use Fundamental Analysis, Technical Analysis and analysis of Market Sentiment as expressed in price action. Fundamental Analysis means they simply check for news items on www.forexfactory.com , indicating when to trade and when not to place a trade. To trade forex successfully you need to combine this knowledge with some knowledge of price action AND Knowledge to Action’s Forex trading strategies. Our Ultimate Forex Secrets is a free two hour seminar, presented by a professional Forex trader, who shows you how to start using proven Forex trading strategies.

Markets are having their traditional good start to the year; in fact it's one of the best for decades, prompted by some successful debt auctions in Europe and optimism about corporate earnings in the United States. The Aussie had a big week, breaking through resistance at 1.0380 early in the week and then breaking above 1.0450, then 1.0460 and finishing on its highs, just below further resistance at 1.0492. This was despite last week’s Australian economic data, which was mostly disappointing; while housing finance rose in November, maintaining a slight uptrend over the last year, it is yet to show much evidence of a solid recovery from the falls of 2010; consumer confidence failed to recover much from a sharp fall in December; motor vehicle sales fell in December; and the December labour market report highlighted very soft employment conditions with no jobs growth at all in 2011. The only reason unemployment hasn’t increased more sharply is because labour force participation has declined! Finally, the terms of trade fell in the December quarter as export prices fell and a weaker Australian dollar boosted import prices. All of this combined with the TD Securities Inflation Gauge suggesting that inflation remains benign, supporting the case for more rate cuts from the RBA, with the next cut likely to occur at next month’s meeting. We get Australian PPI on Monday, CPI Wednesday, and it is Australia Day on Thursday, in what will be a thin week in the absence of Asian volume - so price action could be exaggerated. In the US we get economic growth data and a meeting of Federal Reserve policy-makers. First resistance is at 1.0500 with stronger resistance at 1.0570. Above here, 1.0750 begins to come into view, then the twice-tested peak of September 2011 at 1.0760, followed by the July highs of 1.1080 but I do not really expect to see these levels this week. A pullback this week could find first support at the lows of January 13, 1.0230. If that line fails subsequent support is at 1.0140, 1.0040, and if we fall below parity, 0.9860.

EUR/USD Forecast

Last week the Euro staged a good rebound, rising 2% from the lows of 1.2620 to a peak of 1.2990 by Friday – a move underpinned by the talk of progress in negotiations between Greece and the Institute of International Finance (IIF) on behalf of its creditors over the size of the losses to be inflicted on private bond holders. Those talks were suspended over the weekend and time is running out ahead of Mondays EU Finance Ministers meeting, at which the next tranche of the bailout package of $130 billion is supposed to be ratified, in order to avoid a default. But IIF chief Charles Dallara, who is negotiating the Greek debt write down plan on behalf of private sector creditors, said on Sunday that a "maximum" offer (rumored at 70%)has been made to Greece on a debt deal and that he is confident of an agreement taking place soon. A continuation of the gains this week will be signaled if there is good news on that front AND a move above Friday’s peak. Should we make upside progress this week the next target is 1.3000, then 1.3053 which acted as Fibonacci support on the way down. We might then see the high of January 3 at 1.3080 followed by resistance at 1.3243 then around 1.3430. Immediate support is at 1.2840, then the low of last week at 1.2623 which stands ahead of important 1.2590 support line. This is followed by the peak of June 2010 at 1.2470. It could be a choppy week and much will depend on the outcome of the Greek news, but there will be disappointment if they fail to reach a suitable deal with the IIF. Today sees the start of the EU Finance Ministers meeting and EU Consumer Confidence figures, with this week’s economic highlights the FOMC on Wednesday and Durable Goods on Thursday.

