Forex Tips & Daily Analysis

Risk Appetite Returns to Trading.

The Yen slid against its major currency counterparts and the Dollar posted mild losses against all currency pairs except the Yen following a rally in global equity markets. The rally prompted investors to turn to higher yielding riskier assets and away from the safety of the USD and JPY. With risk appetite the main focus for today's trading and while market conditions remain mixed, traders should follow the vital economic data to be released today from the U.S and Europe as this will provide direction to the market for today's trading.

Economical News

USD

The Dollar plummeted on Monday against most of its major currency pairs. The Wall Street rally was initiated by positive comments from analyst Meredith Whitney about the financial Sector. She made her comments on CNBC (business channel), stating that banks shares will make short-term gains of 15%, and financial institutions will post better-than-expected results in the coming weeks. From this point on, Wall Street rallied, which led to risk-taking in U.S. equities and commodities. The result was a weak USD throughout yesterday's trading.

The USD lost 50 pips against the EUR to close at the 1.3974 level yesterday. Much of this behavior was due to investors' risk-taking. The GBP/USD climbed by a dramatic 120 pips to the 1.6244 level. This was partially due to the recent bottoming out of the British housing market. However, the greenback rose 50 pips against the JPY, marking the first daily rise in the pair for 2 weeks. This came about as forex traders dumped the Yen as it has been the number 1 safe-haven currency as of late.

Looking ahead to today, there is much vital data expected to come out of the U.S. economy. These are the Core Retail Sales, PPI (Producer Price Index), and Retail Sales, which are all set to be published at 12:30 GMT. If the results are worse than forecasts then we may see another day of USD bearishness. However, equal to or better-than-expected results may lead to a bullish Dollar going into mid-week trading.

EUR

The EUR climbed against the Dollar on Monday ahead of the German ZEW Economic publication today. This is important as it is a leading measure of the health of the German and Euro-Zone economies. Analysts predict the figure to be 48.0, notably higher than the previous figure of 44.8. This helped the EUR climb against the USD yesterday. This pair also rose due to the equities rally in the U.S. and Euro-Zone. The result of this was traders dropping the USD in many cases for higher-yielding currencies, such as the EUR and GBP.

The EUR/USD climbed by 50 pips to the 1.3974 level, as the EUR recorded a bullish trading session against a number of its main currency pairs. The EUR/GBP rate, however, slipped 35 pips to 0.8601. This comes out as Britain saw sentiment in her housing sector at its highest since late 2007. The EUR saw its first gain against the JPY in several days, as the pair climbed by 120 pips to the 129.98 level due to traders buying into higher-yielding currencies. Additionally, traders realized that this pair had been undervalued in the past 2 weeks.

Today, there is much economic news coming out of both Britain and the Euro-Zone. At 08:30 GMT there is the release of the CPI (Consumer Price Index) and RPI (Retail Price Index) from Britain. At 09:00 GMT we can expect the publication of German ZEW Economic Sentiment and Industrial Production figures from the Euro-Zone. Today's data is vital in determining the levels of the EUR and GBP against their main currency crosses as Tuesday's trading gets under way.

JPY

The Yen collapse against the major currencies in Monday's trading session. This came about as global stock markets rallied, led by banking stocks. In turn, traders dropped the Yen for higher-yielding assets. This included currencies such as the GBP and EUR, and commodities such as Crude Oil. The Japanese currency also fell due to Japanese analysts stating that a downward correction for the Yen will soon be under way.

The USD/JPY slid about 50 pips to 92.89. The GBP/JPY pair rose dramatically by 180 pips to 150.89. The Yen's bearish behavior may continue into today's trading, as Monday's pessimistic Revised Industrial Production figures may put additional downward pressure on the JPY. Today, the Yen is expected to take the backseat due to a lack of key economic releases. Therefore, expect much market volatility to dominate JPY trading.

Technical Analysis

EUR/USD

The daily chart shows that the pair is currently range-trading within a restricted price range. However, as the RSI on the daily chart has dropped beneath the 70 line, it appears that bearish momentum might be arising. Going short with tight stops could be the right choice today

GBP/USD

The 4 hour chart is showing mixed signals with its Slow Stochastic fluctuating at the neutral territory. However, the hourly chart's RSI is already floating in the overbought territory indicating that a bearish correction might take place in the nearest future. When the downwards breach occurs, going short with tight stops appears to be preferable strategy

USD/JPY

The bullish trend is loosing its steam and the pair seems to consolidate around the 93 level. The hourly chart's RSI is already floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. Going short with tight stops appears to be preferable strategy.

USD/CHF

The pair has been quite choppy in the past two days yet no clear direction was seen. The 4 hour chart is showing bullish signals as the daily chart is still quite bearish.

Traders advised to wait for a clearer signal on the hourlies before entering the market.

