German IFO In The Headlines, as No Other News on Tap.
Economical News
USD
The USD continued to strengthened a bit more, after stable inflation figures on Wednesday, followed by a thin news day yesterday. The only meaningful piece of information was the Initial Jobless Claims that came in at 332K which was a bit higher than the expectation of 325K. Although coming higher, the labor statement had almost no effect on price movement, and the market kept on floating in the range traders have been accustomed to all throughout last week's trading. The small influence probably derives from the fact that strong figures from the US economy are shifting the market's attention from economy growth figures to interest rate differentials and on central bank policy.
As for today, no major news is expected from the US markets today, which will probably cause the USD to continue to range trading, as traders will be expecting next week's consumer confidence, Chicago PMI, And the ISM Index.
EUR
The only news that might spur some excitement in this calm European morning may be the German IFO business confidence data, as the Euro markets are bound within the range after a light Calendar in Europe this week. On paper the IFO is the Biggest European news event of this week and will probably cause some kind of price movement for the EUR against most majors. The expectations are that the figure will come in at around 103.1 after previously coming in at 107.9, which might cause the EUR crosses to weaken a bit. The coast looks clear after that, and no further price shifts are expected, as the market will probably continue to float within the range.
JPY
Although the BoJ raised rate by 0.25%, the post meeting policy did not give any hint for further rate hikes which supported the carry trade activities. The JPY has started again to lose its ground across the board; as the USD/JPY rose to 121.63, the EUR/JPY to record high of 159.63 and the GBP/JPY also rose above the 237.48 level.
Although we found evidence to suggest that yen lending to foreigners has picked up over the past year or two, the data also seemed to indicate that yen carry trades are not as prevalent now as they were in 1998. A massive unwinding of these trades in the autumn of 1998 contributed to extreme financial market volatility at that time, and some analysts' worry that history could repeat itself soon.
Perhaps a more likely scenario would be a narrowing of interest rate differentials between Japan and the rest of the world that would diminish the luster of many yen carry trades. Although a sharp turnaround in the value of the yen or a marked narrowing in interest rate differentials does not look likely in the near term, an unexpected exogenous shock could put these forces in motion.
Technical Analysis
EUR/USD
No major movement was seen overnight, as the pair floats in 1.3120. The daily studies moderately bearish, and the hourlies a currently neutral, which creates no specific bias.
Range trading might be in place in the 1.3190/1.3070 zone.
GBP/USD
A relatively quiet night, after a choppy week, as the pair now consolidates near 1.9560. The daily charts give mixed signals, as hourlies deliver the notion that a move is close. If a break through 1.9500 occurs, we should be expecting a further move to the 1.9350 levels.
USD/JPY
The uptrend continues as the daily charts indicate that there is still plenty of momentum left in the trend. The hourlies are highly overbought which strengthen the notion that buying on dips might be a preferable strategy. Target price is 121.90.
USD/CHF
After a month of range bound trading, the daily charts indicate a slightly bullish notion, supported by semi bullish hourlies. A good strategy might be to wait for a 1.2430 break that would confirm the signals and unleash a further uptrend.
Wild Card
EUR/GBP
The downtrend initiated 4 days ago is picking up more steam, and looks like a great opportunity for Forex traders to jump in, as all oscillators support the notion that the downtrend has plenty more room to run. The pair now trades at 0.6702, and it looks like its not going to calm down before 0.6600.
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
|---|---|---|---|---|---|---|
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.3240 | 1.9713 | 122.28 | 1.2566 | 0.7978 | 0.6812 |
| 1.3193 | 1.9685 | 122.16 | 1.2500 | 0.7959 | 0.6777 | |
| 1.3165 | 1.9630 | 122.00 | 1.2455 | 0.7934 | 0.6735 | |
| Support | 1.3080 | 1.9500 | 120.87 | 1.2380 | 0.7850 | 0.6670 |
| 1.3040 | 1.9456 | 120.19 | 1.2329 | 0.7811 | 0.6652 | |
| 1.3002 | 1.9400 | 119.49 | 1.2300 | 0.7787 | 0.6600 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 23/02/2007 | 9:00 | EUR | Germany Ifo index | Feb | 107.9 | 107.5 |  |
| 23/02/2007 | 09:30 | GBP | U.K. GDP Q/Q | Q4 | 0.80% | 0.80% | |
| 23/02/2007 | 09:30 | GBP | U.K. GDP Y/Y | Q4 | 3.00% | 3.00% | |