Pound/Euro exchange rate forecast Outlook

Monday 10th December 2012

Good morning. Sterling Euro rates hit a 5 week low last week, before staging a slight recovery on Thursday and Friday. As always for a Monday, today I will take a look at what has moved the rates in the last week, and take a view on what the forecast for Pound/Euro exchange rates moving forwards. 

In today's report:

• Pound/Euro hits 5 week low before recovering on Friday


• Effect of budget statement on exchange rates


• Weakness after ECB speech pulls the rate higher again


• Round up of the week’s other data that may affect rates

Sterling vs. Euro; 

With last week’s Autumn Statement and data releases you would have expected substantial movement on both sides of the channel, and some significant movement for the GBP/EUR cross. Unsurprisingly with the ever so unpredictable currency markets the pair remained range bound with a 1 week movement within 0.65%. This week’s report will look at what has affected the rates and why Sterling seems to have put a stop to the recent decline in rates and strengthening Euro. 

 

So what happened with rates last week?

Markets opened at €1.2331 last Monday with a raft of data from the Euro zone, UK and States; Sterling was seen as the best performer as with a Purchasing Managers Index (PMI) of 49.1 (predicted 48.0). Across the Chanel, the Euro zone scored 46.2 with Greece coming bottom of the pile at 41.8. Albeit positive news for the UK sentiment it didn’t actually affect the rates much as the GBP/EUR cross seemed to be awaiting the Autumn Statement from George Osborne on Wednesday with Interest rate and GDP figures out on Thursday. 

What effect did the Autumn statement have?

The Autumn Statement was announced Wednesday with changes in Income Tax, Tax Relief, Capital Spending and Welfare; with the most worrying aspect being that debt reduction targets were behind schedule. This lack of progress could indicate towards a future downgrade of Britain’s AAA rating which would hinder the UK’s ability to borrow at current levels reducing the value of the pound. This could also mean further Quantitative Easing for the UK, putting Sterling at risk somewhat. 

Euro weakness pushes the rate higher again

There was however some good news for the Pound/Euro rate on Thursday as President Mario Draghi said “economic weakness will persist next year”. The European Central Bank (ECB) cut its growth forecasts and the Euro weakened as the mid-market moved up 0.5% within the space of an hour; further weakness continued through Friday as the Bundesbank slashed the 2013 German Growth Forecast from 1.6% to 0.4%. The Frankfurt based central bank did say it would recover to 1.9% in 2014. 

So from the 5 week low for the GBP/EUR cross, rates could come back up due to the weakness in the Euro zone. Alternatively, we could also see further Quantitative Easing (QE) out of the UK as debt reduction targets are behind schedule, and more stimulus might be required to help and bolster growth in the UK, potentially weakening Sterling. So the tug of war between Sterling and Euro continues, with no clear consensus on which direction things will go in the coming weeks and months. 

So what does this mean if you are looking to fix a rate or make the most out of your funds? 

If you are looking to purchase Euro’s at the moment, yes the rates have come down from the August High of €1.2878, but we're still looking pretty good at the €1.24 level. If you need to buy Euros, it's important to remember that at the end of last year you would have seen the mid-market nearer to €1.13. 

A typical purchase of €200,000 would now cost you over £15,000 less! Certainly if I needed Euros, I'd be happy to trade above €1.24 and would not want to risk losing out more should the UK have it's credit rating downgraded.

If you are looking to sell Euro’s and you are wary of the problems in the Euro zone or you are in the process of signing for a property a Forward Contract is a great tool for securing your price ready for completion. 

A Forward Contract takes the volatility out of the market and means you know exactly where you stand once you have completed either selling or buying a property abroad. 

Another option for Euro sellers is a Stop Loss order. This allows you to continue taking any gains, but should the market move against you, you can place an order to trade at a certain level, limiting any potential loss should the market go against you. 

To find out how Forward contracts operate, along with all the market contracts available to you hy not send me a free enquiry now. I can provide a free consultation on all the options available to you. 

Click here to send a free enquiry now.

