The dollar retreated in the past week on most fronts. Was it a temporary move? The upcoming week provides lots of American events, with Ben Bernanke’s rate decision being the highlight. Here’s an outlook for this week’s market-moving events.

In the forex industry, the proposed regulations by the CFTC are again in the news, as their decision is getting close. Also Introducing Brokers joined the fight against these proposals. We’ll probably hear more about it in the upcoming week. OK, let’s look at the market:

1. American TIC Long-Term Purchases: Published on Monday at 13:00 GMT. Treasury International Capital Long Term Purchases represent the difference between foreign investments in the US and US investments abroad, and actually shows foreign confidence in the US economy. The figure leaped to 126 billion two months ago, but was then cut to half. This time, it’s expected to stand at 38 billion.
2. German ZEW Economic Sentiment: Published on Tuesday at 10:00 GMT. This is a highly regarded survey that is a good indicator of the economy. It has fallen in the past months, hurting the Euro each time. A further drop from 45.1 to 43.3 points is expected this time.
3. Housing figures: Published on Tuesday at 12:30 GMT. The housing sector had a big “contribution” to the global crisis and is now showing a small recovery. Building Permits dropped to 620K last time, and are now expected to tick down to 619K. Also note a very related figure – Housing Starts, published at the same time. They’re expected to drop from 590K to 570K.
4. American rate decision: Published on Tuesday at 18:15 GMT. Ben Bernanke already made his move out of the usual cycle – the “mini rate hike” of the discount rate shocked the markets and signaled that the Federal Reserve will probably be more aggressive than other central banks. Will they finally drop the wording “an extended period of time” for the interest rate? As usual, the FOMC Statement will be in the limelight, as the Federal Funds Rate isn’t expected to move. Note that the statement can be very confusing.
5. Japanese rate decision: Published on Wednesday morning. Also in Japan, no change is expected in the rock bottomOvernight Call Rate, standing at 0.1%. The statement accompanying the decision will be carefully read, and the tone voiced at the press conference has the utmost importance for the Japanese yen.
6. British employment data: Published on Wednesday at 9:30 GMT. The number of unemployed Brits rose last month after two good months, as reflected in the Claimant Count Change. Another rise, of 8700 people, is expected this time. The unemployment rate, which relates to the previous month, is expected to follow the same line and rise from 7.8% to 7.9%.
7. American PPI: Published on Wednesday at 12:30 GMT. The first inflation figure of the week is about producer prices, and serves a warm up for the consumer prices. After a jump of 1.4% last month, a drop of 0.2% is predicted this time. Note that Core PPI is expected to edge up by 0.1%.
8. American CPI: Published on Thursday at 12:30 GMT. A rise in consumer prices is the key for future rate hikes. Last month the regular small changes: a rise of 0.2% in CPI and a drop of 0.1% in Core CPI. There aren’t any expectations this time – both indicators are expected to rise by 0.1%. This will be a very shaky time in the markets, as jobless claims are released at the same time.
9. American Unemployment Claims: Published on Thursday at 12:30 GMT. After jumping to almost 500K, jobless claims are slowly dropping, reaching 462K last week. Another drop to 456K is predicted now. A drop below 430K will boost the dollar. The rise in jobless claims was clearly reflected in the recent Non-Farm Payrolls.
10. American Philly Fed Manufacturing Index: Published on Thursday at 14:00 GMT. This important survey has been positive in the past 7 months, indicating improving economic conditions. After exceeding expectations and reaching 17.6, it’s predicted to soften to 17.3 points this time.

That’s it for the major events this week. I’ll later publish specific currency outlooks.

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Here are my favorite reads for this weekend. I take them from the sites I follow on a regular basis. The articles are in a variety of topics:

• Larry Greenberg makes an in-depth comparison of the American and Canadian job markets and how it impacts. We’ve just seen USD/CAD getting closer to parity on great Canadian jobs.
• Adam Kritzer announces the return of the Yen carry trade, following its recent weakness.
• Kathy Lien sees an upside for the yen, and discusses other currencies in a TV interview.
• Macro Man plays the game of 20 questions, some are critical for forex.
• Casey Stubbs highlights a petition to stop the CFTC, especially the 10:1 leverage proposal. We’ve seen introducing brokers join the fight this week.
• Jay Norris discusses which times are bad for trading – when not to trade.
• Michael Greenberg reports about a new phenomenon on in forex web: sites for comparing broker spreads. He also shares his interesting opinion.