GBP/USD (Cable) Forecast

The Cables’ rejection of the October lows did indeed lead to a rebound and saw 5 successive days of gains on improved sentiment as December Retail Sales improved +0.6% in the lead up to Christmas. Cable finished the week on its highs at 1.5573 and there is no sign that the gains are exhausted yet. This week we get the MPC minutes on Wednesday which will provide some direction, once we see how the BOE is looking at the state of the economy. A continuation of the upside this week means getting through the next resistance at 1.5582, before an attempt at 1.5660 and the trendline resistance level, and January 3 high, at 1.5670. This resistance needs to be taken out fairly early in the week or the Cable could run out of steam and head lower again. If it breaks the January 3 high, at 1.5670, the next resistance is at the thrice-rejected highs of 1.5780. The indicators are generally encouraging for further tests of higher ground and dips continue to look as though they will provide buying opportunities. The outlook remains bullish unless there is a move below Thursday’s low of 1.5410 early in the week but for what it is worth my downside support lines are drawn at 1.5500, 1.5445, 1.5410 and 1.5230.

Knowledge to Action forex traders use Fundamental Analysis, Technical Analysis and analysis of Market Sentiment as expressed in price action. Fundamental Analysis means they simply check for news items on www.forexfactory.com , indicating when to trade and when not to place a trade. To trade forex successfully you need to combine this knowledge with some knowledge of price action AND Knowledge to Action’s Forex trading strategies. Our Ultimate Forex Secrets is a free two hour seminar, presented by a professional Forex trader, who shows you how to start using proven Forex trading strategies.

Once the rating agency Standard & Poor's Eurozone downgrade rumours began to appear on Friday, we saw a spike down to 1.0230 which was was followed by an impressive recovery to finish pretty much unchanged for the day. Early Monday trading is nervous following the EU downgrades, but sharp bounces are inevitable and the Aussie will probably continue to trade between converging support and resistance levels in the 1.0040-1.0385 range. Flows are coming into the Aussie at the expense of the Euro, the Pound, and the Swissy, currently propping it up and perhaps supporting a test of the 1.0380 level yet again this week. On Friday, we saw an all time low at one stage with the EUR/AUD trading at 1.2263 and looking as though the 1.2000 target may not be far away. This week sees the release of the December readings on inflation from the Producer Price Index and the Consumer Price Index, as well as December housing starts. Offshore this week, China releases important data on GDP, retail sales and home prices. In the US, markets are closed on Monday for the Martin Luther King holiday but from Tuesday, traders will be watching as earnings reports from numerous bellwethers including Bank of America Corp, General Electric Co, Intel Corp and Goldman Sachs provide some direction. First serious resistance is in the 1.0380/1.0410 range with strong resistance above this at 1.0460 and at 1.0500, but don’t expect to see that any time soon. Support below the current price is at 1.0180, 1.0150 and at 1.0040, the previous low, ahead of parity. Below here could see a test of 0.9990, 0.9660 and then 0.9920on any move lower. If the situation with the Euro gets worse, this may happen sooner rather than later, but my indicators are not supporting that move. Being a US holiday will make for thin forex trading conditions on Monday.

EUR/USD Forecast

Friday 13th saw S+P downgrade the debt rating of nine European countries, including France and Austria which despite the Fitch view that their AAA rating was safe for a year, lost their top-notch triple A ratings. Malta, Slovenia, Slovakia, Cyprus, Italy, Portugal and Spain all lost two notches but surprisingly Ireland rating remained unchanged. The Euro was holding up well until S+P stepped in and although rumours of the downgrades were rampant all afternoon in Europe, the announcement came after most EU based traders had gone for Friday beers, so Monday is likely to see pretty volatile trading. The lowering of the ratings is going to make it hard for the European Financial Stability Facility (EFSF) to retain its own AAA credit rating which in turn, if dropped, would make its own cost of borrowing increase. To compound the downgrades Greece looks as though it is rapidly edging nearer to the exit as it approaches default following failed talks about its debt reduction programme last week. The Euro closed above the previous 1.2660 support, having been to an intraday low of 1.2623. The charts suggest we are approaching Fibonacci support at 1.2590 and the divergence is hinting at some volatile range trading. If we get a meltdown in the EU though, no amount of technical analysis will support the Euro but 1.2625/1.2590 should provide some resistance on any move lower. Below here, the March 2009 low at 1.2445 is the next major target. Topside resistance really depends on surprises, but levels to watch are 1.2730, 1.2795 and then 1.2878 (the high on Friday). Economic data out this week includes the important Chinese data on GDP, retail sales and home prices as well as EU CPI on Tuesday and US CPI on Thursday.