Weekly Economic Data that may affect exchange rates 

Monday – There is no UK data of note today. There is however a raft of data from the Eurozone including German Trade Balance and wholesale prices, Italian Industrial Output and GDP figures, Greek inflation data and Industrial production, in addition to an EU wide investor confidence Survey. 

Tuesday – Today we have UK House Price Balance from RICS. There is also a bond auction in the UK. In the Eurozone we have the German & EU wide ZEW survey on economic sentiment. Over in the United States we see Trade Balance numbers and wholesale inventories. Further afield, Australia has a consumer confidence survey. 

Wednesday – It’s all about unemployment in the UK today, as we will see the claimant count, unemployment levels and average earnings data. Later in the morning we have a speech by one of the BoE’s MPC members, so this could cause volatility for Sterling. In the Eurozone inflation is the order of the day, with the latest numbers from Germany and France. Over in the USA we will see Imports and Exports, an interest rate decision from the FED, the latest FOMC economic predictions and a budget statement. 

Thursday – Unusually quiet in the UK for a Thursday, with only a CBI industrial trends survey. In the Eurozone we will see inflation data for Spain and Italy, and also Greek unemployment and the ECB monthly report. There is also a European Council meeting which will discuss the debt crisis. In the states we have inflation, Retail Sales & Business inventories. 

Friday – We end the week with Services & Manufacturing PMI from Germany France and the whole EU. Over in the US we have a raft of inflation data in addition to Industrial production. There is nothing of note from the UK.
 

Getting the best exchange rates 

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you. 

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

Click here to send me a free enquiry

Source | Foreign Exchange Rate Forecasts | http://foremostcurrencygroup.blogspot.com/2012/12/poundeuro-exchange-rate-forecast-outlook.html

Pound/Euro exchange rate forecast outlook

Monday 19th November 2012
Good morning. Another Monday morning, so let's take a retrospective look at what happened with exchange rates this week. In today's post I'll also look at some of the tools you can use to protect against exchange rates moving against you.


In this week’s Report: 

• Bank of England warns of triple dip recession


• Greek bailout casts shadow over Eurozone 


• US Dollar strengthens 


• Round up of the week’s other data that may affect rates 

Sterling vs. Euro; 

After a crazy week on Sterling/Euro last week, many people will be looking at this week a little unsure as to how their own requirements will play out. Many thought sterling would start to stretch its legs against the single currency as it started the week by pushing up to a 6 week high on the cross by Tuesday. 

This bullish run for the pound was, as often is these days, more of a dash than a marathon as BoE Governor Mervyn King poured his customary glass of icy water over the hopes of strong UK economic growth. By predicting that growth will follow a long and winding road, and saying there could be scope for further QE as it is only assessed every month and not forecasted; King and his MPC colleagues moved the market down over a point in a single trading session on Wednesday after their inflation report. 

It should come as no surprise that the pound fell on the back of Kings’ speech, as it is certainly not the first time. It is also no coincidence either; throughout the financial crisis a tenet of BoE policy has been to keep the pound weak to aid UK exports to both boost economic growth and support the UK’s payments deficit. We will find out even more detail from the central bank when they release their minutes of the last meeting, on Wednesday.

The effect of the Eurozone crisis on Pound/Euro rates

What Mervyn King cannot control however, is the performance of the much maligned Euro zone economy. Figures at the end of last week showed that the 17 nation currency area returned to recession and gave the weekly graph a kick in its tail with the rate forced up on Friday, just not quite as high as it got to on Tuesday. 

One of the reasons the rate did not drive further and may not do so is the closeness and interdependent nature of the UK and Euro zone economies. Although the Euro zone appears to be teetering on the edge of disaster and the UK has posted good growth for the last quarter, the short-term forecasts still do not expect a sustained sterling rally. 

Every bail out of sovereign states strengthens the Euro as investors take it as a signal of solidity in the euro zone and the threat of a Spanish bailout, an economy which dwarfs Greece’s, would potentially see a large swing in the Euros favour. 

How to protect against rates moving against you

So going forward, if you are looking to buy Euros you should consider placing a Stop Loss order.This is where you can instruct us to purchase your currency should it drop below a pre-agreed level. 

