<span style="text-decoration: underline;"><strong>1. INTRODUCTION:</strong></span>

I'm back....

Three weeks of flu has really had me up the wall.

Despite being somewhat out of it, I have been watching the markets from a distance, observing and towards the end of this past week I have been back to 50% trading. Including our vacation in Europe and Hong Kong it has been literally four weeks away from full-time trading. What I have noticed though is that for the most part in my absence the Fx markets have been trading in fairly tight ranges and it is only very, very recently that it looks like we are finally ready to break free and see a little bit of volatility.

Even the USD/JPY, which had been on the tear is now in a range as it appears that old Shinzo has decided that the run to 93.00 is about right.....and fair.....but fair for who? Not to be too cynical but his latest comments followed the recent G7 and G20 meetings or  "Cheese and Wine" parties.

Ah, the denial of currency wars in the G7 is about the same as Ahmadinejad's denial of the holocaust. Unbelievable, I watched George Osborne, UK Chancellor of the Exchequer, squirming on TV under scrutiny over the "wishy-washy" press release. That certainly cheered me up...I love watching politicians on the ropes trying to defend the indefensible and deny the undeniable....oh...happy days!!

Finally, the Friday afternoon rating agencies announcement this time went to Moody's who downgraded the UK debt rating to Aa1 from AAA.....
The ramifications of this will be hugely different from the US and French downgrades. London relies on the financial markets so much and is such a huge percentage within the FTSE, this move will have the effect of creating big waves. Yesterday at the end of the day literally the last gasp of the Fx market, the GBP/USD sold off 75 pips in 30 minutes. I do not want to appear to be a drama queen but we may test 1.5000 in the London session (overnight Sunday tomorrow) if the reaction in Europe is really negative. Then again many would argue that the markets will simply shrug this news off as the rating agencies count for nothing, and many people will argue that that this downgrade was to a large effect already priced in given the huge move lower in the GBP/USD over the past 10 days. We may see what is called "The Revenge Bounce", who knows, and, if we do, how far could cable pull back....1.5400.....who knows? We will wait and see the reaction....no sleep for me tomorrow!!

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<span style="text-decoration: underline;"><strong>2. THE VIEW FROM MY TRADING DESK:</strong></span>
<p style="text-align: center;"><strong>ALL EYES ON THE EURO....FUNDAMENTALS DO MATTER</strong></p>
Over the past twelve months I have been consistently blogging about how much the Eurozone economies, in fact, the Eurozone  are down the toilet.

The constant non-productive summits (wine tastings to you and I), the totally ineffective Eurozone treaties and the numpty politicians when added together provide what can only be described as the biggest recipe for disaster that would even have world acclaimed best chef ever, Gordon Ramsey running for new expletives other than the "F" word. But his comments right now if  he were at a Eurozone summit would be along the lines of: -
<p style="padding-left: 150px;"><em>What the f**k was that comment Draghi made about the OMT all about, we do not f**king understand that f**king man?</em>
<em> Who the f**k do they think they f**king are in the UK, tell that Cameron to f**k off!</em>
<em> Are they f**king smoking something in f**king Greece?</em>
<em> What is all the F**cking worry over the f**king GDP about anyway, its the f**king fact no one has a f**king job is what they should f**king  focus on?</em>
<em> Who's f**king idea was it to have a f**king single f**king currency anyhow...f**king idiots.</em>
<em> Pass me the f**king wine...I need another f**king drink..f**king plonkers.</em></p>
You get the idea...

Fundamentals always matter, it not just technicals. Eventually  the chickens come home to roost and the all ducks line up. Let's look at the Eurozone right now, at a macro level (this will not be too detailed for obvious reasons).

<strong>A - GERMANY: The power house, the work horse, the leader of the Eurozone and dominant economy. (The largest economy in the Eurozone)</strong>

This weeks, February "Flash Manufacturing PMi" came is at  50.1 versus the consensus of  50.4 ...whilst over the contracting line of 50...still a miss.

The previous monthly results from August through to December  2012 were as follows:

January 2013         Actual 48.8    Forecast  47.1  Beat
December 2012     Actual 46.3    Forecast 47.1    Miss
November  2012    Actual 48.8   Forecast  45.9   Beat
October 2012         Actual  45.7   Forecast  48.1   Miss
<em id="__mceDel">September 2012    Actual   47.3   Forecast  45.4   Beat
</em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel">August 2012          Actual   45.1    Forecast  43.5   Beat   (The Source of these statistics was the Forex Factory).</em>

I am only citing Manufacturing PMi but this is a great benchmark indicator on raw material purchases, current market conditions and it is a great indicator of a country's economic health. It is not exciting reading, it shows that that the German economy is continuing to struggle. Remember the German government stated that Germany had turned the corner following misses in February, March, April, May, June and July 2012. It is NOT that simple or straightforward as the numbers show.