GBP/USD (Cable) Forecast

The UK escaped the scrutiny of S+P on Friday, but the Cable didn’t escape, heading sharply lower in very choppy trade within its overall downward trend channel. Surely, with its very poor fundamentals, it cannot be long before the ratings agencies focus on the UK? The cable reached important support on Friday at 1.5233 before a big bounce. 1.5230/1.5400 provides a wide range to start the beginning of the week, and with the market betting on further quantitative easing in coming months, the overall direction looks likely to remain lower. Expect price action to continue to be dominated by big spikes in either direction. 1.5265 and 1.5200 provide immediate support with 1.5372, 1.5400 and 1.5480 providing immediate resistance. EUR/GBP cross had closed at 0.8275 on Friday and may be heading towards the recent low at 0.8220. The medium term target remains, at 0.8175, possibly extending to 0.8060. The strong rejection of 0.8375 should now provide a cap, and above here 0.8420 will act as resistance. I don’t think we will see this in the short term and we are in for some choppy trade as the dailies unwind their oversold condition.

Knowledge to Action forex traders use Fundamental Analysis, Technical Analysis and analysis of Market Sentiment as expressed in price action. Fundamental Analysis means they simply check for news items on www.forexfactory.com , indicating when to trade and when not to place a trade. To trade forex successfully you need to combine this knowledge with some knowledge of price action AND Knowledge to Action’s Forex trading strategies. Our Ultimate Forex Secrets is a free two hour seminar, presented by a professional Forex trader, who shows you how to start using proven Forex trading strategies.

Unlike the grim situation in the EU, the US market is doing rather well with better employment data, elevated consumer sentiment and improved housing figures. Last week the weekly jobless claims dropped to 372K continuing the recovery in the labor market after 387K claims in the prior week. ADP Non-Farm Payrolls also surprised with a gain of 325K jobs in the private sector, much better than the 176K predicted. These figures led to the Non-Farm Payrolls surging higher than expected with an addition of 200,000 jobs and another drop in the unemployment rate. These positive figures raise expectations for a stronger job market and US economy in 2012.

The Australian dollar showed some movement at year’s end, dropping close to the parity level before rallying to end the year just shy of the 1.02 level. Then the Australian dollar showed upward movement against the dollar in early 2012 trading, climbing close to the 1.04 level, before retreating at the end of last week with almost no change. The US economy continues to gain steam, which should push AUD/USD downwards, however, the Aussies strong move towards 1.04 last week shows that it can hold its own against the greenback. The record levels of the Aussie against the Euro are a further indication of the strength of the Australian economy despite cracks in key trading partner China’s growth starting to appear.

The big news events this week, apart from whatever happens in the Eurozone, are the continued evidence of strengthening in the US economy, which will push currencies around this week;

1. GBP/USD, UK rate decision: Thursday, 12:00 GMT. No change is expected now. The Bank of England’s Monetary Policy Committee decided to maintain the official Bank Rate at 0.5% and refrain from increasing its quantitative easing. However, more QE is expected in February after the current £75bn of asset purchases is completed.

2. EUR/USD, Euro-Zone rate decision: Thursday, 12:45 GMT. The same rate is expected now but the ECB might act in February on the rates. The ECB members decided to cut the rate 25 basis points in December to 1% but President Draghi indicated that the decision was not unanimous, suggesting no further rate cuts this month. Draghi said that growth is expected to gradually recover next year and inflation is forecast to remain stable. Draghi also announced that the ECB will adopt non-standard measures to aid banks offering offer three-year loans to prevent a credit default and called for a joint effort with fiscal consolidation to save the EU from recession.

