European Forecasts

  GBP/CHF has broken down through the 1.32 level during the week, showing even more weakness as traders continue to buy the Franc at the expense of the Pound. We believe that this continuation of the trend makes sense, and also believe that this level should be a good entry point for more shorts.

  EUR/USD had a down week and even broke through the 1.40 handle solidly. The pair then bounced back up, and it appears that the week is forming a hammer. This is very bullish, but it should be noted that the highs are getting lower, and as such – we don’t like buying at this point. A break below this week’s lows gets us wildly bearish and selling quickly. There is simply too much headline risk out of Europe to buy the Euro at this point.

The EUR/USD ended another volatile and hectic week which was encompassed by strong fluctuations and choppy trading, where the euro started the week with heavy losses and recovered to the end on dollar weakness. The debt crisis remains the focus for the euro area and global markets and the euro’s weakness was no surprise considering the flow of downbeat signals for a deepening crisis and continued speculation for the spread of the agony to Italy and maybe then Spain. Finance chiefs have not reached an agreement on the means to salvage Greece to end the speculation and sooth volatile markets which are hammering bonds and taking yields to records which is increasing borrowing costs on other nations suffering or at the brinks of asking for help. The focus this week will remain on the developments in the debt crisis, especially as the debate expanded to the end of last week across the Atlantic with warnings to the United States for an eminent downgrade...

The EUR/USD on Monday is expected to start a very volatile week as investors start a new week with the debt crisis in mind and act upon the results from the EBA 2011 Stress Tests. The euro fluctuated heavily last week as the debt focus turned to the United States with the warning from the rating agencies for the US that their credit rating is at risk shall the government fail to resolve the deadlock on raising the debt ceiling. Monday is expected to me very volatile with one eye on the stress tests and the other on the decision from Congress as president Obama asked congressional leaders for a response within two days and that will clear if the debt-limit will be raised or not and accordingly will be reflected on the pair. In other news on Monday, Germany will start the week with the ZEW Survey for July at 09:00 GMT where the Current Situation Index is expected to slow to...

In the week ended July 15, the USD/CHF continued its drop for the second week as safe haven demand boosted the franc as a favorable refuge amid the mounting European debt crisis, due the proximity of the Swiss economy from the euro area, the Alpine country's largest market, where, on the other hand, the greenback was pushed down by possible downgrade by rating agencies. Standard and Poor's said it may lower the U.S. AAA rating within the coming 90 days on possible default, while the weak data from the US raised speculations there may be third round of stimulus to reinvigorate the economy. However, Bernanke said that there is no intention to launch QE3. Thus, since It is unlikely that the there would be further money printing, the dollar may gains some strength as its supply will be reduced after the end of the QE2 in June.   This week, the spotlight will be on housing data from the United States while...

Both economies lack fundamentals which suggest that there would be calm trading on the pair that is expected to follow the general trend in market as it will not able to get direction from data. In the week ended July 15, the dollar weakness pushed the pair down on threats that S&P may downgrade the U.S. standard AAA rating within the coming three months which worsened the outlook of the economy amid the slowdown seen from second quarter data. However, with lower possibility that there would be a third round of stimulus by the Fed, the dollar may gain some strength, especially as Bernanke referred that the economy will show progress in the second half of the current year. 

Both economies lack economic fundamentals which propose that there would be calm trading on the pair which is predicted to follow the general trend in market as it will not able to get direction from data. The dollar's weakness pushed the pair to the upside in the week ending July 15 as the dovish announcements by Standard and Poor's that the US economy may be prone to a downgrade within the coming three months made the outlook for the US economy bleak, amid the slowdown signaled in the second quarter as depicted by recent data.  Yet, the with the likelihood that there will be no extension to QE2 after its end in June, the dollar may advance against the pound, especially as the latest announcements by BoE policy makers show that there will be no soon tightening in monetary policy. In addition, the ease in inflation to 4.2% in June from 4.5% may encourage the BoE to keep lose monetary policy to...

The GBP/USD showed an incline in the week ended July 15 as the dollar was pushed down by threats from Standard and Poor's that the world's largest economy may be prone to a downgrade within the coming 90 days on possible default. Also, the dollar declined on speculations there may be a third-round stimulus by the Federal Reserve to boost the weakling recovery. However, by the end of last week, the dollar gained some ground after Bernanke revealed that launching QE3 is not possible unless the economy is in a strong need for it. The announcement is expected to give the dollar some strength as the supply will be reduced after the end of the 600-bond-purchase program in June. On the other hand, the pound was not much affected by the rise in jobless claims for the month of June and deceleration in inflation to 4.2% in the year ending June from the prior 4.5%. This week, the main focus will be on...

  The USD/CHF pair rose slightly on Wednesday, but the move was much smaller than the fall on Wednesday. The pair is most certainly in a downtrend for ages, and there is no reason to think it will change anytime soon. We like selling rallies in the USD/CHF pair.

  The GBP/USD fell on Thursday, but just barely. We still think this pair is bearish, and like the idea of selling rallies. However – we have no bearish candles to work with at the moment, so we will sit still. Look for weakness at higher levels before selling.