USD Downtrend Continues.
Economical News
USD
The USD continued trending lower during yesterday's sessions, a bearish sentiment that was fueled by renewed concerns of a slumping housing market and reemerging trade tensions between the US and China. Following a profit warning issued by "American Home Mortgage" which announced that its earnings are going to be heavily impacted by the losses in Alt-A mortgages, markets now seem to realize that the problems in the housing market are not contained to the sub-prime lending sector, and they have started spilling over to other sectors as well. Alt-A is a mortgage risk categorization that falls between prime and sub-prime, but is closer to prime. The fact that Alt-A loaners face problems paying their debts raises some serious concerns, and prime loaners could very well be the next to default. Economists are concerned with the state of the housing market because a large portion of the personal consumption in the US is financed by second mortgages consumers take on their houses in order to afford and maintain a certain life style. Therefore, a hard landing scenario in the housing market could very well materialize into a hard landing scenario in the overall US economy. For the time being, there are no signs of such a crisis in the housing sector, and the last NFP report provides us with quite solid evidence; during the month of March, the construction sector has added 56K job - certainly not a sign for a slumping sector.
Another factor weighing on the dollar yesterday were complaints the US filed to the World Trade Organization against China regarding China's Piracy of US copyrighted movies, music, software and books. After imposing tariffs on paper imports from China, the Bush administration takes a step further in its fight against what it defines as "trade imbalances" caused by the Chinese trade policy. The markets see such moves as dollar negative, because such actions can result in retaliation from Beijing.
Today at 18:00GMT, the Federal Open Market Committee will release the Minutes from its March 21st meeting, which might prove to be the only USD positive release this week. Yesterday, Fed governor Mishkin commented that "the central bank has been successful in anchoring inflation in the US, but it was currently too high and if the expected moderation in inflation did not occur the Fed would need to act", and given the hawkish rhetoric we have recently heard from other Fed officials as well, the script of the meeting's protocol seems clear and is probably well priced-in. Taking the different Fundamentals into account, it seems that the USD still has some more downside to fulfill and is likely to continue trending lower in the upcoming days.
EUR
The German Trade Balance fell a little shy of market's expectations of 15.4Bln and released at 14.2Bln. This has not diminished the EUR bullish bias a bit, as traders accumulate EUR ahead of the ECB rate decision tomorrow, or, to be precise, the following press conference by the European Central Bank governor, Jean-Claude Trichet. Although no rate hike is expected this Thursday, the expectations of a rate hike next month were more than enough for the EUR to establish a new all times high against the JPY at 160.10.
In spite of the high levels of the EUR, the currency still has substantial upside potential that is likely to materialize only tomorrow.
JPY
Core Machinery Orders fell 5.2% in March, a significantly sharper decline than the 0.4% decline anticipated by the markets. Any negative economic release from Japan makes an additional rate hike even more distant, and with current JPY value mainly driven by carry trades, this could mean further devaluation of the JPY.
In the next 24 hours the Corporate Goods Price Index, a supply side inflationary measure, is due out and is expected to come at 0.1% after a flat reading the previous month. The CGPI usually does not have a considerable impact on the markets, but a negative figure could once again reignite fears of an economy in Deflation, which would immediately translate into further JPY losses.
Technical Analysis
EUR/USD
The pair is floating at the top of the current uptrend and is now consolidating.
The daily charts are slightly bullish with room to extend, as the hourlies are unwinding from neutral levels. Target price might be 1.3500.
GBP/USD
The pair has been testing 1.9780 overnight, and it looks like its heading steadily towards 1.9850. The daily charts are going back to a bullish state as the hourlies support the positive notion.
USD/JPY
The pair is approaching the Fibonacci resistance of 119.40 after a choppy overnight. The uptrend still has plenty of steam in it and shows no sign of stopping. The hourlies are a bit overbought making it preferable to buy on dips.
USD/CHF
The pair is now consolidating at the 1.2170 levels which is the bottom level of a very distinct 4 hours channel. The stochastic is showing a fresh bullish cross, and the hourlies support with unwinding to bullish territory. Target price is around 1.2260.
Wild Card
EUR/JPY
The pair is touching the historic level of 160.00 and shows no signs of calming down. This level gives forex traders a great opportunity for an entry point for a long position if a further break will occur. Being very strong resistance traders must scrutinize the pair closely in order to get in this sharp up trend on time.
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 | 1.3500 | 1.9915 | 120.87 | 1.2314 | 0.8400 | 0.6878 |
| 1.3450 | 1.9860 | 120.00 | 1.2298 | 0.8356 | 0.6845 | |
| 1.3435 | 1.9820 | 119.50 | 1.2230 | 0.8318 | 0.6815 | |
| Support | 1.3400 | 1.9740 | 119.00 | 1.2150 | 0.8210 | 0.6756 |
| 1.3370 | 1.9700 | 118.75 | 1.2100 | 0.8185 | 0.6723 | |
| 1.3300 | 1.9645 | 118.50 | 1.2067 | 0.8171 | 0.6700 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 04/11/07 | 18:00 | USD | FOMC Minutes (March 20-21) |  | |||
| 04/11/07 | 18:00 | US | Monthly Treasury Budget Statement | MAR | -$120.0B | -$85.0B |  |