Forex Tips & Daily Analysis

Economical News

USD

The Greenback strengthened a bit yesterday after a positive news day that contained two important events. The first would be the ISM Non-Manufacturing Index which exceeded the expectations of 58.1 and was released at 60.7, indicating a healthy expansion in the services sector. The same is true for the ISM Non-Manufacturing Prices which also came in higher than expected at 65.5 and a consensus of 64.0.

Yesterday's biggest news release was the ADP Nonfarm Employment Change as its importance is constantly argued, and its correlation with the Nonfarm Payroll release is often doubted. The ADP release showed a very strong figure of 150K jobs added, whereas the wide expectation stood at 105K. This is good news for the labor market which is strongly connected to the Housing market which is currently struggling, as we can see from recent related figures. This might give traders a small taste for the much anticipated release of the Nonfarm Payroll today, which is widely expected to be released at 125K and was released at 157K last month. Although we saw a relatively calm market reaction for the release of the ADP we should certainly expect a much more violent reaction if the NFP will surprise with a similar figure. This might push the USD ahead into a much stronger position and will probably pull it out of the quicksand it has been sinking in recently.

If indeed we will see a local strengthening for the Greenback, it might represent the beginning of the much anticipated winds of change and will take the USD on a reversal journey.

EUR

It was a big day in Europe yesterday as we saw the much anticipated release of the two interest rate statements. The Bank of England raised the interest rate to 5.75% as was widely anticipated and caused almost no price movement as the statement was completely priced in. This was the fifth time the Bank of England raised rates since last August. This indicates that the BOE was truly concerned regarding the GBP level and are looking to pressure the inflation levels.

The Euro-Zone interest rate was left unchanged at 4% yesterday, as we heard several important words which were used by Trichet such as “strong Vigilance”, which is a powerful indication that we might see a rate hike even as soon as next month. It looks as if the ongoing monetary policy of the ECB is not in favor of an excessively strong EUR, as Europe is known to be a highly export related economy.

JPY

Yesterday the JPY hit a record low against the EUR as the prospect of an interest rate hike may increase Japanese investors demand for European assets. According to ECB President Trichet's comments the market can continue to expect a rate increase as soon as September. The yen has dropped 6.5 percent versus the EUR this year as Japan's 0.5 % key borrowing cost encouraged investors to send money abroad. The widening interest rate differentials between Japan and the rest of the world is continuing to encourage carry trades and there is no indication that they will unwind in the near future so it seems that the JPY is set continue on its bearish path as the market's bias is to sell the JPY. However there may be some light at the end of the tunnel for the JPY as Bank of Japan Governor Fukui reiterated earlier today that the Japanese economy is expanding moderately and deflationary pressure is easing. This positive outlook may provide the JPY with some much needed reprieve.

Technical Analysis

EUR/USD

After touching the 1.3650, which is very close to record levels, the pair shows signs of a slight correction. The dailies are moderate, and the hourlies are starting to be bearish. There is a bearish cross forming on the daily chart, indicating that the move down might be targeting the 1.3500 levels.

GBP/USD

The pair has been roaming on record highs for several days now, and is showing a drop to the 2.0100 levels. The daily charts are very bearish, as the hourlies support. The RSI on the 4 Hour charts shows that the bearish move still has steam to take the pair down back to the 2.0000 on the next move.

USD/JPY

The pair broke through the 122.80 level which is the 61.8% Fibonacci level of the 120.75/124.10 move. Together with a very bullish daily chart, a preferable strategy might be to wait for the hourlies to unwind, and go long until the next target price of 123.50.

USD/CHF

The very strong support of 1.2100 held fiercely yesterday, as the pair showed the first signal of recuperation. The daily charts show bullish cross, as the hourlies support the bullish notion. If a breach through the 1.2200 level will occur, than the move up will probably be stronger and might take the pair back to the 1.2300 level.

Wild Card

EUR/GBP

There is a very distinct downwards channel forming on the daily chart, and the pair refuses to break through the upper level of the channel. This provides Forex traders with the opportunity to join the downtrend at a very high position, thus maximizing the profit potential. The bottom section of the channel is 0.6690.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.3510	1.9945	124.14	1.2514	0.8534	0.6843
	1.3476	1.9899	123.78	1.2495	0.8500	0.6810
	1.3400	1.9849	123.50	1.2423	0.8478	0.6767
Support	1.3315	1.9779	122.99	1.2360	0.8400	0.6700
	1.3265	1.9753	122.50	1.2312	0.8367	0.6682
	1.3240	1.9625	122.23	1.2289	0.8334	0.6653

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
07/06/07	08:30	GBP	Industrial Production	m/m	0.3%	0.3%
07/06/07	08:30	GBP	Manufacturing Production	m/m	0.3%	0.3%
07/06/07	11:00	CAD	Employment Change	m/m	9.3K	17.5K
07/06/07	11:00	CAD	Unemployment Rate	m/m	6.1%	6.1%
07/06/07	12:30	USD	Nonfarm Employment Change		157K	125K
07/06/07	12:30	USD	Unemployment Rate		4.5%	4.5%
07/06/07	12:30	USD	Average Hourly Earnings	m/m	0.3%	0.4%