That’s it. Have a great weekend!

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.

Canadian employment data was slightly better than expected. This was the hay that broke the camel’s back – after a week of struggle, USD/CAD finally broke 1.02 and heads down to parity.

Canada’s employment figures surprised analysts for a second month in a row. Contrary to last month’s huge surprise, the numbers were only slightly better this time. Employment Change showed a gain of 20,900 jobs, better than 17,500 that was predicted. Only a small change.

The more significant release was the Unemployment Rate, that fell once again – from 8.3% to 8.2%, the lowest since April 2009. This continues the steady advance of the economy. Let’s see the impact on forex:

USD/CAD Breakdown

USD/CAD reacted with a fall off the cliff – it fell from 1.0215 to 1.0165 in a sharp and instant move. The initial reaction will probably be followed by a small correction, and then a continued move downwards.

USD/CAD is now at the lowest levels since July 2008. The 1.02 support line was the 2009 low (in October) and also approached twice in 2010: in mid January and during the last two weeks. During this week, USD/CAD gradually went down, approaching the line and retreating time after time.

The employment numbers took it below this line. No further support lines exist before the ultimate one: USD/CAD parity. The pair was around the parity line from September 2007 to July 2008, reaching the lowest level, 0.9056 in a swing move on November 7th, 2007.

Parity supplies huge support. If the pair breaks it, the next level is 0.98. If the current break under 1.02 isn’t confirmed, the next resistance line if 1.04, which worked as both support and resistance lines for a very long time.

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Two American figures will be in the limelight todya: retail sales and consumer sentiment. In addition, we have employment figures from Canada and other events. Let’s see what’s up for today.

Up to now, this week saw tight trading, especially in the major pairs. Only the Aussie stood out with a break, enjoying good employment figures among other reasons to rise. OK, let’s start the review:

German wholesales prices are released in the morning. They’re expected to rise by 0.6%, half of last month’s scale. Later in Europe, Industrial Production is expected to rise by 0.8% after falling last month.

Apart from indicators, two speeches are due in Europe: Bundesbank president Axel Weber will speak in Bonn and ECB president Jean-Claude Trichet will speak in Stanford near the end of the day.

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

In Britain, we also have a speech: MPC member Spencer Dale can shake the Pound when he makes a public appearance. For the Pound’s levels, read the GBP/USD forecast.

The Canadian dollar will have a chance to break below 1.02 when the employment figures are released. Canada’s Employment Change is predicted to rise moderately by 17,500 jobs. The Unemployment Rate is expected to remain unchanged at 8.3%.

These important figures come after a tight week, in which USD/CAD traded lower, but couldn’t break below 1.02. For more, read the USD/CAD forecast.

In the US, Retail Sales are expected to drop by 0.1% after a nice rise of 0.5% last month. Core retail sales, no less important, are expected to rise by 0.1%. This important figure will shake the markets, but there’s another one released soon afterwards.

Consumer sentiment is expected to edge up from 73.6 to 74. This is the initial release by the University of Michigan. This figure is released near the close of the markets, so it will move them strongly.

Also in the US: Business Inventories are expected to rise by 0.2% after dropping by the same scale last month. Treasury secretary Timothy Geithner will speak at a conference in Washington, and can also shake the dollar.

That’s it for today. Happy forex trading!

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.

The proposed regulation by the CFTC isn’t only about leverage. It consists of regulations that are a big blow to brokers and to introducing brokers. A group of IBs has joined forces to challenge the CFTC in a new site: ibcoalition.org.

All the founding members of this coalition are members of the NFA. Regarding permits, they ask to get the same treatment as IB operators in futures or guarantees. They also ask the CFTC to study forex market and to rethink the 10:1 leverage proposal.