3. US retail sales: Thursday, 13:30 GMT. Both retail sales and core sales are expected to climb 0.3%. U.S. retail sales figures were disappointing in November amid a drop in the food and beverages sector overshadowing the increase in motor vehicle sales. The low increase spoiled expectations of a strong holiday shopping season. Retail sales rose 0.2% following 0.6% increase in October and against the 0.6% increased forecasted by analysts and Core sales also increased 0.2% after rising 0.6% in October lower than the 0.5% rise predicted. Despite the strong sales reported days before the holidays the high unemployment rate and heavy discounts weighed on the actual figures.

4. US Unemployment Claims: Thursday, 13:30 GMT. A further drop to 370,000 is expected now. The jobs market is continuing its recovery with increased hiring in the private sector. Initial claims for unemployment continues to contract reaching 372,000 after 387,000 claims in the week before and a bit better than the 375,000 predicted by analysts. This positive trend gives hope for further improvement in the labor market in 2012.

5. US Trade Balance: Friday, 13:30 GMT. Deficit is expected to grow to $44.6 billion this time. The U.S. trade deficit narrowed in October to$43.5 billion despite a record increase of imports from China. September balance stood at $44.2 billion. The reading was consistent with analysts’ predictions. The smaller deficit suggests better growth rate for the fourth quarter.

6. US Initial UoM Consumer Sentiment: Friday, 14:55 GMT. Another rise to 70.8 is predicted. The preliminary survey of consumer sentiment conducted by the University of Michigan revealed an increase in confidence with a reading of67.7 in December following 64.1 in November. This figure was higher than the 65.5 predicted suggesting increased confidence in the US market.

Knowledge to Action forex traders use Fundamental Analysis, Technical Analysis and analysis of Market Sentiment as expressed in price action. To trade forex successfully you need to combine this knowledge with Knowledge to Action’s Forex trading strategies. Our Ultimate Forex Secrets is a free two hour seminar, presented by a professional Forex trader, who shows you how to start using proven Forex trading strategies.

It was a wild ride for Aussie Forex traders last week but in the end the Aussie closed only 5 pips above the previous week’s close. ANZ Job Advertisements remained unchanged in November, but the Aussie ignored this and only moved up on the agreement announced by Angela Merkel and Nicolas Sarkozy early in the week. The Aussie then took a dive when the RBA cut interest rates to 4.25% on Tuesday but managed to recover. It was announced that the Australian economy grew by 1% in Q3, as expected and this helped the Aussie, but it remained weighed down by the European crisis. Employment figures were a disappointment, with a loss of over 6,000 jobs and a rise in the unemployment rate to 5.3% and then the Aussie got another blow from the lack of help from the ECB to troubled European countries. The end of the week saw trading in a wide range of 1.0380/1.0046, so we may be in for a continuation of the same choppy conditions. As usual, much will depend on the EU situation but thankfully EU leaders are not meeting again this year so keep an eye on the slowing Chinese data and this week’s European bond auctions which could prompt the Aussie lower – check for news items on www.forexfactory.com . My charts are very messy right now and are not offering much assistance so it looks as though we are going to be in for a directionless run in to Christmas as liquidity dries up. Dips towards the previous support at 1.0150, and Fibonacci support at 1.0075 look likely to hold but the low on Friday at 1.0046 could be seen again on any negative news from the EU. A close below 1.0040 and the Aussie does not have much support so we could see parity challenged. Parity strengthened as a support line in September after capping a recovery attempt. Below parity, 0.9953 is a line of weak resistance. The 0.9850 line provided support when the Aussie was falling in October and is minor now. Below, 0.9803 provides further resistance. The round number of 0.97 provided some support for the pair in September, before falling even lower and is the last support line I am bothering with for now despite my view that we are headed below here in the medium/long term. Looking up, the resistance line at 1.0335 was reached last week and could be tested again this week. 1.04 was a swing low in June and also the peak of a failed recovery attempt in September. 1.0460 was a support level in September, and is now a line of resistance. The round number at 1.05, which served as strong resistance in August and September, is the last line on my messy charts.