Bear in mind that in the final quarter of 2012 the German economy shrank by 0.6%.

In addition, remember Germany also goes to the polls later this year.

The fundamentals are not winning anyone over.

<strong>B - FRANCE: Main supplier of cheese and wine to the Eurozone summits (Second largest economy in the Eurozone).</strong>

PMi in France is a bloody disaster. Out of the past six months it has beat only  once in November 2012.

<em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel">February 2013        Actual 43.6    Forecast 43.9    Miss
</em><em id="__mceDel"></em><em id="__mceDel">January 2013         Actual 42.9    Forecast  44.9   Miss
</em><em id="__mceDel"></em><em id="__mceDel">December 2012     Actual 42.9   Forecast 44.9    Miss
</em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel">November  2012    Actual 44.7   Forecast  44.1   Beat
</em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel">October 2012         Actual  43.5   Forecast  43.9   Miss
</em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel">September 2012    Actual   42.6   Forecast  46.5   Miss
</em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel"></em><em id="__mceDel">August 2012          Actual   46.2    Forecast  43.7   Beat   (The Source of these statistics was the Forex Factory)</em>  

Not pleasant reading and considering Sarkozy was booted out for Hollande........it's shown that the promises supplied to the electorate to use for voting preferences were maybe not that straightforward an option as first thought. Given that France is the second largest economy in the Eurozone it is having a difficult time.

The risk of social unrest (riots to you and me) in France are massive. The public deficit is set to be even worse than that of 2012. In 2013 it is now predicted to come in at 3.7% of output and in 2014 even higher at 3.9%.  France has been due in 2013 to be back within the EU's deficit ceiling of 3.0% of output...that ship has long sailed. In fact Hollande is at Charles de Gaulle airport expecting his boat to miraculously dock at Terminal 2F. The gap leaves Hollands looking to Brussels for favours. It should be interesting, he'll need more than a few cases of Chateauneuf du Pape and Corton Charlemagne  promised to the next summit to win over the tough standing Angela Merkel....mind you God love her she has elections to contend with later this year. If France flatlines this year on growth Hollande will be in Reims and Ay on the Champagne having parties...but not the Berlusconi type....but your never know......

<strong>C - ITALY: Home of the party animal Silvio Berlusconi, my favourite wines Sassicia and Brunello di Montalcino (The third largest economy in the Eurozone).</strong>

2013 the Italian economy is set to shrink by 1.0%

This weekend we enter an Italian election, with the outcome far from certain. Boring incumbant, Mario Monti looks like he is never going to win a majority and may not even have the largest party to try and form a coalition with. He is up against the Party Animal and Toga man (lock up your daughters) Berlusconi that has promised to get out  of all this austerity crap and get back to the good old days.

Then you have a comedian turned politician...there is a joke in there somewhere, most politicians are jokers and comedians to me at the best of times. The "Five Star Movement" headed by Beppe Grillo, who promises no coalitions and unity to get back to the good old days without the EU.

Finally, you have Bersani...can't find anything humorous, or any dirt about him, he can't be Italian..he must be Finnish or something.

Italian politics at the forefront this weekend. The result will be so  complicated if no outright winner emerges it may take up to two weeks to sort matters out.

Unemployment and social unrest in Italy continues to rise, hence the fact "whackos" are running for Prime Minister. In December 2012 the rate of unemployment in Italy rose to 11.2%, it represents a month on month rise from January 2011 from a base of 8.1%. Youth unemployment (18-24 year olds) is at 36.6%.

No growth, increasing unemployment......get the message.

<strong>D - SPAIN: Supplier of superior corks to the French wine industry (keeping lower grade for their domestic market) best Olive Oil in Europe and best national football team in the world (The fourth largest economy in the Eurozone).</strong>

Having lived in Spain for six years I love the place, the climate is magnificent, although.......infrastructure is a nightmare.

Economically, scandals that even have the French opening their eyes wide.......this year the EU's Ollie Rehn stating that the Spanish economy will shrink by 1.4%. Rajoy, the Spanish Prime Minister has not uttered much recently due to the number of brown paper envelopes in his office, he is having difficulty locating his telephone!!

Unemployment, in particular youth unemployment at 55%....overall a record 26% of people actively looking for work cannot find jobs. These are only the official numbers there are so many illegals living in Spain these numbers do NOT reflect the true state of play.

