Forex Weekly Outlook – December 29th 2008 – January 2nd

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This week, is still a holiday week. The year is changing Wednesday night. Januray 1st is a holiday, and the volume is usually low at this time of the year.

But this time, the flames in the middle east are looming over the forex traders. The violent conflict in Gaza, that broke out 36 hours ago might escalate. Hassan Nasrallah of the Shiite Hizballah organization in Lebanon, just made a speech that could build up more danger in the middle east. The conflict might not stay in the beaten Gaza strip, but spread around.

And what does all this have to do with Forex? Well, mideast conflicts mean higher oil prices, which in turn have a major influence on currency trading. As previously written, this might strengthen the Yen, Australian dollar, NZ dollar and Canadian dollar. Those are the currencies that are predicted to have the highest impact from the conflict.

Forex Quotes before the week starts

EUR/USD is at 1.4020, quite stable during the previous week. GBP/USD is at 1.4591 – this is a very low price. The pound lost ground during very thin trading (Chirstmas). It might bounce back. As they say in London: Mind the Gap!

The USD/JPY shows the dollar in the high areas of last week’s range. Apart from oil prices, this currency pair could be affected by the terrible Prelim Industrial Production which showed a fall of 8.1%!

In the Canadian scene, the USD/CAD is currently at 1.2208, a little bit higher than the tight range it was trading last week. The Swiss Franc, which is often looked upon in troubled times like these, is based stronger, at 1.0705. 

And down under, Australia’s strong economy has it’s dollar trading at 0.6871 (AUD/USD), ready for a push upwards. In New Zealand, the NZD/USD is stable at 0.5731.

Forex Data in the coming week

On Monday, there isn’t much data. The only interesting info comes from Switzerland: the KOF Economic Barometer will be published. This “Konjunkturbarometer” is a good sign of the direction of the direction of economy. It’s expected to show economic weakness.

On Tuesday, the Nationwide House Price Index (HPI) will be published in the UK. The Nationwide House Prices figure is important, especially when real estate prices in the UK skyrocketted and then plummeted – being a big part in the crisis. 

Two more interesting figures from Europe are the German Prelim CPI, an indicator of inflation, and the UBS Consumption Indicator from Switzerland, yet another composite economic indicator from the land of chocolate.

The most important figure from the US that day is the CB Consumer Confidence – a composite index from The Conference Board. 

Like last week, the Unemployment Claims in the US will be published one day earlier – on Wednesday. The market expects, and is used to high figures – 575K is the number.

After that, it’s New Year’s Eve! The forex market won’t operate on Thursday. 

When trading resumes on Friday, there are a few interesting figures. In the UK, Halifax HPI always shakes the market. The House Price Index by the Halifax Bank of Scotland is expected to fall 1.6% and might send the pound to a very bad start of the new year.

Also the Manufacturing PMI in the UK will be closely watched. The expectations are very poor for the Purchasing Managers’ Index. Together with the Halifax HPI, the British pound is in serious danger.

And to close the trading week, the US will provide the ISM Manufacturing PMI. The Institute for Supply Management’s Purchasing Managers’ Index is expected to see the 35.5 mark. Remember that any figure under 50 means contraction. 35.5 is really very low, but the expectations are reasonable: in all the previous months, this figure was always below expectations.

And for those of you who want to spend the first weekend of the New Year busy with Forex, there’s a speech by Federal Reserve Governor Randall Kroszner. He might indicate the direction of the economic policy, although the tool of cutting interest rates was used to its full extent.

Happy New Year!

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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