EUR & GBP Interest Rate Announcement - on tap.
Economical News
USD
Yesterday the greenback traded on a slippery slope as a succession of negative data from the US threatened to reverse the dollars recent gains. The first and most significant news of the day was the ADP Nonfarm Employment Change, which measures the number of new jobs created outside of the farming sector, this figure came in at 48K which was well below the expected figure of 103K. This weak ADP release gives a strong indication that the Nonfarm Payrolls Report will release on Friday significantly below its expected figure of 135K. Although the ADP figure has been questioned in the past with regards to its predictive value it still managed to shake up the rallying greenback. To make matters worse for the USD there was more negative news to follow as both the ISM Manufacturing Index and Prices figures came in below expectations at 53.8 and 65.0 respectively. However the greenback has performed solidly amongst the global equity market fall and it recouped after yesterday's string of negative data and now seems to be preparing itself for another rally.
Today the only significant news to be released from the US will be Unemployment Claims and Factory Orders which are both expected to release stronger than their previous figures. The persistent problems in the US sub-prime mortgages coupled with further reports of hedge fund worries is fuelling the risk aversion sentiment. The USD has performed well amid this safe-haven sentiment and it will continue to show strength today particularly against the high yielding market currencies as this sentiment is showing no imminent signs of letting up. However with yesterdays negative data taming the dollars bullish run traders will exercise caution ahead of Fridays NFP report which has a strong probability of springing a negative surprise.
EUR
The EUR is still showing signs of resilience as it traded in a relatively close range yesterday even though there was volatility all across the board. The German Manufacturing PMI figure was released slightly below the expected figure of 57.0 at 56.8. However this soft data did not manage to slowdown the overall European Manufacturing PMI figure which was released stronger than expected at 54.8. The most significant news to be released from the Euro-zone today will be the ECB's key interest rate announcement which is expected to remain unchanged at 4.00 %. . The EUR should to continue to range trade today but we could see some strong volatility if the ECB hints towards future rate policy. No news conference is expected to follow the interest rate announcement so a surprise conference by the ECB will cause the market to start flapping.
In other news yesterday the GBP had a short-lived bullish burst on the back of the release of the better than expected UK Manufacturing PMI. Today the BoE will announce its benchmark rate which also expected to remain unchanged at 5.75 %. However the current market sentiment seems to be that the ECB and BoE will both hike rates in the near future so it will be crucial for traders to identify how the preceding economic indicators from Europe and the UK will affect the two central banks monetary policy.
JPY
The JPY has enjoyed a sustained bullish run as a result of the carry trades unwind which is being driven by increased risk aversion. There has been a strong negative correlation between the JPY and US equity markets as a fall in the equity markets has usually sparked a rise in the JPY. This was reiterated yesterday as the JPY had a dip against some of the majors on the back of a short lived Dow rebound. However without any further news releases expected from Japan for the rest of the week the direction of the JPY will heavily depend on the volatility of the equity markets but with the carry trade unwind likely to continue in the near future we should see the JPY extend its gains particularly against the greenback.
Technical Analysis
EUR/USD
There is a bearish configuration forming on the 4 Hour chart. The volatility is high and the EUR/USD is not in a consolidation stage, especially after the pair has broken the 1.3700 support level. The price should continue to move downwards in the 1.3700 /1.36050 range. As it seems, the bearish pressure will continue to gather momentum at least until the week ends.
GBP/USD
The pair is going through a choppy session in the past few days, and gives mixed signal on the hourly level. The daily chart is showing massive bearish formation, and it looks as if the pair is heading 2.0200 again. a preferable strategy might be to wait for the hourlies to unwind before going short.
USD/JPY
The pair is in the middle of a very strong downtrend that started from 124.00. It looks as if the pair is having difficulties breaking the 117.60 level which is now a very strong support. If the support level will be breached it will validate the next move down, to 116.00.
USD/CHF
The pair is floating a low range similar to the one in December. The 1.1950 level is established as an almost impossible level to break. The dailies are showing bullish signals, and the dailies support the bullish notion. It might be preferable to buy on dips, as the bullish sentiment is quite strong.
Wild Card
Crude Oil
Oil is going through a massive downtrend momentum, and broke the 77.50 level. This provides Forex traders with the opportunity to jump in a good trend and to take some profit on the short rang. Next target price is 75.50.
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 | 1.3510 | 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 |
|---|---|---|---|---|---|---|---|
| 08/2/2007 | 07:30 | CHF | SVME PMI | 62.8 | 62.0 |  | |
| 08/2/2007 | 08.30 | GBP | Construction PMI | 60.1 | 59.0 |  | |
| 08/2/2007 | 09:00 | EUR | PPI | m/m | 0.3% | 0.3% | |
| 08/2/2007 | 11:00 | GBP | Interest Rate Statement | 5.75% | 5.75% |  | |
| 08/2/2007 | 11:45 | EUR | Interest Rate Announcement | 4.00% | 4.00% | | |
| 08/2/2007 | 11:45 | USD | Unemployment Claims | 301K | 315K | | |
| 08/2/2007 | 12:30 | USD | Factory Orders | m/m | -0.5% | 1.2% | |
| 08/2/2007 | 02:00 | AUD | Services PMI | 54.9 | | ||
| 08/2/2007 | 23:30 | AUD | TDMI Inflation Gauge | m/m | 0.2% | |