Will This Be The Week Of The Greenback Reversal?
Economical News
USD
It has been a very impressive move for the greenback on Friday as it appreciated about 0.5% against the EUR and across most of the board. It started early in the trading session and culminated at the release of the US Trade Balance which narrowed down to -58.5B, a much better figure than the expected 63.5B. The move on Friday caused traders to understand that this might be the first signal to a wider move and the notion on the market is slowly turning into a USD bullish one. Whether this is just local profit liquidation or in fact the beginning of the change, will probably be resolved in the following two weeks. The expectations for an interest rate change have been lowered by the Federal Reserve officials, and we will probably not see any cuts or hikes for the remainder of 2007. As for this week, it is not expected to be heavy with news from the US but there are several key points; the US Retail Sales on Wednesday, the PPI on Thursday, and the Consumer Sentiment and industrial Production on Friday. Most of the figures are expected to help the Greenback on its bullish move.
EUR
Last week ended with some mixed figures coming from the European market causing the EUR and the GBP to depreciate against the USD during the Friday trading session. The French Trade Balance went further down to -2.8B together with the German Trade Balance which also went down but remained in positive grounds of 15.0B. The positive data release came from the UK as the Industrial Production came out higher then the expected 0.2% on 0.3%, which made the GBP depreciation against the USD softer. As for today the most significant news event will come from the UK with the PPI Input expected to be released at 0.6%, and the PPI Output at 0.4%. The important events that are expected to come this week are the UK CPI, the UK Retail Sales, and the Swiss Interest Rate Release.
JPY
It has been a relatively quiet trading session in Asia after the release of the JPY Gross Domestic Product revision, which caused no price shaking.
The economy expanded by a revised 0.8% in Q1 from the previous quarter, growing at a faster rate than the preliminary estimate of 0.6%, as the corporate sector continued to spend on new plants and other assets to meet demand abroad for Japanese-made goods.
“Today's revised GDP data confirmed that Japan's economic recovery remains intact,” said Masayuki Gotoh, senior economist at the Cabinet Office.
Although the picture looks pink for the JPY, it appears that most of the trading bias will come from US and EUR derived events, as most focus this week will be concentrated on the USD movement.
Technical Analysis
EUR/USD
The pair is breaking through major key levels as the 1.3400 barrier was broken; we see that a 1.3350 breach has already been made. The daily charts are bearish and the hourlies are unwinding to support the bearish notion. 1.3300 is the next target price.
GBP/USD
There is a very strong support level forming at 1.9620, as the pair was shy of a breach at the early stages of the trading session. If a breach will be made we will probably see the April 1st low of 1.9550.
USD/JPY
The pair is showing moderate sign of a local correction, as we might see it touch the 121.00 levels again before the next move up will occur. The dailies are very bullish, and the hourlies delicate bearish cross indicating that buying on dips might be preferable today.
USD/CHF
A massive 200 pip move on Friday caused the pair to close the week at 1.2350. The daily charts are bullish with plenty of room to run, together with the hourlies which are unwinding from overbought levels to support the bullish notion.
Wild Card
CAD/CHF
The pair is touching record levels of 1.1650 as there is a very clear bearish pattern forming on the 4 Hour chart allowing forex traders to jump into what looks like a very interesting downward move. If the dailies will approve we might see a reverse move that provides a great entry point for a short position.
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 | 1.3490 | 1.9824 | 122.90 | 1.2489 | 0.8500 | 0.6880 |
| 1.3469 | 1.9789 | 122.36 | 1.2423 | 0.8487 | 0.6833 | |
| 1.3400 | 1.9710 | 121.89 | 1.2382 | 0.8460 | 0.6804 | |
| Support | 1.3310 | 1.9624 | 120.98 | 1.2290 | 0.8372 | 0.6760 |
| 1.3285 | 1.9600 | 120.52 | 1.2234 | 0.8358 | 0.6735 | |
| 1.3245 | 1.9525 | 120.30 | 1.2189 | 0.8332 | 0.6712 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 06/08/07 | 9:30 | GBP | PPI Input | m/m | 0.7% | 0.6% |  |
| 06/08/07 | 9:30 | GBP | PPI Output | m/m | 0.5% | 0.4% | |
| 06/08/07 | 15:00 | EUR | ECB President Trichet Speaks | |