Apart from showing their stand, the members also call traders to send their comments to the CFTC. This coalition joins the Forex Dealer Coalition (FXDC) and the Traders Alliance. Also US congressmen “grilled” the CFTC for these proposed regulations.

Their announcement contains more data about the members and their goals:

Leading Forex Introducing Brokers form coalition to challenge proposed CFTC rulings

Forms IBcoalition.org and proposes fair industry-based alternatives to regulations

Boston, MA – March 11, 2010 – Today, a group of leading Forex Introducing Brokers (IBs) announced the formation of www.ibcoalition.org, an organization comprised of independent, regulated Forex Introducing Brokers who have joined together to challenge the proposed CFTC rules titled “Regulation of Off-Exchange Retail Foreign Exchange Transactions and Intermediaries,” 75 FR 3282 (Jan. 20, 2010).

The main mission of the IB coalition is to suggest significant changes to the proposed CFTC regulations. The IBs currently participating in www.ibcoalition.org are ATC Brokers (NFA Member #0358522), BackBay FX (NFA Member #0388617), Currensee (NFA Member #0403251), Fast Trading Services LLC (NFA Member #0342002), Forex On The Go, LLC (NFA Member #409594) and Gecko Financial Services, Inc. (NFA Member #0402367).

“We formed IBcoalition.org to come together as regulated IB businesses to oppose the proposed CFTC regulations that, if passed, will significantly change our businesses,” said Dave Lemont CEO Currensee.   “Those of us in the IB Coalition are, we believe, the types of firms the Commission should be supporting as alternatives to the fraudulent unregistered solicitors the Commission has spent so much time and effort shutting down over the years. Unfortunately, though, in its zeal to curtail fraudulent solicitation practices, the Commission is proposing a set of rules that needlessly restrict legitimate Forex activities and will, if adopted, seriously undermine our ability to operate successfully as regulated alternatives. We welcome the opportunity to meet with the Commission and present our comments directly.”

The pending CFTC rulings propose that a Forex IB must enter into a guarantee agreement with a CFTC-regulated Forex Dealer Member (FDM), along with a requirement that the Forex IB may be a party to only one guarantee agreement at a time. By asking IBs to enter into an exclusive arrangement with only one FDM, IBs are limited in where they can refer customers, which creates a conflict of interest and is not aligned with the best interest of the customer. Independent IBs bring a valuable service to the retail trader. By carefully matching a trader’s style and needs with the right broker as it relates to spreads, trading platforms and customer service offerings, independent IBs help retail customers make the decision that’s right for them. Furthermore, these proposed rule changes are contradictory to the current CFTC policy in place for the on-exchange futures market, which allows independent IBs to introduce business to multiple Futures Commission Merchants thus enabling IBs to do what is in the best interest of their clients. The IB Coalition views the CFTC proposed rules as needlessly restricting legitimate Forex activities and capable of pushing Forex business off-shore, creating new opportunities for non-regulated or fraudulent businesses who don’t care about U.S. regulatory requirements.

The IB Coalition recently submitted a 10-page letter to the CFTC and, among other points, suggested the following changes to the proposed rulings

• First, the IB Coalition urged the CFTC to revise the proposed rules to permit a Forex IB to operate either as an independent IB subject to the same minimum capital requirements that apply to a futures IB or as a guaranteed IB.
• Second, the IB Coalition asked the CFTC to undertake a study of the retail Forex markets to assure that the rules it ultimately adopts are based on a solid factual understanding of the markets and are tailored accordingly.
• Third, the IB Coalition proposed the CFTC defer to NFA to set appropriate leverage restrictions as it relates to the proposed 10:1 leverage. An onerous leverage restriction, such as this, creates opportunities for unregistered fraudulent schemes to exploit U.S. customers is contrary to the public interest.

“As an IB, our job is to be objective and help the trader make the best decision about which broker best suits their needs,” says Stephen Leahy, President Back Bay FX. “The proposed CFTC rulings compromise the objectivity we are able to bring to our clients and completely disregards the best interest of the customer. Joining forces with the other IBs participating in IBcoalition.org is an important step in articulating our concerns both from a business and consumer-protection perspective. We welcome other IBs to join us in opposing the CFTC proposed rulings as it is currently written.”