For example, if you have set your budget at 1.22 you can then take a bit of a gamble on rates getting better, but have a safety net in place should rates fall. This is a good way to approach the current market, as it means you don’t lose out on all the recent gains and can still trade at a reasonable level. 

Click here to find our more about our rates and service.

Weekly Economic Data that may affect exchange rates 

Monday – Rightmove releases the latest UK House Prices this morning showing how that sector is performing. Eurozone data includes Italian Industrial Sales & EU wide construction output. We may also see news on Greeks latest bailout. Over in the United States we have House prices. 

Tuesday – There are no UK releases today. In the EU we have German inflation data and the EcoFin meeting. Further afield we have the latest minutes from the Reserve Bank of Australia. 

Wednesday – Quite an important day for the UK as we have the BoE minutes from the latest MPC meeting, which will show the discussions regarding Quantitative Easing. There are no EU releases of note. USA data today comprises of Jobless Claims, Mortgage Applications and a Consumer Sentiment survey. 

Thursday – Fairly quiet in the UK today with only a minor industrial trends survey being release. There is a host of inflation numbers from across Europe that could affect GBP/EUR rates however. There is also an EU consumer confidence survey. 

Friday – Mortgage approvals is the only notable release from the UK this morning. In the EU we have German GDP figures and a European Council meeting. There is nothing of note from the US.
 

Getting the best exchange rates 

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you. 

 It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

 Click here to send me a free enquiry

Source | Foreign Exchange Rate Forecasts | http://foremostcurrencygroup.blogspot.com/2012/11/poundeuro-exchange-rate-forecast-outlook.html

Pound/Euro & Pound/Dollar forecast outlook

Wednesday 29th September 2012
Good morning everybody. Today I’m posting a quick mid-week update on what’s been happening with exchange rates, and what may happen in the coming days and weeks. The Pound has recovered a little against the Euro, but is not likely to continue gaining much. Against the US Dollar the Pound remains at a 5 month high. Let’s have a more detailed look at each currency pair in turn.

Pound/Euro

Sterling has risen a little against the Euro into the mid €1.24’s following uncertainty about Spain. The concerns encouraged investors to take profit on some of the single currency's recent strong gains, and this helped the GBP/EUR rate recover slightly. Concerns are growing about whether and when Spain will seek a bailout, while a German investor survey highlighted concerns about Europe's largest economy.

The results of a financial stress test on Spain's banks are due to be published on 28 September, and will provide a basis for calculations as to which banks should receive European Union funds and how much they should get. This may weaken the Euro slightly, however I think events in the UK over the coming days will take precedent which I’ll look at in a moment. All in all I think the Pound/Euro rate may fall further due to the weak UK economy.

Pound/Dollar

The Sterling/Dollar rate has not moved much this week, but has risen slightly and remains near a 5 month high. It’s due to weakness in the US Dollar after the announcement of open ended Quantitative Easing in the USA.

If we don’t get any negative UK data in the coming days, I think GBP/USD could rise a little further. If you need US Dollars, while it may rise further this is no guarantee. Given rates are at their best for many months, if I needed USD I would place a Stop Loss order a rate a little below the current level. In this way I can continue to take advantage of any gains, but if things go the wrong way and move against me, I have a worst case scenario.

Find out more about Stop Loss Orders.

UK Data

Yesterday we saw that UK inflation dipped slightly in August despite a rise in oil and fuel costs. This kept alive prospects of the Bank of England injecting more cash into the economy later this year which might weaken the Pound.

Sterling has been quite well supported by better UK data in recent weeks, which has eased concerns about the growth outlook. The inflation data didn’t really have any effect on exchange rates, as it does not change the balance of expectations over whether the Bank of England will increase its asset-buying programme later this year.

Bank of England minutes – more QE on the cards?

I expect more QE in November, but of course today's BoE minutes may give us a cleared idea of what to expect. Today at 09:30am the minutes are published, and they will show what was discussed and differences of view during their last meeting on QE and interest rates.

