Forex Tips & Daily Analysis

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USD

Yesterday, no significant economic data was released in the US and trade in the USD was mixed. The currency managed to regain some strength against the EUR, breaking back below the 1.30 level and spiking to 1.95 vs. the GBP, mainly due to the decline in oil prices that dropped below $58/brl.

Today's main release from the US is the US Trade Balance for December at 13:30 GMT. The Trade Balance is expected at -59.5Bln after -58.2Bln last month. The Trade Balance is expected to tick up a bit, mainly due to the December's holidays, a period characterized with increased consumption, a great portion of which is imported. The risks of an off-expectations figure is to the upside, in which case some USD weakness can be expected. Nevertheless, recent Trade Balance readings indicate a positive trend, and it is unlikely that the market will take a worse than expected figure too far in terms of a dollar sell-off.

Although the USD's calendar is thin today, external events, such as the CPI in England and the ZEW survey in Germany, can drive some volatility into the markets. We don't see how these releases can drive the USD out of its month's range versus the EUR, so we would say that this is yet another opportunity to range trade.

The US calendar is gearing up tomorrow with US Retail Sales data due out and the Fed's Bernake testimony before the Senate. Stay tuned.

EUR

The EUR opened this trading day higher all across the board, on the back of a significantly better than expected yearly and quarterly German Gross Domestic Product. The GDP; 3.5% YoY on expectations of 3.1% and 0.9% QoQ on expectations of 0.6%. Despite the surprisingly good growth data, the EUR managed to edge higher only about 30 pips against the USD to only just touch the 1.30 level. Later on today, we are expecting the German ZEW index that measures the economic sentiment among business and economic analysts. For the last several months the survey has printed in negative territory, but it is expected to rebound to 5.0. It seems that the impact of the ZEW survey will be somehow muted, as along with this release, the Euro Zone Q4 GDP is due out. Current market expectations are for 3% YoY increase and 0.6% QoQ growth. Given today's upside surprise from Europe's biggest economy, we are expecting the growth in EZ to print higher, something that if indeed occurs, can very well drive the EURUSD out of its 1.2880-1.3050 trading range.

Meanwhile in the UK, at 9:30 GMT markets are expecting the UK Consumer Price Index for the month of January, which is expected to drop sharply from a positive 0.6% into the negative territory and print at -0.6%. Although these expectations should already be priced in, a CPI reading that negative might reinitiate the GBP's sell-off. However, a better than expected reading, a figure closer to -0.2%, might prompt a knee-jerk reaction and strengthen the GBP all across the board

JPY

The JPY strengthened slightly during the overnight Asian session, touching 121.31 against the USD and 236.40 vs. the GBP. However, upon the release of the better than expected Consumer Confidence figure, the JPY actually weakened against its major counterparts, as markets were probably expecting a more significant improvement.

As for today, trade is going to be driven mostly by external events, but we see the JPY downside to be more likely as a consequence of the repositioning of carry trades.

Technical Analysis

EUR/USD

The pair is still trading in its tight 1.2880-1.3050 range and volatility has dropped significantly of late. Bollinger bands are tight, probably indicating an impending range breakout. The trigger for the breakout might be this week's fundamentals, and should we judge by the longer term trend, we see the upside as more likely.

GBP/USD

The pair has breeched below its last 4 month trendline, as well as below the January 31st support at 1.9480. Price action is currently hovering around these regions, but bearish daily and intraday oscillators point to the downside. Significant support will emerge no closer than 1.9304.

USD/JPY

Key resistance level at 122.10 held firm for the second time in the past 2 weeks, Sending the pair to its 119.95-122.10 38.2% retracement at 121.31. Intraday bearish momentum has lost its strength; some basing above 121 is expected and then a resumption of the uptrend.

USD/CHF

Range trading continues where the key resistance level at 1.2550 has held firm and the price action that brought the pair there seems to lack the momentum required to breech above this resistance level. 4H MACD is about to turn negative, DI- is at 24 indicating the bearish move should continue. 1.2463 is the first floor.

Wild Card

EUR/JPY

Forex traders be aware, a classical head and shoulders pattern has emerged from the daily chart on this pair, we can also notice that the key support level at 0.9100 has been broken and a further downward trend is expected to accelerate in the longer run.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.3130	1.9850	123.10	1.2610	0.7878	0.6710
	1.3085	1.9740	122.50	1.2585	0.7821	0.6692
	1.3050	1.9615	122.15	1.2535	0.7777	0.6688
Support	1.2959	1.9455	121.21	1.2450	0.7711	0.6641
	1.2926	1.9400	120.80	1.2411	0.7694	0.6600
	1.2860	1.9350	120.15	1.2375	0.7655	0.6575

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
13/02/07	09:30	GBP	Consumer Price Index (MoM)	JAN	0.6%	-0.6%
13/02/07	09:30	GBP	Consumer Price Index (YoY)	JAN	3.0%	2.9%
13/02/07	10:00	EUR	Euro-Zone Gross Domestic Product seasonally adjusted (QoQ)	4Q	0.5%	0.6%
13/02/07	10:00	EUR	Euro-Zone Gross Domestic Product seasonally adjusted (YoY)	4Q	2.7%	3.0%
13/02/07	13:30	USD	Trade Balance	DEC	-$58.2B	-$59.5B