Forex Tips & Daily Analysis

Economical News

USD

The USD continues losing ground against its major counterparts, although yesterday's price action was relatively narrow-ranged on the back of a thin calendar and ahead of this week's heavy flow of US data - which starts today. It seems that forex traders are not anticipating the US economic data on tap to be too dollar positive, and therefore they are repositioning themselves accordingly. Adding fuel to this USD bear's fire was former Fed chairmen Alan Greenspan. The former Fed said that given the 6 year period of economic growth, it is "possible" that the US economy will head into recession by the end of the year. If, in fact, the former Fed Chairmen is right, their would be no refuge for the Fed to lower its interest rates by the end of the year, and on such expectations the USD can definitely sell off, especially when interest rates elsewhere continue to rise. We still have a lot of data to monitor until then; data that will surely have a far more significant impact on the USD value.

Today's data flow starts with the US Durable Goods Orders, a typically volatile figure which is expected to reverse December's 2.9% increase and post a 2.5% decline in January. Later on, the February Consumer Confidence is due out and is seen posting a modest 1.3 drop from the previous 110.3 reading. Along with the Consumer Confidence we have the important Existing Home Sales (f/c 6.24mln) and Building Permits. We believe that the market is already pricing-in mildly disappointing readings on these releases, so no significant USD sell-off should take place in such a case. Significantly better than expected readings, on the other hand, might prompt a limited USD recovery ahead of tomorrow's revised Q4 GDP.

EUR

The EUR is trading mixed across the board, stronger against the USD while sliding lower against the JPY and the CHF. The only data from Europe yesterday was the German GFK Consumer Confidence which came in a little shy of the 4.9 expectations and printed at 4.4. This had little effect on the EUR, and markets are expecting some more important releases today and tomorrow.

A preliminary reading of the German February Consumer Price Index is due out later today (time tentative) and is expected to surge 0.5% after dropping 0.2% the previous month. The expected surge is attributed mostly to the delayed affect of the VAT increase in Germany. If indeed we see such a high reading, this might very well renew speculations of an additional European Central Bank rate hike during the 2nd quarter.

Another inflationary gauge which is expected to be released today is the M3 Money Supply- the amount of currency outstanding. M3 is seen increasing by 9.5%, compared with a 9.7% previous annual increase. Nevertheless, the figure expected to draw the most attention from the EZ today is the German Retail Sales, which are expected to fall 1.5% MoM and 0.6% YoY. Should the figure print higher it would put in question the effect the German VAT increase had on Personal Consumption in Europe's biggest economy, and might fuel the EUR to break the 1.32 barrier.

JPY

Japanese government officials are keeping up the hawkish rhetoric, and yesterday it was Cabinet Secretary Shiozaki who said that prices are "picking up", pointing out that Japan is finally through with the deflation age. The JPY is stronger today all across the board, and speculation about Japanese firms repatriating funds in preparation for the fiscal year-end next month suggest that we might see some JPY strength today.

Technical Analysis

EUR/USD

The pair has tested the 1.3220 (the upper boundary of an upsloping channel in the 4H chart) and although the trend is definitely up, a negative divergence in the 4H chart's MACD suggests a possible turn. The divergence is seen on the 1H as well, where the DI- just crossed above 20.

GBP/USD

A red doji evening star on the daily suggests that we are going to see the some downside today and possibly in the upcoming days as well. Daily MACD is neutral; the 4H MACD is intersecting downsides at positive territory- a bearish sign.

USD/JPY

Daily Studies are pretty neutral, but we can't ignore the heavy resistance the pair met each time it got close to 122. On the downside, there is a trendline expected to test near current levels, at 119.70, after that level the next floor will emerge only around 118.70.

USD/CHF

There is definitely a short term down trend in this pair's charts, but there is also a down sloping trendline defined by February lows, and we are currently directly on top of it at 1.2276. It is therefore seems reasonable that a better opportunity to short this pair will show up in the upcoming days, but longing it is too risky.

Wild Card

NZD/JPY

There are signs of weakness in this forex pair's uptrend- the daily MACD bearishly diverge during the last three tops. We have a trendline support to test near 84.00, where the 4H 200MA also pass. Short positions before then are considered risky.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.3300	1.9745	121.70	1.2468	0.79798	0.6812
	1.3260	1.9730	121.10	1.2415	0.7969	0.6777
	1.3220	1.9680	120.00	1.2380	0.7944	0.6735
Support	1.3150	1.9570	119.70	1.2275	0.7860	0.6670
	1.3115	1.9500	119.00	1.2220	0.7811	0.6652
	1.3080	1.9460	118.50	1.2170	0.7787	0.6600

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
27/02/2007	All d	EUR	German CPI m/m (p)		-0.20%	0.50%
27/02/2007	9:00	EUR	Euro Zone M3 sa	Y/Y	9.20%	9.50%
27/02/2007	9:00	EUR	German Retail PMI		43.9
27/02/2007	13:30	USD	Durable Goods Orders	M/M	2.9%	-2.4%
27/02/2007	13:30	USD	Core Durable Goods Orders	M/M	2.7%	-0.2%
27/02/2007	15:00	USD	Consumer Confidence		110.3	109.0
27/02/2007	15:00	USD	Existing Home Sales		6.22M	6.25M
27/02/2007	15:00	USD	Richmond Fed Index		-11
27/02/2007	23:30	JPY	Manufacturing PMI		53.4
27/02/2007	23:50	JPY	Industrial Production	M/M	-1.8%	0.9%
27/02/2007	23:50	JPY	Retail Sales	Y/Y	0.2%	-0.2%