The IB Coalition urges traders to make their voice heard by submitting their comments at www.ibcoalition.org.

About IBcoalition.org
IBcoalition.org is an organization comprised of independent, regulated Forex Introducing Brokers who have joined together to challenge the proposed CFTC rules titled “Regulation of Off-Exchange Retail Foreign Exchange Transactions and Intermediaries,” 75 FR 3282 (Jan. 20, 2010). The main mission of the IB coalition is to suggest significant changes to the proposed CFTC regulations and a number of Introducing Brokers have already joined the group. To get more information or find out how to join, please visit www.ibcoalition.org.

Despite unexciting job figures from Australia, the Aussie held the higher range it broke to earlier this week. The strength continues. Here’s an update on AUD/USD.

Only 200 jobs were gained in Australia in the month of February. This fell short of expectations that stood on 15,700 jobs. Australia’s Unemployment Rate remained unchanged at 5.3%, exactly as expected.

Aussie traders got used to positive surprises: in the past four months – the gain in jobs exceeded expectations each time, and the unemployment rate never disappointed and was usually better than expected. So this breather is a relative disappointment.

AUD/USD Reacion

The initial reaction was a lower Aussie: AUD/USD dropped towards 0.91, just above the 0.9090 support line. Earlier this week, AUD/USD finally broke above 0.9090, a long standing resistance line.

The strength of the Aussie kept it from falling back down. The recovery was quick, and withing hours, AUD/USD returned to 0.9160, close to the 0.9170 resistance line. The Aussie breached this line for a short while yesterday reaching 0.9193, but this happened for a vey short time.

If AUD/USD provides a convincing breach of this level, 0.9170, the next hurdle is a big one – 0.9327. This line sent the Aussie down many times in the past, and is a very strong resistance line.

Looking down below 0.9090, the important line is 0.8850. Only risk aversive trading can send the Aussie back down there. The trend is optimistic at the moment, so the high yielding, “risky” currencies such as the Aussie have room for more gains.

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The calendar is crowded today with major releases: Australian jobs, a rate decision in Switzerland and important figures in the US are the highlights today. Let’s see what’s up.

As seen in the Non-Farm Payrolls and also beforehand, the commodity currencies continue to show strength while the Euro and the Pound are weak. This will probably continue, although the Euro seems to be stabilizing.

After making a move upwards, Australia provides a strong start for the day. MI Inflation Expectations provide a warm up hinting about inflation. The main course is the employment data: Australia’s Employment Change is expected to show a gain of 15.3K jobs and the Unemployment Rate is expected to remain stable at 5.3%.

Note that these figures were better than expected for four straight months. The expectations were modest, like this time, and the result was better. Will it happen again? For the Aussie’s technical levels, check out the AUD/USD forecast.

In Europe, France begins the day with the release of the final Non-Farm Payrolls for Q4. The drop of 0.4% is expected to be confirmed. Later in Europe, the ECB Monthly Bulletin will provide an indicator about the whole region.

The Euro’s technical situation is stabilizing. Will it rise? Check out more on the Euro in the EUR/USD forecast, and in Casey Stubbs’ latest analysis.

British Consumer Inflation Expectations are expected to rise, as the inflation rises in Britain. The Pound is sliding down once again, after another credit warning from Fitch.

The Pound’s greater limits remain 1.4770 and 1.5350. It sticks to this range at the moment. Read more in the GBP/USD forecast.

In Switzerland, the central bank will announce a new interest rate. The SNB will probably leave the Libor Rate unchanged at 0.25%. The wording of the SNB Monetary Policy Assessment will shake the Swissy for sure. What’s never sure is the actions of the bank. At the same time last year, they intervened immediately after the rate decision. While these interventions are short-lived, they can throw traders out of their positions.

Moving to North America, Canada’s Trade Balance is expected to shift from a deficit to a surplus of 0.4 billion. The American Trade Balance will be released at the same time and will probably show the same deficit as last month – 40.2 billion.