EUR/USD Forecast

The results of the EU Summit on Friday provided hope for the future with 26 of the 27 EU member nations agreeing to abide by new rules on fiscal unity (only the UK declined to sign up), but there was no relief for the current funding issues that could turn Italy’s liquidity problems into a major solvency problem. The interest rate cut and the measures to aid banks are helpful in buying time but just show how severe the banks problems are. A quick deterioration could come from ongoing issues with high bond yields or the collapse of even one European bank - with French banks especially vulnerable. This week sees 8 economic news announcements but the bond auctions in both Italy and Spain should give us a better idea of how solid the market support for the outcome of the Summit really is. It cannot be understated however that the immediate problem of how to dig Europe out of its current debt situation has not gone away. A sharp and widening downtrend channel can be seen on the charts, although it is weaker than earlier. Downtrend resistance begins at the end of October and has been widened to accommodate last week’s highs and lows. Immediate resistance lies at 1.3450 and above here at the 2nd December high of 1.3546. Further out 1.3610 (the 38.2% Fibonacci) and 1.3730 (the 50% Fibonacci) act resistance of the move down from 1.4247/1.3210. Downside support is at Friday’s low of 1.3280 an important support line on any move lower. Below here support can be found at 1.3210 and then at the important 4th of October low of 1.3145 - which is the lowest point seen in the current round of the crisis. This is closely followed by 1.3080, which provided some support when the pair was range trading at the end of 2010. The round number of 1.30 is psychologically important, before the low of 1.2873 seen early in the year. This 2011 year to date low is the last line on my charts.

GBP/USD (Cable) Forecast

The Cable showed some movement against the US dollar after Britain’s trade balance deficit fell to 7.6 billion pounds in October, which was significantly better than the 9.5 billion deficit that was expected. David Cameron’s one man stand against the EU does not appear to have done any immediate harm to the Cable but the British economy is in serious trouble, as shown by various economic indicators like consumer and business confidence. Given the strains on the domestic economy the upside looks limited, but for the time being the Cable continues to hold its own against both the Dollar and the Euro. This week will give us a clearer picture following the release of November CPI, Claimant Count Change and Retail Sales. Cable has been trading sideways and it looks as though it could continue into the coming week but further out the daily charts still show the possibility of some upside momentum. If we see a move higher first resistance will be found at 1.5690 followed by the swing low of 1.5780, which worked perfectly at the end of November, capping an attempt to rise. Above here 1.5815 has proven to be a strong line of resistance and this is followed by 1.5882. 100 pips above that, the round number of 1.60 that served in both directions during 2011 is my last line of resistance. The base looks to be protected at the 23.6% Fibonacci area around 1.5580. It is followed by 1.5520 which was the bottom line of the recent range, then 1.5470 and 1.5423, the bottom in November. 1.5340 had a role early in the year, and the pair bounced off this line in September.

Knowledge to Action forex traders use Fundamental Analysis, Technical Analysis and analysis of Market Sentiment as expressed in price action. To trade forex successfully you need to combine this knowledge with Knowledge to Action’s Forex trading strategies. Our Ultimate Forex Secrets is a free two hour seminar, presented by a professional Forex trader, who shows you how to start using proven Forex trading strategies.

