The Greenback pulls Further Back.
Economical News
USD
The greenback pulled back quite massively last week, as we saw that the small strengthening signal was very short lived and was replaced by a deep drop all across the board.
The news that came from the US last week was very consistent as the negative sentiment prevailed time after time and pushed the USD down one step after the other.
After weak releases of the Chicago PMI, unemployment claims, ISM manufacturing, and the ADP Nonfarm index, we saw some more negative sentiment on Friday.
The Nonfarm Payrolls was released at a disappointing 92K after it was widely expected to come in at around 135K. The unemployment rate also rose a bit to 4.6%, painting a gloomy picture for the US labor market. The release showed strong correlation to the ADP release that although was released much lower than 92K at 46K, still forecasted the extremely negative sentiment that caused the NFP to be released that low.
On top of all this the ISM Non manufacturing Index was released a bit later showing a dip from 60.7 to 55.8 and a consensus of 59.5, which completed an extremely negative week for the greenback in regards to news events.
This week might be very interesting for the USD, as it might be light on news events, but the two major events that are expected to be released are the Fed's Rate Announcement, and the Nonfarm productivity, both are expected tomorrow.
It looks as if it is not going to be easy for the greenback to pull back from the ongoing depreciation if the negative sentiment will continue, especially with the Sub-Prime condition that doesn't seem to be getting better any time soon.
EUR
There weren't many important news events which came from Europe last week, and the few that were, came out quite as expected, like the ECB and BOE rate announcements which came inline with expectations, and provided little price movement as they were overshadowed by a packed US calendar.
Trichet's speech at the end of last week which stated that the ECB will take a “strong vigilance” policy might raise the expectations that we will see a rate hike next month, in order to further stabilize the Euro-Zone condition.
This week should not be very exciting with regards to news releases, as the UK Inflation report will be the only major event that is expected to deliver some excitement from the European market.
JPY
The unwinding of the carry trades continues at full steam, as the deterioration in USD situation takes the USD/JPY to levels it has not seen since March 2007. The positive news flow from Japan such as the better unemployment rate which went down to 3.7%, and the housing starts which soared 6.0% from negative territories also contributed to the situation.
This week will not contain many news events apart from the Core Machinery Orders release which is expected to drop to -1%, and the M2 CD Money Supply which is expected to remain unchanged at 1.8%. The JPY movement will be heavily influenced by the USD market this week, and the unwinding of the carry trades will most likely continue.
Technical Analysis
EUR/USD
The pair is now trading around 1.3840 which is the July High level, and a very strong resistance. If the level will be breached violently, we might see a further move to the 1.3900. The daily charts are waiting validation, and the hourlies are very bullish.
GBP/USD
The Cable is now in the middle of a short correction move and will probably test 2.0400 shortly. The daily charts are moderately bullish, and the hourlies are unwinding from overbought territories. Next target price might be 2.0500.
USD/JPY
The pair is in consolidation around the 117.70 level, probably before making the next break down. The down trend is very strong, and the pair will probably try to test 117.00 shortly.
USD/CHF
After the 1.1900 level has been breached, a very strong psychological barrier has been broken. This notion is supported by extremely bearish dailies. The hourlies are a bit oversold, which makes it preferable to try to go short on tops.
Wild Card
Crude Oil
The Oil is floating at a key level, at the bottom of an upwards channel.
This provides Forex traders with the opportunity of a great entry point for a long position that might provide a pullback to the 76.50 levels again.
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
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Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 08/06/2007 | 09:30 | GBP | Industrial Production | m/m | 0.6% | 0.1% |  |
| 08/06/2007 | 09:30 | GBP | Manufacturing Production | m/m | 0.4% | 0.2% |  |