The housing market is a complete disaster. So many second and third homes purchased in Spain are up for sale at almost any cost as people try to realise capital. Mortgage arrears out of control, the banking sector in denial.

Regional debt spiralling out of control.

Welfare structure cut when more and more people need help and government assistance.

Apart from the above, Spain is in great shape.

<strong>E - SOME OF THE PERIPHERY COUNTRIES:  Ireland, Greece, Portugal and Cyprus.</strong>

<strong>IRELAND:</strong> The Golden Boy of austerity. Housing still not at the bottom yet. The 100% guarantee of Irish bank deposits soon to be removed completely from personal savings. Unemployment still an issue...........amongst other economic issues.

<strong>GREECE:</strong>  Youth unemployment now at 60%. The National rate is at 27% or above. The bailout kings of Europe. Another one again soon as the government fails with every attempt to get finances under control when it has minus growth and will have through 2013 and 2014. I read somewhere almost 1,000 Greeks were losing their jobs between November 2011 and November 2012...stagerring.

<strong>PORTUGAL:</strong> Austerity hitting hard and although the government state that they will not require more EU funding...many, many economists think otherwise and feel it just a matter of time before Frankfurt and Brussels are alerted.

<strong>CYPRUS:</strong> Now at the table sorting out a bailout.

It is a false reality that the Eurozone, along with other countries have been living recently.

Good economic or bad economic data...it makes no difference the answer is to buy shares, the central banks are printing money like crazy to keep the equity markets inflated. If the greed of the markets is satisfied when the economics can be so poor,it makes little sense to the man on the street fighting to make ends meet. The Forex markets follow this lead in equities most of the time. As traders we examine the technicals on the charts and make trades. Behind all of this, the fundamentals are placed more often than not in a secondary role because technicals do matter probably a bit more to the markets. Every now and then a dose of reality strikes home and someone says WTF are we doing here...forget about the technicals........This economy is down the crapper!!

In my opinion, we are there now with the Eurozone.

I think a break below 1.3140 in the EUR/USD will open up a run at 1.3000. A break through there and I really do think that because nothing has been tackled by the Eurozone politicians effectively, admittedly Super Mario Draghi has done his bit but even he will be somewhat limited, we will see a test of 1.2600 and I think fair value for the EUR/USD lies well below there.

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<span style="text-decoration: underline;"><strong>3. MY CURRENT LONG-TERM TRADES:</strong></span>

I have no long term trades in play right now.

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<span style="text-decoration: underline;"><strong>4. LOOKING INTO NEXT WEEK THE FUTURE KEY SUPPORT AND RESISTANCE LEVELS WITH THE USD MAJORS:</strong></span>

<strong>EUR/USD: Closing Price 1.3191.</strong> We are in a down trend with this pair. The close this week below 1.3250 is bearish and the fact that we are just 50 pips away from the lows of 1.3140 makes it all looks pretty bleak for the EUR/USD. The worsening economic outlook in the Eurozone and the impending Italian election results will keep the pressure to the downside very much in play. The immediate range is 1.3140 to 1.3250. Beyond these levels the wider support and resistance targets will be 1.3000 to the downside and the critical upside resistance will be at 1.3400.

<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/EURUSD-M-230213.png"><img class="aligncenter size-large wp-image-1462" alt="EURUSD M 230213" src="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/EURUSD-M-230213.png" width="660" /></a>

<strong>GBP/USD: Closing Price 1.5162.</strong> Following the Moody's downgrade, the market reaction in Asia and Europe tomorrow and overnight into Monday will be crucial. I do think that we will see a lower level in the pair but we should also be ready for a bounce. Just how strong the bounce could be is the $64,000 question. I think the likes of 1.5000 is now an extremely important level and if that gives away we will be at 1.4800 pretty quickly. Initial upside resistance at 1.5250 has held for the past few days, so the bounce may be contained there. If  the response in London Monday is f**k the US rating agency, we could see 1.5400. My feelings are 1.5000 is more likely but.....who knows??

<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/GBPUSD-D-230213.png"><img class="aligncenter size-large wp-image-1463" alt="GBPUSD D 230213" src="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/GBPUSD-D-230213.png" width="660" /></a>

<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/GBPUSD-M-230213.png"><img class="aligncenter size-large wp-image-1464" alt="GBPUSD M 230213" src="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/GBPUSD-M-230213.png" width="660"/></a>

<strong>AUD/USD: Closing Price 1.0319.</strong> RBA Governor Stevens talked up this pair on Thursday and it was very well supported yesterday. I heard that on CNBC Brian Kelly was looking to play this pair long opposite Gold to 1.0800. Jesus, Mary and Joseph......I am completely 100% opposite him on this trade. I see more downward pressure on the AUD/USD over the coming months. The 1.0600 level has held so many times, in fact, 1.0500 has been great resistance. Bear in mind, as equities have risen recently, the divergence in the AUD/USD has been more than remarkable. Equities have risen, the AUD/USD has dropped. As long as 1.0375 to the upside holds, I think that the downside  pressure will return. The next support will be 1.0260 followed by 1.0150 then look out for lower levels as I think Gold will fall to test $1400. My longer term thoughts on the AUD/USD is sub parity around 0.9800.

