Forex Tips & Daily Analysis

Crude Oil Price Crashes after Unusually High Inventory Data.

The price of Crude Oil experienced a sharp decline in prices yesterday after a U.S. inventories report highlighted a sudden surge in energy supplies. While these reports may carry mixed messages about demand, supply, and growth expectations, the message yesterday was quite clear: demand is plummeting. Many analysts were expecting a draw-back in prices after last week's surge, but the inventory report only demonstrated how unwanted this commodity has become, which only put additional weight on the downward pressure this commodity was already expecting.

Economical News

USD

The Dollar continues to strengthen against all the major currencies. During yesterday's session the greenback was traded near a two-week high versus the EUR. The Dollar also marked a significant uptrend against the Pound and Yen.

It seems that the main reason for the USD's appreciation yesterday came as a result of the positive Core Durable Goods Orders monthly report, as well as a statement by China that it will maintain a more loose monetary policy. Whilst the Durable Goods figures reported a drop of 2.5% in June, mainly as a result of the weak demand for new civilian aircraft and defense equipment, it seems that investors were more impressed by the 1.1% rise in the Core Orders during June.

The difference between the two reports is that the Core report measures the change in the total value of new purchases orders placed with manufacturers for durable goods, excluding transportation items. Orders for aircraft are known to be very volatile, and thus have the potential to distort the underlying trend. This is why investors tend to attribute more importance to the Core report. The positive figure marked the third consecutive month in which this report delivered signs of positive growth, driving investors to believe that the global recession is reaching its end.

As for today, the main publication from the U.S economy looks to be the weekly Unemployment Claims report at 12:30 GMT. Currently, while all the major indicators of the U.S economy are showing signs of improvement, it is only the job sector which continues to deliver negative figures. Analysts forecast that 578K individuals have filed for unemployment insurance for the first time during the past week. If the actual result will be similar, this could be the harshest unemployment figures in the last month. Such a result may help drive the demand for the safety of the USD and drive its recent bullishness even higher.

EUR

The EUR dropped yesterday against most of the major currencies. The EUR is currently traded near a two weeks low against the Dollar, as the pair fell to the 1.40 level. The EUR also saw a sharp drop against the Pound during yesterday's session.

The EUR's slide came as a result of the unexpected negative German Preliminary Consumer Price Index (CPI) report. This indicator measures the change in the price of goods and services purchased by consumers in Germany. Considering the fact the Germany currently holds the strongest and relatively healthiest economy in the Euro-Zone, the inflation indicators from this nation have a large impact on the EUR. The indicator showed a drop of 0.1% in July.

More severely, this report has marked the first annual decline in consumer prices in Germany in more than 22 years! It appears to be the drop in energy and food costs, which took place as a result of the global recession, which created the poor annual decline in German CPI. It now seems quite certain that for any negative indicators from the German economy such as this one have the potential to weaken the EUR in the near future.

Looking ahead to today, another significant report is scheduled from the German economy. The German Unemployment Change, which measures the change in the number of unemployed people during the previous month, is expected at 07:55 GMT. Analysts have forecasted that unemployment in Germany increased by 44K in June. If the results are indeed close to this figure, the EUR might continue to depreciate against the major currencies.

JPY

The Yen underwent a bearish session against most of the major currencies yesterday. The JPY dropped over 100 pips versus the Dollar, and over 200 pips against the Pound.

The Yen dropped yesterday on poor Retails Sales data. The report showed that the total value of sales at the retail level dropped by 3.0% in June, failing to reach expectations for a 2.5% drop. Furthermore, Japan's retails sales fell for a 10th month in June, making the longest losing streak since 2003. It seems that even though the Japanese economy is showing signs of recovering, mainly due to the positive export figures, the Japanese citizens are reluctant to resume last year's consumption levels, an indication that optimism may be lacking in Japan.

As for today, a batch of data is expected from the Japanese economy. Traders are advised to follow the Tokyo Core Consumer Price Index report. This report is a leading inflationary indicator for Japan, and thus tends to have a large impact on the JPY's value. If current expectations for a 1.7% drop will be similar to the real result, the Yen might continue to weaken against the major currencies in late-trading today.

Technical Analysis

EUR/USD

After a steady decline in trading yesterday, the price of this pair now sits in the over-sold territory on the 4-hour chart's RSI, indicating a level of upward pressure. The fresh bullish cross on the 4-hour Slow Stochastic, however, indicates that an upward correction is imminent. Going long with tight stops may be a smart choice today.