The Aussie climbed nearly 300 points in one day after a surprise announcement on Wednesday that saw six of the world’s most important central banks announce they would “enhance their capacity” to provide liquidity to the global financial system, easing strains in the financial markets after banks had started to pull back on their lending to households, businesses and each other. The Aussie twice tested levels above 1.03 (Friday’s high was 1.0324), but failed both times and closed the week on the Friday lows, just above 1.0200 - probably in expectation of a rate cut at the upcoming RBA meeting on Tuesday. The tone for forex traders at the start of the week was set by China’s Services PMI which was released on Saturday, coming in at 49.7, down from the previous month of 57.7, on softer demand. It is a huge news week with 17 news items on www.forexfactory.com but Tuesday’s Interest Rate Announcement, Australian Unemployment data, Chinese CPI/PPI at the end of the week and of course the outcome of the EU summit, will be drivers of the Aussie this week. Wednesdays rebound from 0.9660 was huge and the momentum suggests that we may see further tests of my line at 1.0324 (Friday’s high) and possibly towards 1.0400, which was a swing low in June and also the peak of a failed recovery attempt in September. If it breaches here, my next resistance lines are at 1.0460, 1.05 and 1.0717. The downside has support lines at 1.0211, 1.0150 and then at the Fibonacci line at 1.0075. Parity strengthened as a support line in September after capping a recovery attempt and also proved its importance in October. Below parity I have 0.9953, 0.9850, 0.9803, 0.97 and the swing low of 0.9622 as the final line of support for now. It is not really possible to pick the direction of the Aussie from the charts right now, but I expect a drift towards the 1.0211 or 1.0150 support lines in what will be pretty choppy trading, made more pronounced as liquidity begins to dry up in the approach to Christmas.

EUR/USD Forecast

The move higher in the Euro following the recent Central Bank coordinated action saw a brief spike above 1.35 (1.3548 high - assisted by a rumour that NFP would be +200K) was followed by an equally brief look below 1.34 (1.3363 low - on a rumour of a Spanish downgrade), before settling and eventually closing at 1.3392. The USA’s Non Farm Payroll number on Friday came in pretty close to expectations at +120K, while the unemployment number improved to 8.6%, mainly because of the amount of people who have given up looking for work. All this leaves the Euro in pretty neutral territory at the end of a volatile week with little follow through buying momentum seen after the spike up on Wednesday. This week has the potential to be hugely volatile, as Merkel and Sarkozy meet on Monday, with the expectation of a deal, on the road to some sort of fiscal unity that is hoped will bring enduring stability to the EU. This blueprint of a deal will then be put to the EU summit on Friday but it is unlikely the other 17 Euro nations will like being essentially a principality of an EU controlled from Berlin; and equally the German population will not be happy to be the guarantor of Greek or Italian debt. The outcome of the Summit promises to have major ramifications not just for the Eurozone, but for the whole global economy and I am not happy guessing what will actually happen next. Technical indicators are being overtaken by news flashes from the EU, closely followed by knee jerk price spikes. Resistance at 1.3550 remains intact and above here I have the 1.3610 (38.2% Fibonacci) and 1.3730 (50% Fibonacci) resistance calculated from the move down from 1.4247 to 1.3210. Downside support is at 1.3325 and then at 1.3260 and 1.3210. Very important support is at 1.3145 which is the lowest point seen in the current round of the crisis. But as fellow trader Keith Cotterill reminded me on FaceBook yesterday “It won't be too long before we're worrying about the US dollar again.”

GBP/USD (Cable) Forecast

The British pound enjoyed the optimism that came from the coordinated central bank action last week peaking at the 1.5780 line before losing ground and eventually closing just under 1.56 line. The UK housing sector is relatively stable as evidenced by another positive Construction PMI and another rise in house prices but manufacturing remains sluggish. We will get the last PMI figure and more housing data this week as well as the BOE Interest rate decision on Thursday but the Cable’s fortunes in the coming week will be heavily reliant on the outcome of the meetings in Europe. My Cable charts are messy and the outlook is rather indecisive suggesting that we may be in for more of the same volatile but directionless price action over the next few sessions. For now look at 1.5500 and then 1.5423, the bottom of November, to provide support. My resistance lines are at 1.5700, 1.5790 and 1.5850.

Knowledge to Action forex traders use Fundamental Analysis, Technical Analysis and analysis of Market Sentiment as expressed in price action. To trade forex successfully you need to combine this knowledge with Knowledge to Action’s Forex trading strategies. Our Ultimate Forex Secrets is a free two hour seminar, presented by a professional Forex trader, who shows you how to start using proven Forex trading strategies.