Analysts suggested that the falling inflation rate eased concerns that the Bank's policy of pumping money into the economy to stimulate demand - known as quantitative easing (QE) - could lead to inflation picking up. The UK economy has contracted for the past three quarters and the Bank announced another £50bn of QE in July, taking the total amount of money it has injected into the economy under this programme to £375bn.

Some analysts suggested this total could rise again later this year, as the economy struggles to exit recession. If there is any hint of QE any time soon, the Pound may take a little dip against other currencies.

Are you looking for the best exchange rates?

Whether you need to buy or sell foreign currency, the rates I can source through my firm are significantly better than you can achieve at the bank, sometimes by as much as 5%. This represents a significant saving.

We can also give you a free consultation on what is happening with the markets, and run through the different options you have to protect you against unnecessary losses due to exchange rate fluctuations. Mention 'BLOG' when you get in touch.

Click here to send me a free no obligation enquiry.


I can then get in touch to discuss your requirements, explain how we can help and the mechanics of how our service works. I look forward to hearing from you.

Source | Foreign Exchange Rate Forecasts | http://foremostcurrencygroup.blogspot.com/2012/09/poundeuro-pounddollar-forecast-outlook.html

Pound/Euro forecast outlook October 2012

Monday 1st October 2012
Good morning everybody. It's the start of a new week and a new month. Today I'm going to have a look back over what has been happening with Pound/Euro rates in the last week. In short, we've seen a slight recovery in Pound/Euro rates, however during the next month there are some key decisions in both the UK and EU that could pull the rate in either direction. I will also touch on tools and strategies you can use to protect against the rate moving the wrong way.

In this week’s Report: 

• Sterling/Euro remains choppy due to debt crisis


• EU problems now spreading to Spain 


• What will October hold for GBP/EUR rates


• Round up of the week’s other data that may affect rates 

Sterling vs. Euro; 

After losing ground against the euro in recent weeks, the pound started last week strongly as worries over Spain once again took centre-stage. The pound subsequently rose to its highest level in two weeks against the euro over fears that Spain would become the latest member of the Eurozone to request a bailout. Renewed concerns over Greece and a weaker-than-expected German sentiment survey also weighed on the single currency.

The pound was also lifted by talk of a €3 billion injection of farm subsidy payments, which the Eurozone pays the UK once a year. All of the above resulted in Sterling/Euro rates making a slight recovery.
"The thing that is dominating market sentiment is when Spain will apply for a bailout. And, until that happens, it is weighing on both the euro and sterling, but especially the euro," said currency strategist Adam Myers of Credit Agricole.

The euro weakened further mid-week with Spanish ten year bond yields rising to 6 % on Wednesday. There was no let-up on the Euro either, with the Bank of Spain warning that gross domestic product for the Eurozone’s fourth largest economy would keep falling at a "significant rate" in the third quarter of 2012.

The rise in GBP/EUR rates continued, with the pound hitting a three week high against the euro on Thursday, helped by news Britain's economy contracted less than expected in the second quarter and as worries grew about Spain's debt and economic problems.

However, the trend was reversed on Friday as the euro gained around 0.5% against the pound over the course of the day after investors gave a cautious welcome to Spain's 2013 draft budget. This demonstrates how quickly trends can change.
Also last week, the troubled southern European nation of Spain unveiled a 2013 budget based on spending cuts that many saw as an effort to pre-empt the likely conditions of a bailout – which could be seen as a positive for the euro and other riskier currencies, as it would allow the European Central Bank to start buying the country's bonds to try and lower yields, effectively lowering borrowing costs.

So, what does all of this mean if you need to buy or sell euros in the near future? 

Is the rate likely to go up or down? With so much uncertainty in both the Eurozone and the UK, it is almost impossible to predict which way the markets will move. On the one hand, the talk of Quantitative Easing in the UK could potentially weigh heavily on the pound. QE effectively floods the market with Sterling, weakening the pound in the process and bringing exchange rates down.

