Forex Tips & Daily Analysis

Economical News

USD

Yesterday, the USD traded in a bearish sentiment, making it lose some ground against most of its counterparts. The bearish sentiment was mainly attributed to the ADP employment survey which fell more than expected to 57K - against the 100K consensus estimates. The ADP survey is held by the largest payrolls processing company in the US and is intended to predict the Non Farm Payrolls report that is scheduled for release tomorrow. Up until 9 months ago, the ADP estimates stood in good correlation with the actual NFP report, which is the major market mover of the month. However, in the past 9 months the ADP estimates were all over the place and its correlation with the NFP was somewhere between very low to non-existant. Recent changes that have been made to the sampling method are expected to provide better accuracy and therefore yesterday's weak ADP reading might signal a weak NFP report tomorrow.

The US calendar is not playing a major role today as the only release scheduled from today is the Weekly Jobless Claims which is not a major market mover. This does not necessarily mean that the USD trade will be calm today, as data originating elsewhere in Europe might shake the markets quite a bit. The direction of such price action, however, depends on ECB Governor Trichet's pick of words.

EUR

A mixed German Factory Orders report, released yesterday did not bother the EUR much and did not prevent it from strengthening against most currencies. February's Factory Orders dropped 1% on expectations of a 0.4% increase, but the disappointing reading was slightly offset by a 0.9% upward revision to January's reading. With the lack of any clear direction provided by the data, the EUR was left to strengthen on the back of USD weakness.

All eyes are currently on the news conference that will accompany the European Central Bank rate decision. The Interest rate decision is scheduled for 12:45 GMT, and the ECB is widely expected to raise the interest rates by 0.25% to 3.75%. There is a tiny probability, if any, that the ECB will choose to surprise the markets and leave the rates unchanged, but should such a measure be taken, a massive EUR sell off might be prompted. The markets are expected to pay closer attention to the news conference at 13:30GMT and ECB's Trichet peak of words. Should the governor retain his hawkish "Strong vigilance" rhetoric, further EUR gains are expected all across the board.

Also expected today is the Bank of England's rate decision, and it is likely to leave interest rate unchanged. The BoE's rate decisions are laconic, with the inflation report and minutes releasing a week and two weeks later, respectively. Therefore, unless the BoE takes the markets by surprise one more time, the decision is not expected to have a significant impact on the GBP.

JPY

The JPY was little changed yesterday as market participants were trying to determine whether the impressive rebound that took place two day's ago signals the end of carry trades unwinding or just a short break in a greater JPY rally. Today's ECB news conference in Europe might provide a partial answer, and so might tomorrow's NFP report. The future of speculative carry trades will be determined by the interest rates differentials between the JPY and its counterparts, and since we do not expect the Bank of Japan to hike its rates too quickly, it all depends on what is going to happen elsewhere. An unchanged hawkish tone from the ECB might provide sufficient reason to reinitiate the JPY carry trades, and therefore weaken the JPY significantly.

Technical Analysis

EUR/USD

The pair has bounced back from its trendline support at 1.3080 and seems to be heading back the upper boundary of the channel eyed at the daily chart, extending from late January. 4H Slow Stochastics is slightly overbought and MACD is at neutral level. A continuation of the uptrend is likely.

GBP/USD

The GBPUSD reversed just a touch from early July's trendline at 1.9175. Daily studies are still slightly bearish but intraday oscillators are neutral. We expect the pair to continue range trading between 1.9200 and 1.9700.

USD/JPY

The pair's failed attempt to breech below 115 defines this level as the first significant support. Intraday studies are at neutral levels. Zooming out to the daily, oscillators are still bearish but MACD and Slow S are starting to reverse direction. We hold a bullish opinion on the pair, but some more basing above 115 is not unlikely.

USD/CHF

The USDCHF range trades between 1.2100 and 1.2260 for over a week in an overall short term down trend. There are no signs of reversal present and intraday's are neutral. We favor the downside but prefer waiting for a better entry point.

Wild Card

NZD/USD

This forex pair met a trendline support down at the 0.67 area. Intraday oscillators are neutral but dailies start to head back up to positive territory. A 38.2% retracement of the last bearish 0.7120-0.6720 move, towards 0.6876 seems likely.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.3250	1.9563	118.44	1.2400	0.7946	0.6960
	1.3217	1.9452	117.73	1.2329	0.7850	0.6902
	1.3192	1.9348	116.95	1.2254	0.7793	0.6830
Support	1.3147	1.9283	115.81	1.2174	0.7756	0.6789
	1.3086	1.9205	114.90	1.2142	0.7705	0.6694
	1.3033	1.9130	114.05	1.2057	0.7678	0.6649

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
08/03/2007	11:00	EUR	German Industrial Production seasonally adjusted (MoM)	Jan	-0.5%	0.3%
08/03/2007	12:00	GBP	Bank of England Announces Rate Decision	Mar	5.25%	5.25%
08/03/2007	12:45	EUR	European Central Bank Announces Rate Decision		3.5%	3.75%
08/03/2007	13:30	EUR	Trichet Speaks at European Central Bank News Conference
08/03/2007	13:30	USD	Initial Jobless Claims	Weekly	338K	333K
08/03/2007		JPY	Machine Orders	Jan	-0.7%	2.1%