<a href="https://weeklyfxdrivethru.comv/wp-content/uploads/2013/02/AUDUSD-240-230213.png"><img class="aligncenter size-large wp-image-1461" alt="AUDUSD 240 230213" src="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/AUDUSD-240-230213.png" width="660" /></a>

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<strong>NZD/USD: Closing Price 0.8379.</strong> We closed yesterday just below 0.8400. This is a great area to try to enter short if it holds, it could offer a great risk/reward to much lower levels as the NZD would be dragged lower if the AUD falls. A break above 0.8435 and then all bets are off.  0.8375 to 0.8435 is the immediate range that I am looking at. I do fear a move above 0.8435 will test 0.8520 or maybe even higher. We are at a critical point with this pair. If it falls, in line with the AUD/USD 0.8000 would be my longer term target.

<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/NZDUSD-D-230213.png"><img class="aligncenter size-large wp-image-1465" alt="NZDUSD D 230213" src="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/NZDUSD-D-230213.png" width="660" /></a>

<strong>USD/CAD: Closing Price 1.0213.</strong> Yesterday this pair failed to capitalise on its move towards 1.0260 then 1.0280, with it pulling back towards 1.0200. Positively, we are last on the cusp of a breakout that looks like it could get some legs. Longer term, I think this pair will be trading above 1.0450-1.0600 maybe even up towards 1.1000....who knows? If the EUR/USD really falls away and the US$ index gains in strength away for $82 to say $86 or $89 as some analysts predict, the dizzy heights of 1.0600 is not so weird. For now 1.0100 to 1.0280 is the range to play the breakouts from.

<strong>USD/CHF: Closing Price 0.9295.</strong> I am not getting in any way excited with this pair until the well established range is broken one way or the other 0.9250 support to 0.9350 resistance.

<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/USDCHF-240-230213.png"><img class="aligncenter size-large wp-image-1467" alt="USDCHF 240 230213" src="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/USDCHF-240-230213.png" width="660"  /></a>

<strong>USD/JPY: Closing Price 93.41.</strong> The trade of 2013 has now entered consolidation mode. We have a defined trend line and top end of the range to measure. Support is at 92.70 and resistance is at 94.00.

<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/USDJPY-D-230213.png"><img class="aligncenter size-large wp-image-1468" alt="USDJPY D 230213" src="https://weeklyfxdrivethru.com/wp-content/uploads/2013/02/USDJPY-D-230213.png" width="1024" height="562" /></a>

<span style="text-decoration: underline;"><strong>5. MAJOR NEWS EVENTS THAT INTEREST ME OVER THE NEXT SEVEN DAYS:</strong></span>

SUNDAY: EUR - Italian Elections.
SUNDAY: CNY - HSBC Manufacturing PMi.

MONDAY: EUR - Italian Elections.

WEDNESDAY: USD - Bernanke testimony.
WEDNESDAY: EUR - Draghi speaks.
WEDNESDAY : AUD - Private Capital expenditure.

THURSDAY: CNY - PMi data.

FRIDAY: GBP - PMi data.
FRIDAY: USD - PMi data.
FRIDAY: CAD - GDP.
FRIDAY: USD - Bernanke testimony.

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<span style="text-decoration: underline;"><strong>6. CLOSING THOUGHTS AND FINAL COMMENTS:</strong></span>

There is a great deal of volatility on the horizon so look out.

The GBP and EUR should provide some spice in the early part of the week. The AUD news on Wednesday should give guidance to the RBA on whether they ease or not. The China PMi data........its going to be a long week and I predict some sleepless nights, burning the early hours oil with lots of coffee......jack and diets included.

So as always be careful placing trades, my ten cents would be to trade in very small positions with wider stops to cope with the volatility that will be happening. I think this week could be a sit over your computer all the time week. Take it to the bathroom with you as moves in the market given the backdrop will be swift and as usual in the Forex market totally unforgiving.

Good luck,

Scott Pickering
The Pip Accumulator
Saturday 23rd February 2013.