On the other hand, with problems in Greece starting to resurface, and the fear Spain will soon be forced to seek a bailout, GBP/EUR rates could easily move in the opposite direction. When we had some negative news out of Greece back in October 2011, the euro lost 3 cents against the pound over the course of 10 days.
Regardless which way the markets will move in the coming weeks, there are tools at your disposal to help protect yourself from adverse movements and wild swings in rates of exchange.

Forward Contracts, Limit and Stop Loss orders are all handy tools to help make the most of your currency. Using these to take control of your currency requirement is a wise strategy to consider, as simply hoping the market will move in your direction can often prove very costly indeed.

To find out more about how you can limit your exposure to fluctuating exchange rates, send me a free no obligation enquiry today.

Weekly Economic Data that may affect exchange rates 

Monday – Starting in the UK, today we will see the latest House Prices from the Halifax, following by mortgage approval numbers and measures of manufacturing and consumer Credit. Over in the Eurozone there are Spanish inflation numbers, and manufacturing data for Italy and France. We also see Italian unemployment numbers. Across the pond we have US Manufacturing and Construction figures, in addition to a Speech by one of the FED’s FOMC members. 

Tuesday – Further UK House prices are released today, this time from the Nationwide. We also have construction data and the shop price index from the British Retail Consortium. In the Eurozone we have some inflation numbers. Further afield there is an interest rate decision in Australia, and Vehicle sales numbers from the United States. 

Wednesday – Fairly quiet in the UK today with only PMI data being released. In Europe we also have PMI in addition to the latest Retail Sales which is a good barometer of overall economic health. In the USA there are mortgage approval numbers and the latest unemployment measures. 

Thursday – As always for the first Thursday in the month we have the latest interest rate decisions for the UK and EU, in addition to possible change in the UK’s Quantitative Easing plan. It’s likely to be quite important as any changes could make a big difference to the GBP/EUR rate. In the USA we will see the latest FOMC minutes, in addition to the most recent Jobless Claims numbers. 

Friday – We end the week on a quiet note, with no releases for the UK. We will see some Factory order numbers from the Eurozone but they don’t usually have much of an impact on rates. In the USA we have various measures of unemployment, and as we touched on in the USD report, the all-important Non-Farm Payrolls.
 

Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.
 

Click here to send me a free enquiry

Source | Foreign Exchange Rate Forecasts | http://foremostcurrencygroup.blogspot.com/2012/09/poundeuro-forecast-outlook-october-2012.html

Pound/Euro forecast outlook 2012 Best Exchange Rates

Monday 22nd October 2012
Good morning. It was a torrid weak for Pound/Euro rates last week, with levels dropping to their lowest in 4 months. In this mornings report I'm going to have a look back at the reasons why rates have fallen, and what the rest of 2012 may have on store for exchange rates. If you need the best possible rates, click the link at the bottom to send me a free enquiry today.

In this week’s Report:

• Pound/Euro rates hit 4 month low 


• More Quantitative Easing on the way? 


• Better UK data pushes other crosses higher 


• Round up of the week’s other data that may affect rates 

Sterling vs. Euro; 

The pound hit a four month low against the Euro last week dropping to the high 1.22 mark. Trading opened last Monday morning around at 1.2407 and steadily dropped throughout the week closing on Friday afternoon at around 1.2296 as the graph below shows. This report aims to analyse the reasons why the pound has stooped to a four month low against the Euro and what the coming weeks may have in store for the GBP/EUR rate.

 
So what has happened last week to drop the value of the pound? One large factor was the mid week announcement by the Bank of England, which hinted that there would be another round of quantitative easing. The minutes of the last policy meeting released on Wednesday showed the BoE's monetary policy committee agreed that no further stimulus was needed. However the BoE’s policy maker, David Miles, in a statement to the Guardian newspaper, revealed that the bank needed a more expansionary monetary policy to steady inflation and boost sub-par economic growth. More quantitative easing is considered bad for the currency as it increases the supply, thus decreasing its value.

Later in the week, the European Union Summit which convened in Brussels gave some confidence to the Euro zone when it was agreed by the European Union leaders' that they would introduce a single European banking supervisor giving the European Central Bank overall responsibility for banking supervision. This will help lend stronger unity to the Euro zone and give investors stronger confidence in the Euro, thus giving it strength and making it more expensive to buy.

