Forex Tips & Daily Analysis

Economical News

USD

Yesterday, the Empire State Manufacturing Index beat expectations of 10.5 and printed at 24.4. However, the great regional Fed survey reading did not manage to help the dollar much, as the data that was later released painted a far less optimistic picture. Along with the Empire State Survey, New Jobless Claims rose 44K and printed at 357K on expectations of 314K while last week's reading was upwardly revised by 2K to 313K. The Treasury International Capital Flow report which measures the foreign demand for US securities came out as low as 15.6bln, significantly lower than the 60bln reading that was expected. Earlier this week the US trade Balance came in at -61.2bln, meaning that the capital flow this month was not even close to cover the trade deficit. This is negative for the USD because it means the US external debt continues to rise. Although the woeful reading was slightly offset by an upward revision of the previous report, this was about the time traders decided to punish the USD, sending it around 40 pips lower vs. the EUR to visit 1.3170 and 60 pips against the GBP, which traded as high as 1.9620 after the release.

The data that was later released was also below expectations, except for the NAHB Housing Market index which came at 40 on expectations of a 35 reading. The Housing Market condition is carefully observed by the Fed and is one of the variables the Fed takes into consideration when weighing inflation risks against recession risks.

The past few weeks, which have been characterized by a heavy economic calendar, continues today with the PPI, Housing Starts, Building Permits and Consumer sentiment data scheduled for release. Contrary to what we saw in the last month, disappointing data today might very well provide the reason for the USD to drop against its counterparts, possibly even extending above the 1.3200 barrier vs. the EUR.

EUR

While no significant economic data was released from Europe yesterday, ECB governor Trichet kept on with hawkish rhetoric in his speech before the Chamber of Commerce and Industry in Amsterdam. There was nothing new, though, in his words, but the consistency among the ECB Monetary Policy Committee members regarding inflation and the interest rate environment, when compared with the US Fed's hesitation in the same matter, certainly make traders bullish on the EURUSD.

The most significant data on the European tap is the German CPI, expected to show a 0.2% decline. Even an off expectations reading is unlikely to hurt the EUR much, as it seems the ECB has already made up in its mind to raise interest rates in its next meeting.

JPY

The market's somewhat delayed reaction to Japan's better than expected quarterly GDP report sent the JPY higher all across the board on expectations that the Bank of Japan will finally raise its interest rates. The currency surged even higher upon the release of the US data yesterday, making the USDJPY fall as low as 119.30.

Yesterday, in our Daily Analysis, we mentioned that we don't see that this GDP growth interprets into a rate hike, or, more importantly, to a monetary tightening cycle (because a stand alone rate hike, or a once in 6 month rate hike, would probably not generate a massive JPY short covering). The Japanese Tertiary Industry Activity Index that was released overnight, declining 0.4% on expectations of -0.1%, further strengthen our opinion in that matter because it shows that the recovery of the Japanese economy is still fragile. Nevertheless, some JPY strength is likely to continue for the next few days.

Technical Analysis

EUR/USD

After touching 1.3170, the pair has slowly moved back down to 1.3130 overnight.

Daily charts are bullish with a slow momentum, as hourlies are neutral and slowly heading north. Next target price for the pair is 1.3200.

GBP/USD

The pair's downward rally did not last long, as the pair now consolidates around 1.9520.

The daily studies show mixed signals with a possibility for a choppy trading day. The hourlies are slowly unwinding from oversold territories, indicating that there might be a small correction up to the 1.9600 levels, before resuming the mid range downtrend.

USD/JPY

After six consecutive days of depreciation from 122.00, the pair now quietly floats at 119.30. Daily charts continue to be bearish with plenty of room to run. Hourlies are in oversold levels and are unwinding to neutral territories. All eyes are on 118.00.

USD/CHF

The pair has corrected into the 1.2330 levels which is the 38.2% Fibonacci of the 1.1900/1.2540 move. Daily charts are giving mixed signal with a slight bullish tendency, as hourlies are neutral. Range trading might be a preferable option.

Wild Card

GBP/JPY

The pair has been dropping from 241.30 to 233.00 in the last two weeks. All indicators show that there is plenty more steam in the downtrend. The daily charts are very bearish, and are supported by even more bearish hourlies. There might be a good opportunity for forex Traders here, to join into a very strong trend that shows no signs of stopping.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.3222	1.9770	121.36	1.2538	0.7930	0.6850
	1.3200	1.9621	120.67	1.2470	0.7900	0.6804
	1.3162	1.9560	119.88	1.2437	0.7876	0.6768
Support	1.3095	1.9452	119.00	1.2315	0.7812	0.6676
	1.3041	1.9394	118.90	1.2295	0.7793	0.6600
	1.3023	1.9283	118.28	1.2257	0.7739	0.6576

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
16/02/07	10:00	EUR	Euro-Zone Trade Balance not seasonally adjusted	DEC	3.1B	2.0B
16/02/07	10:00	EUR	Euro-Zone Trade Balance seasonally adjusted	DEC	4.5B	3.0B
16/02/07	13:30	USD	Producer Price Index (MoM)	JAN	0.9%	-0.6%
16/02/07	13:30	USD	Producer Price Index (YoY)	JAN	0.1%	0.3%
16/02/07	13:30	USD	Producer Price Index Ex Food & Energy (MoM)	JAN	0.2%	0.2%
16/02/07	13:30	USD	Producer Price Index Ex Food & Energy (YoY)	JAN	2.0%	1.8%
16/02/07	13:30	USD	Housing Starts	JAN	1642K	1600K
16/02/07	13:30	USD	Building Permits	JAN	1613K	1590K