At the same time, 13:30 GMT, American Unemployment Claims are released. They’re expected to drop from 469K to 453K, still within the same range as in recent weeks. This is the first jobless claims release after the NFP, and it will probably move the markets.

Canadian events aren’t over: the NHPI (New Housing Price Index) is predicted to rise by 0.5%, similar to the previous month. Later in Canada, BOC governor Mark Carney will make a public appearance and can also move the loonie.

USD/CAD is struggling to break below 1.02. This 2009 low is a tough and critical spot. For more on the Canadian dollar, read the USD/CAD forecast.

In New Zealand, the day after the rate decision brings another significant release: retail sales. After remaining unchanged last month, they’re expected to rise by 0.3% this time.

That’s it for today. Happy forex trading!

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EUR/USD is trading in a range for over a month. While the long term trend is bearish, some bullish hints can be found within this range.

Since February 4th, EUR/USD plunged into a range between 1.3423 to 1.3850. At the beginning the trend in the hourly charts was negative. On February 19th, the bottom line of 1.3423 was approached for the first time. And later, the peak was lower than previous peaks – 1.3690 on February 23rd.

EUR/USD hourly trends. Click to enlarge

This narrow range of 1.3423 to 1.3690 continued until March 4th. And then, EUR/USD approached 1.3750 and fell only to 1.3530, far enough from the bottom.

In the chart above, you can see the trend changing from bearish to bullish. But this is a narrow time frame. Since the peak of 1.5144 in December, the long term trend of EUR/USD is down.

Fundamentals support the long term downtrend: Europe’s recovery is slower than expected, the unemployment rate is high and the debt problems from all over the continent continue to weigh on the Euro.

The levels to watch continue to be 1.3423 and 1.3850. A break of these levels will indicate the long term direction. In the meantime, range trading, which characterizes this pair, will be further seen.

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After two light days, today’s calendar is quite busy: a rate decision in New Zealand and the Federal Budget Balance are the highlights. Let’s see what’s awaiting us toady.

We’ve already see one hesitant break of the Australian dollar and we’ve seen the USD/CAD edge down, still not breaking 1.02. In these currencies, the action will probably be seen after they post employment data. OK, let’s start the review:

Australia’s Home Loans are predicted to rise by 2.1% after a sharp drop of 5.5%. This should help the Aussie make progress. For more on this strong currency, read the AUD/USD forecast.

German Final CPI will start a bunch of European events. It’s predicted to confirm the 0.2% rise that was initially reported. French Industrial Production is expected to rise by 0.3%, after dipping by 0.1% last month. The German figure disappointed earlier in this week.

Two speeches are due in Europe: Bundesbank president Axel Weber, possibly the next president of the ECB, will speak in Dublin and will probably move the Euro. The current ECB president, Jean-Claude Trichet, will later talk in the inauguration ceremony of “The Language of Money” exhibition, in Frankfurt and will also have his share of moving the currency.

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

In Britain, Manufacturing Production is expected to rise by 0.3%, much less than last month’s 0.9% rise. This will probably cause high volatility. Later in Britain, the NIESR GDP estimate will be released. It showed a rise of 0.4% in the three months ending in January. Will it continue to be optimistic?

More on the Pound’s technical levels can be found in the GBP/USD forecast.

In the US, the Federal Budget Balance is expected to show a huge deficit: 204 billion. This is about 5 times last month’s figure. It will probably weigh on the dollar.

New Zealand’s interest rate will probably remain at 2.5%. Alan Bollard, head of the RBNZ, isn’t expected to raise the interest rate, at least not this time. Will he do it sooner than others? That’s the big question that awaits kiwi traders. We’ll probably get information in the RBNZ Rate Statement and press conference.

Kathy Lien sees a short opportunity in AUD/NZD and generally sees a strong NZD/USD.

Japanese Final GDP closes the day. A downside revision from 1.1% to 1% is predicted. The Japanese yen lost some ground last week.

That’s it for today. Happy forex trading!

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In the weekly video outlook on Forex TV, I spoke with Julie Sinah about range trading currencies, the economic indicators and expected breakouts. Enjoy!

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