In the UK this week’s GDP figures, if worse than expected could also have a negative effect on the pound and could see rates drop further.

There was some good news for the UK last Friday when figures regarding the borrowing levels of the UK public sector saw that the net borrowing was £12.8bn in September, down from £13.5bn in the same month last year. The figure is lower than analysts had been expecting, while previous months' figures for this financial year were revised down by a total of £6.7bn.

Alongside this, a strong jobs report which shows that UK unemployment figures have fallen by 50,000 to 2.53 million in the three months up to the end of August also offers some optimism for the British economy and Sterling. While this helped the pound against other currencies, it was not enough to halt the decline in GBP/EUR rates due to the renewed confidence in the Eurozone.

With the on-going volatility in the Europe and mixed feelings regarding the British economy, the market will likely remain volatile in the coming weeks. If you need to buy or sell Euros then send me a free enquiry today, in order to limit your exposure to fluctuating exchange rates and to ultimately make the most of your currency.

Weekly Economic Data that may affect exchange rates 

Monday – A very quiet start to the week. In the UK we have the latest Nationwide Housing prices, which are a useful barometer for overall economic health. In the United States we see a FOMC member give a speech. There is no data from the Eurozone. 

Tuesday – Nothing from the UK today. In Europe we will see a business climate assessment from France. IN the United States there is some Manufacturing data, and Canada releases its latest retail sales. 

Wednesday – Again no data from the UK today. In Europe there is a raft of data releases from Germany: Manufacturing Data, Business Climate Assessment, and inflation data. The rest of today’s data is from the USA: New Home Sales, Mortgage Applications, Manufacturing Data and the latest Interest Rate decision from the Federal Reserve. 

Thursday – Probably the most important day for Sterling, as we have the latest GDP figures which will show if the economy is growing or shrinking. Europe has Retail Sales from Germany. In the United States we see Jobless Claims, Home Sales & Durable Goods Orders. 

 Friday – We end the week with Confidence measures from Germany and France, along with unemployment from Germany. In the United States we have the latest Gross Domestic Product numbers along with a consumer sentiment survey.
 

Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.

 It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

 Click here to send me a free enquiry

Source | Foreign Exchange Rate Forecasts | http://foremostcurrencygroup.blogspot.com/2012/10/poundeuro-forecast-outlook-2012-best.html

USD/JPY Weekly Outlook

Despite edging higher to 95.87 last week, USD/JPY failed to sustain gain there and retreated sharply on Friday. Initial outlook is neutral this week with focus on 94.01 support. As long as this support holds, rise from 91.73 is still in favor to continue and above 95.87 will target falling channel resistance at 96.61. However, break of 94.01 support will suggest that choppy recovery from 91.73 has completed and will flip bias to the downside for retesting this low first.

In the bigger picture, the stronger then expected rebound from 91.73 suggests that a short term bottom is at least in place and mixed up the outlook of USD/JPY. The three wave structure of the fall from 101.43 to 91.73 and the channeling property do argue that it's corrective in nature. But there won't be any confirmation of completion of such fall until a break of 98.87 resistance. On the other hand, it's still possible that decline from 101.43 is resuming whole down trend from 124.13. Hence while we'll favor upside as long as 93.01 support holds, we'll stay neutral until at least a break of the upper channel resistance at 96.96. Meanwhile, completion of rebound from 91.73 on failure to break through the channel resistance will in turn argue that whole fall from 101.43 is still in progress for at least another low below 91.73.

Source | Forex Update | http://adeel-forex-update.blogspot.com/2009/08/usdjpy-weekly-outlook.html

Forex Strategy Outlook: US Dollar May Shed Gains on December Effect

The US Dollar stands to shed previous gains as financial markets gear up for a quieter end to the trading year.

DailyFX Individual Currency Pair Conditions and Trading Strategy Bias

DailyFX+ System Trading Signals –Breakout Opportunities had a disappointing week, as sharp intraday breakouts did not result in extended moves. In fact the system is on one of its worst drawdowns in recent memory, and we have accordingly moved away from breakout-style trades. A drop in forex options market volatility expectations favors strategies that do well in slow-moving markets.

