Are we gonna see another day of market mayhem?
Economical News
USD
The Greenback maintained some stability yesterday, as most of the price action in the market resulted from the crosses. The moves were mostly felt by the JPY and EUR direction as the USD/JPY fell to 117.70 and the EUR/USD lost more than 150 pips, nose diving to 1.3650. With lack of significant news from the US, traders were searching for an opportunity to look away from the ongoing deterioration in the housing market and the sub prime crisis, and try to focus on other issues like the unwinding of the carry trades, and the Euro-Zone inflation status.
Today's calendar is also clean in the US area, as the most significant news will come from Canada where the Employment Change is expected to be released at 11:00 GMT. The report measures the number of new jobs created in the previous month. The number of new jobs being created is one of the most important indicators of the economy's health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises. The consensus around the release stands at 21.0K which is a major drop from last month's 34.8K, and might shoot the USD/CAD up if it will be released inline with expectations.
Next week will deliver much more interest with regards to the US market, as it full of key releases such as the US Retail Sales, Trade Balance, Industrial Production, and Consumer Sentiment.
EUR
There was no significant news released from the Eurozone yesterday but nevertheless the EUR experienced some sharp volatility. The EUR lost ground all across the board, particularly against the JPY as hedge fund losses sent US stocks on their largest tumble in over five months thereby further discouraging the already unwinding carry trades. The EUR also lost some significant ground against the USD yesterday on the back of the news that BNP Paribas SA halted withdrawals from funds that owned subprime, or higher risk home loans. With global market uncertainty and investor panic it seems that the sharp volatility is set to continue and even the usually resilient EUR may begin to come under pressure. Today the following data is expected to be released from the Eurozone, French industrial production, French Government budget Balance, Italian GDP and the Composite Leading Indicators. These indicators are not expected to be market movers so the EUR should find some reprieve after yesterdays slide. However with the problems in the US housing and credit sectors beginning to have a ripple effect on the European and Asian markets we may very well see the volatility continue today. The resilience of the EUR will be tested today as yesterday's bearish momentum coupled with the global market slide could weigh down on the EUR as investors seek the relative safety of US treasury bonds.
JPY
The big question regarding the carry trades comeback was answered quite massively yesterday, as it was quite clear that the JPY is gaining strength all across the board, and almost making a statement that it is still too early for carry trades to resume. The volatile moves showed 350 pips drop against the EUR, and more than 400 pips against the GBP, which are both quite spectacular, and are not seen on a daily basis.
Last night we saw the release of the Corporate Goods Price Index (CGPI), which is a very important inflation index, which measures the price changes experienced by corporations when purchasing goods. The index was released inline with expectations at 2.1%, and caused no major price movement.
As for tonight, there are no major news releases expected to come from Asia and the unwinding of the carry trades will probably continue at a more moderate pace than yesterday's racing track.
Technical Analysis
EUR/USD
The pair is strongly marching into the 1.3620 zone, which is a key support level, and a two week low. There is a distinct cross forming on the 4 Hour chart that might indicate a correction move. If a breach through the key level will occur, we might see a validation for a drop to the 1.3580 level.
GBP/USD
After the key level of 2.0300 was breached, the negative momentum was quite strong. The RSI and slow stochastic are confirming that the move is indeed validated, and the pair is eyeing the 2.0150 and maybe even further north.
USD/JPY
The bearish rally continues with full steam, and is confirmed with extremely bearish dailies. The hourlies are a bit oversold, which indicates that traders should look for a high entry point before resuming the down trend which appears to have plenty of room to run.
A breach through 118.00 will validate the move and take it to the 117.20 zone
USD/CHF
The pair is in the middle of a very distinct channel, which is heading south. The upper level of the channel is located at 1.2030, which now represents a strong resistance level. If this level will be breached we might see a move to the 1.2180 level, yet if the pair will continue to float in the range, the channel will most probably continue its move south.
Wild Card
Crude Oil
The oil has lost grounds from 78.00 to 71.50, and is showing no sign of stopping. The slow stochastic is floating at the 50 level which strengthens the notion that the trend's momentum is still very strong. This provides Forex traders with a great opportunity to enter a short position on a very stable strong move. Next target price should be around 71.00.
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 |
|---|---|---|---|---|---|---|---|
| 10/08/2007 | 11:00 | CAD | Employment Change | 34.8K | 21.0K |  | |
| 10/08/2007 | 11:00 | CAD | Unemployment Rate | 6.1% | 6.1% |  | |
| 10/08/2007 | 12:30 | USD | Import Price Index | m/m | 1.0% | 1.0% | |