Wild Card

EUR/GBP

The pair is in the midst of a very strong bearish correction move, and seems to have more steam in it. The Slow Stochastic oscillator on the1 hour chart is also providing downward signal. This is a great opportunity for forex traders to join a very promising bearish correction.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4085	1.6345	94.05	1.0925	0.7945	0.8700
	1.4045	1.6315	93.75	1.0895	0.7917	0.8665
	1.4015	1.6285	93.45	1.0864	0.7887	0.8636
Support	1.3950	1.6220	92.85	1.0800	0.7823	0.8572
	1.3920	1.6190	92.55	1.0770	0.7855	0.8540
	1.3890	1.6160	92.25	1.0740	0.7885	0.8510

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2009-07-14		EUR	French Bank Holiday		*	*
		French Bank Holiday French banks will be closed in observance of Armistice Day;
2009-07-14	01:30	AUD	NAB Business Confidence		-2
		NAB Business Confidence The National Australia Bank (NAB) Business Confidence indicator is measuring the mood of domestic firms in non-farm sectors. it is derived from a survey of about 350 Australian companies.
2009-07-14		GBP	CPI		2.2%	1.8%
		CPI The Consumer Price Index (CPI) is a measure of the change in the price of goods and services purchased by consumers. It is a gauge for inflation.
2009-07-14	08:30	GBP	MPC Member Posen Speaks		*	*
		MPC Member Posen Speaks The Bank of England Monetary Policy Committee Member Designate Adam Posen is due to to testify on his appointment as MPC member before the Treasury Select Committee, in London.
2009-07-14	08:30	GBP	RPI	y/y	-1.1%	-1.6%
		RPI The Retail Price Index (RPI) measures the rate of inflation experienced by consumers when purchasing goods and services. RPI differs from CPI in that it only measures goods and services bought for the purpose of consumption by the vast majority of households.
2009-07-14	08:30	GBP	Core CPI	y/y	1.6%	1.6%
		Core CPI Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate. Also Named: Bank of Canada Core CPI, CPI Ex Volatile Items
2009-07-14	08:30	GBP	DCLG HPI	y/y	-13.0%	-12.6%
		DCLG HPI This report offers a general measure for the change in the selling price of homes.
2009-07-14	09:00	EUR	German Economic Sentiment		44.8	48.0
		German Economic Sentiment Zentrum für Europäische Wirtschaftsforschung (ZEW) Economic Sentiment measures institutional investor sentiment. The monthly indicator reflects the difference between the share of investors that are optimistic and the share of investors that are pessimistic. For example, if 30% of participants expect the economic situation to improve within the next six months, 30% expect no change and 40% expect the economic situation to deteriorate, the ZEW Indicator of Economic Sentiment would take a value of -10. Thus, a positive number means that the share of optimists outweighs the share of pessimists.
2009-07-14	09:00	EUR	Industrial Production	m/m	-1.9%	1.5%
		Industrial Production This report measures the change in the total inflation adjusted value of output produced by manufacturers, mines, and utilities. When the actual result is higher than forecasted, it tends to have a positive impact on the local currency.
2009-07-14	09:00	EUR	Economic Sentiment		42.7	44.2
		Economic Sentiment Zentrum für Europäische Wirtschaftsforschung (ZEW) Economic Sentiment measures institutional investor sentiment. The monthly indicator reflects the difference between the share of investors that are optimistic and the share of investors that are pessimistic. For example, if 30% of participants expect the economic situation to improve within the next six months, 30% expect no change and 40% expect the economic situation to deteriorate, the ZEW Indicator of Economic Sentiment would take a value of -10. Thus, a positive number means that the share of optimists outweighs the share of pessimists.
2009-07-14	12:30	CAD	New Motor Vehicle Sales	m/m	0.0%	1.0%
		New Motor Vehicle Sales This report offers a broad measure for the sales of new vehicles. Has a correlation to consumer spending and GDP.
2009-07-14	12:30	USD	Core Retail Sales	m/m	0.4%	0.5%
		Core Retail Sales This report is measuring the change in the total value of sales at the retail level, excluding automobiles. Traders should bear in mind that automobile sales account for about 20% of Retails Sales, however, they can also be very volatile, and thus distort the underlying trend. The Core data is therefore thought to be a better gauge of spending trends.
2009-07-14	12:30	USD	PPI	m/m	0.2%	0.9%
		PPI The Producer Price Index (PPI) is a measure of the inflation rate incurred by manufacturers when purchasing goods and services.
2009-07-14	12:30	USD	Retail Sales	m/m	0.5%	0.4%
		Retail Sales This report is a measure of the change in the total value of retail sales. Positive figures indicate economic growth.
2009-07-14	12:30	USD	Core PPI	m/m	-0.1%	0.1%
		Core PPI Derivative of the Producer Price Index (PPI) that excludes the Food and Energy items. Although Food and Energy can be very volatile from month to month, they play an important role in pass-through inflation. Therefore Core PPI usually has less impact than the overall PPI.
2009-07-14	14:00	USD	Business Inventories	m/m	-1.1%	-0.9%
		Business Inventories This figure measures the amount of inventory in stock at various businesses. As inventories become depleted, businesses are more likely to increase spending in the next business cycle.
2009-07-14	14:00	USD	IBD/TIPP Economic Optimism		50.8	49.6
		IBD/TIPP Economic Optimism The Investor's Business Daily (IBD) TechnoMetrica Institute of Policy and Politics (TIPP) Economic Optimism Index measures the mood of consumers in regard to economic conditions. 900 nationwide adults evaluate their "six-month economic outlook," "personal financial outlook," and their "confidence in federal economic policies." Index readings above 50 indicate optimism, and below 50 indicates pessimism. When consumers are optimistic they tend to purchase more goods and services, which stimulates the economy, and therefore - good for the USD.