GBP/USD

There appears to be a recent bullish cross on the 4-hour Slow Stochastic and an impending bullish cross on the 4-hour MACD, indicating that an upward movement may be on its way. This pair is currently range-trading, however, and has reached the lower border of its channel, supporting the notion that an upward move is indeed imminent. Buying on lows and selling on highs within this channel might be a wise choice.

USD/JPY

The bullish channel on this pair, seen in the 4-hour chart, may be coming to a volatile ending today as the Bollinger Bands on the hourly chart are beginning to tighten drastically. The bearish cross on the 4-hour Slow Stochastic will likely help the price's impending downward movement prior to its volatile jump. Waiting for the breach then jumping on the trend may be the best strategy today.

USD/CHF

A volatile breach of the 4-hour chart's Bollinger Bands occurred at the end of yesterday's trading, which has pushed this pair's indicators into over-sold territory. The 4-hour Slow Stochastic has a fresh bearish cross and its RSI is highlighting the downward pressure from the over-sold position. Going short and riding out the correction appears to be preferable today.

Wild Card

Crude Oil

Yesterday's volatile downward plunge has pushed many short- and mid-term indicators into showing an impending correction. However, the long-term indicators on the daily chart show that there may still be room to run for this bearish movement. The sudden pull-back in Crude Oil's price may not yet be finished and, as such, forex traders may want to set their short positions as soon as possible to capture some of the remaining bearish movement.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4130	1.6500	96.00	1.0950	0.8265	0.8660
	1.4100	1.6465	95.65	1.0925	0.8230	0.8630
	1.4075	1.6430	95.30	1.0900	0.8205	0.8605
Support	1.4025	1.6375	94.75	1.0825	0.8150	0.8550
	1.4000	1.6345	94.45	1.0800	0.8125	0.8525
	1.3975	1.6305	94.00	1.0775	0.8100	0.8500

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2009-07-30	01:30	AUD	Building Approvals	q/q	-11.0%	8.0%
		Building Approvals This report is a measure of impending construction activity. It is a significant indicator since the first step in beginning a new construction project is the acquisition of permits granting the approval to do so.
2009-07-30	06:00	GBP	Nationwide HPI	m/m	0.9%	0.3%
		Nationwide HPI This indicator measures the change in the sales price of homes with mortgages backed by the Nationwide Building Society.
2009-07-30	07:55	EUR	German Unemployment Change		31K	44K
		German Unemployment Change An important measure of the number of unemployed persons seeking employment in the German economy.
2009-07-30	09:00	EUR	Consumer Confidence		-25	-24
		Consumer Confidence This figure is a measure of the mood of consumers in regard to economic conditions in Germany.
2009-07-30	12:30	CAD	RMPI	m/m	2.2%	-
		RMPI The Raw Materials Price Index (RMPI) is a measure of the inflation rate on materials purchased by manufacturers.
2009-07-30	12:30	USD	Unemployment Claims		554K	578K
		Unemployment Claims An indicator which measures the number of individuals who filed for unemployment insurance with the government for the first time during the past week. This is one of the earlier releases of economic data.
2009-07-30	14:30	USD	Natural Gas Storage		66B	-
		Natural Gas Storage This figure measures the change in the number of cubic feet of natural gas held in storage by this country from week to week. It has a moderate impact on the price of fuels, but provides mixed results for investors.
2009-07-30	23:01	GBP	GfK Consumer Confidence		-25	-23
		GfK Consumer Confidence A survey undertaken by the German group GfK which attempts to gauge consumer confidence in the country's economic condition and health.
2009-07-30	23:15	JPY	Manufacturing PMI		48.2	-
		Manufacturing PMI The Manufacturing sector's Purchasing Manager's Index (PMI) is an indicator which measures how much activity the purchasing managers of the manufacturing sector in the economy are experiencing.
2009-07-30	23:30	JPY	Household Spending	y/y	0.3%	0.3%
		Household Spending This report acts as a measure in the change in value of consumer expenditures. Consumer spending accounts for a majority of Japan's GDP.
2009-07-30	23:30	JPY	Tokyo Core CPI	y/y	-1.3%	-1.7%
		Tokyo Core CPI This is a measure of the Japanese economy's Consumer Price Index, a national inflationary measure which subtracts the impact received from the price of food and energy.
2009-07-30	23:30	JPY	National Core CPI	y/y	-1.1%	-1.6%
		National Core CPI This is a measure of the Japanese economy's Consumer Price Index, a national inflationary measure.
2009-07-30	23:30	JPY	Unemployment Rate		5.2%	5.3%
		Unemployment Rate This figure represents the percentage of potential workers that are currently unemployed and actively seeking a job. This report is typically overlooked as its information is derived from previously released indicators.