Reversal or Correction? That is the question!
Economical News
USD
After a much anticipated dollar reversal, the market may be a little disappointed in knowing that it may be over. Despite a surge in the dollar over the last few trading days, the trading week has started with a whimper as the dollar is being traded near 1.9830 against the GBP and 1.3540 against the EUR.
The reason he dollar hasn't managed to build up steam in its recent resurgence is due to the economic figures. Retail sales have hit a snag and as such, other economics indicators have hit the spotlight. Retail sales were negative for the first time since September while the trade deficit widened as well and this despite a weak dollar.
There are a lot of indicators expected for release this week which may either push the dollar higher or actual cause this recent move to seem as just a correction. Traders look ahead to housing data which should shed some light on both the retail market as well as the future of inflation and as such the future for the interest rates. As it currently stands, no rate hikes are expected and the dollar will have a tough time garnering strength.
EUR
After last week's ECB meeting and Trichet's call for strong vigilance, the EUR actually managed to weaken across the board. Traders dropped the EUR as this was expected and as is the case many a time, doing what markets expect can cause currencies to provide an uncorrelated move.
This week, traders look forward to GDP from Germany, France and the EZ at large. If GDP edges higher in each of these cases, it could mean EUR strength and fast. As such, any such move would put recent weakness on the side and be labeled as a mere correction. It is important to note the EZ GDP is expected above 3% and as such, would be significantly higher that that of the USD. This could put strong pressure on the EUR as markets expect a rate hike soon. This is a strong case due to the fact that as GDP increases in the Euro Zone above that of the US, rates have remained significantly lower and is causing the risk premium to shift the other way. Buying EUR could be the move of choice fro many traders if the figures are on the up.
JPY
As was the case in most central bank meetings last week, the BOJ decided to leave rates on hold. Due to a quiet week of news behind us, there was no reason for large moves and that was what occurred. The JPY crosses remained weak yet didn't' continue there slide. It could well be that the current state of the Japanese economy raises more questions than it answers and as such is causing the JPY to remain weak. Expectations for GDP are 2.7% (over double the GDP in the US - 1.3%) over 1st quarter. As such, expect the JPY to remain weak, but we do not expect any more significant moves downward for the Japanese currency over the next few days. Finally, Yen traders will keep a keen eye on Thursday's BoJ Monthly Report and rate announcement. It is fairly obvious that the bank will leave rates unchanged, but any shift in rhetoric would easily cause large price moves in the downtrodden Japanese Yen.
Technical Analysis
EUR/USD
EUR USD broke the 1.3520 resistance. The volatility is high. Exponential moving averages indicators show EUR USD moves without a trend. The price is just below the 1.3550 resistance and it looks like a day of range trading is upon us.
GBP/USD
After bearish movement GBP/USD, the pair has begun to consolidate . The volatility is low. As it seems for today the bearish movement should continue, but at the same time traders should be very cautious, The price should continue to move in the range of 1.9770 to 19850.
USD/JPY
The volatility is very high USD JPY is in a range between 119.40 and 120.50. USD JPY moves without trend. We expect bullish pressure on the pair. The price should continue to move in a range between 119.50 to 120.50 .
USD/CHF
The volatility is quit low, USD CHF moves without a trend. Teh pair is is trading between 1.2150 to 1.2230. Bollinger bands are parallel. We should see bearish pressure on USD CHF for today and a breakout is very possible to the downside.
Wild Card
EUR/CHF
The volatility is very high EUR CHF. The pair is being traded in a range between 1.6425 to 1.6500. For today we expect bullish pressure on a gathering of momentum. The price should find a resistance below 1,6490 and forex traders should look for quick gains in the current range.
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 | 1.3600 | 1.9880 | 120.70 | 1.2215 | 0.8370 | 0.6870 |
| 1.3590 | 1.9865 | 120.50 | 1.2200 | 0.8355 | 0.6850 | |
| 1.3560 | 1.9855 | 120.35 | 1.2190 | 0.8340 | 0.6840 | |
| Support | 1.3520 | 1.9800 | 119.90 | 1.2160 | 0.8300 | 0.6810 |
| 1.3500 | 1.9770 | 119.70 | 1.2140 | 0.8285 | 0.6800 | |
| 1.3480 | 1.9755 | 119.55 | 1.2130 | 0.8270 | 0.6780 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 05/14/07 | 9:30 | GBP | PPI Input | m/m | 1.2% | 1.0% |  |
| 05/14/07 | 9:30 | GBP | PPI Output | m/m | 0.4% | 0.3% |  |
| 05/14/07 | 10:00 | EUR | Industrial Production | m/m | 0.6% | 0.4% | |
| 05/14/07 | 15:30 | GBP | Leading Index | m/m | 0.8% | |