Thus we will shift our strategy bias towards Congestion Opportunities and adapt a counter-trend style of trading. As we discussed in this week’s US Dollar trading forecast, there is considerable risk that a stock market rally in the month of December could force a noteworthy USD correction.

It obviously serves to note that the exact opposite has happened through Monday’s trading session, but the USD continues to trade below October highs against the Euro (EURUSD lows), and we expect that a substantial breakdown is fairly unlikely.

Market Conditions:

Volatility expectations have fallen off sharply into what is typically a slower month of price action, pointing to reduced currency swings across the board. The US Dollar itself has previously benefited from elevated volatility and uncertainty surrounding financial markets; thus we might expect that the reduced vols might likewise influence the USD itself. We will position ourselves for slower market moves and reasonably steady trends into the year end.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To contact David, e-mail drodriguez@dailyfx.com

To be added to David’s e-mail distribution list for this and other reports, e-mail subject line “Distribution List” to drodriguez@dailyfx.com

Definitions

Volatility Percentile – The higher the number, the more likely we are to see strong movements in price. This number tells us where current implied volatility levels stand in relation to the past 90 days of trading. We have found that implied volatilities tend to remain very high or very low for extended periods of time. As such, it is helpful to know where the current implied volatility level stands in relation to its medium-term range.

Trend – This indicator measures trend intensity by telling us where price stands in relation to its 90 trading-day range. A very low number tells us that price is currently at or near monthly lows, while a higher number tells us that we are near the highs. A value at or near 50 percent tells us that we are at the middle of the currency pair’s monthly range.

Range High – 90-day closing high.

Range Low – 90-day closing low.

Last – Current market price.

Bias – Based on the above criteria, we assign the more likely profitable strategy for any given currency pair. A highly volatile currency pair (Volatility Percentile very high) suggests that we should look to use Breakout strategies. More moderate volatility levels and strong Trend values make Momentum trades more attractive, while the lowest Vol Percentile and Trend indicator figures make Range Trading the more attractive strategy.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES IS MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION.

OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice. The FXCM group will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance contained in the trading signals, or in any accompanying chart analyses.

DailyFX provides forex news on the economic reports and political events that influence the currency market.
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Source | Gold and Forex News | http://gold-forex-news.blogspot.com/2011/12/forex-strategy-outlook-us-dollar-may.html

Yen Gains to Six-Week High Versus Euro on Growth Outlook

The yen climbed to the strongest level in almost six weeks against the euro and gained versus all its most-traded counterparts as signs global growth is slowing underpinned demand for the relative safety of the currency.

The dollar rose versus all its major peers except the yen after South Korea unexpectedly lowered interest rates, while the euro slid below .22 for the first time since July 2010. The Bank of Japan (8301) refrained from expanding stimulus, adding to haven demand. China releases quarterly gross domestic product data today. Australia’s dollar slid after employers cut jobs.

“The Bank of Japan monetary-policy decision didn’t lead to any significant new expansion in the BOJ balance sheet or something the market would consider more aggressive quantitative easing,” Shahab Jalinoos, a Stamford, Connecticut-based senior currency strategist at UBS AG, said in a telephone interview. “The market was disappointed, and the yen clawed back some recent losses.”

The yen gained 0.9 percent to 96.72 per euro at 1:15 p.m. New York time after appreciating earlier to 96.43, the strongest level since June 1. Japan’s currency advanced 0.6 percent to 79.30 per dollar. The euro weakened 0.4 percent to .2196 after sliding to as low as .2167.

Japan’s currency rose versus the dollar as the extra yield investors receive for investing in two-year U.S. Treasuries versus comparable Japanese government bonds fell to the lowest in a month, limiting dollar-denominated assets’ appeal. The yield spread was 16 basis points, or 0.16 percentage point.

Source | Forex News Paper | http://forexnewspaper.blogspot.com/2012/07/yen-gains-to-six-week-high-versus-euro.html