Forex Tips & Daily Analysis

Economical News

USD

Yesterday there were several index's published in the US market that directly influenced the Forex market: Nonfarm Productivity q/q, Unit Labor Costs q/q, Unemployment Claims.

Nonfarm Productivity q/q accelerated more than forecasted in the second quarter, it rose at an annual rate of 2.6 percent from April through June, and at the same time the Unit Labor Costs q/q index climbed at a 1.4 percent, less than reported last month. Lowering the risk of a pickup in inflation as the Federal Reserve weighs cutting interest rates, both should reduce inflation worries. Benefit rolls swelled to 2.598 million in the week ended Aug. 25, the highest since February, suggesting hiring has softened. Initial unemployment claims fell by 19,000 to 318,000 in the week that ended Sept. 1. But after all that, the US dollar still remains weak for the present week following its second day in sequence, since home sales data was published . As it stands, these circumstances still demonstrate the struggle of the US dollar that is clashing with the credit crisis on the struggling housing market. At the moment, companies are unenthusiastic to do so but many of them are begining to cut staff.

Regarding this crisis and in order to keep credit markets from drying up, the Fed added today 31.25 billion dollars to the US money markets. The Fed has injected some 200 billion dollars into the financial system since August 9 due to problems linked to the distressed US mortgage market.

The most interesting data which is going to be published today in the US market is: the Nonfarm Employment Change index, and the Unemployment Rate index. Previous month figures were standing on 92K, and for today we expect a rise to 110K which is a net increase of 18k national payrolls. As we can see, there is not a big expectation for a dramatic recovery of the US dollar in the short run and it should continue to trade on a slippery slope.

EUR

Yesterday at a Policy makers meeting in Frankfurt The European Central Bank decided to leave the 13-nation currency interest key rates unchanged at 4.00 percent. In addition, The GBP softened yesterday to some extent against other major currencies after the Bank of England announced that it has left for the second month running the key British interest rate on ice at the current level of 5.75 percent, as was expected.

The main reason for keeping the interests key rates unchanged is due to the fact that the central banks still suffer from the turbulence which exists in global markets and the lack of liquidity in the financial system attributed by the collapse of the US subprime mortgage market has made banks unwilling to lend.

By keeping the interest rate on the same level they intend to avoid creating any "unnecessary tension" for the short run, and as it seems the next interest rate increase will be made only during the following month. However the BoE emphasized that it has agreed to set interest rates in order to meet the government's inflation target. ECB President Jean-Claude Trichet said more information was needed before raising interest rates. The BoE said it would inject about 1.0 billion pounds into the financial system due to the recent chaos in global credit markets -- and could inject a further 4.4 billion pounds as soon as next week.

JPY

There was no significant data released from Japan last night and the JPY has remained relatively range bound against the majors. The direction of the JPY will heavily depend on whether carry trades will be the preferred strategy by investors. At the moment carry trades could be regarded to be in a “semi-unwind” as the JPY strengthened against the NZD on the back of weak US data yesterday but it did lose most if its gained ground in the Asian trading session. The NZD is a favorite of carry trades so it's up and down movement is making it difficult to determine whether the market is heading towards a sustained carry trade unwind. The JPY will experience some volatility today on the back of key US economic releases and traders will get a clearer picture of the direction the JPY will take next week.

Technical Analysis

EUR/USD

The pair is floating in a relatively tight range for several days now, as can be seen on the 4 Hour chart. No significant break through the 1.3640 -1.3700 range has occurred, and the hourly chart continues to deliver mixed signals. The daily chart is giving a moderately bullish sentiment with a bit more room to run.

GBP/USD

On the 4 H chart, a rising wedge (bullish) is forming which may imply a continuation of the bullish trend; its recommended to time the entrance to the market with short term charts, 2.0155 seems like a strong entry point. At the moment GPBUSD is being traded around 2.0130 to 2.0260 range. The volatility is low so we should expect to see also today bullish pressure on the GBP. The uptrend should continue onto the 2.0250 resistance level.

USD/JPY

USDJPY is in a downtrend supported by 1H exponential moving averages. The volatility is low. Bollinger bands are tightened. We should expect to see also today a bearish configuration. 1H, 4H Elliott pattern implies that the USDJPY will continue to gather momentum. Traders should pay attention to the fact that the dailies are still bearish, and there is still more room to go down on a longer time scale. The target is expected at 114.30 level.

USD/CHF

The USDCHF is in a bearish configuration. The volatility is down. USDCHF moves without trend and swings around exponential moving average (EMA 50 and 100). Bollinger bands are tightened. 1H, 4H Elliott pattern implies a continuation of the bearish pressure. The target is expected at 1.1985.

Wild Card

Gold

There is a bearish channel forming on the daily chart, as the gold is floating on the upper level of it. The slow stochastic has completed the cross above the 80 level, which validates the move as bearish. This provides Forex traders with a great opportunity to enter a short position with strong bearish momentum.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.3750	2.0275	115.80	1.2100	0.8355	0.6850
	1.3725	2.0255	115.60	1.2075	0.8330	0.6830
	1.3700	2.0225	115.40	1.2055	0.8305	0.6795
Support	1.3665	2.0195	114.70	1.2000	0.8235	0.6735
	1.3645	2.0175	114.45	1.1070	0.8210	0.6705
	1.3620	2.0155	114.25	1.1050	0.8185	0.6680

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
07/09/2007	11:00	CAD	Employment Change		11.3K	15.3K
07/09/2007	11:00	CAD	Unemployment Rate		6.0%	6.1%
07/09/2007	12:30	USD	Nonfarm Employment Change		92K	110K
07/09/2007	12:30	USD	Unemployment Rate		4.6%	4.6%
07/09/2007	12:30	USD	Average Hourly Earnings	m/m	0.3%	0.3%
07/09/2007	14:00	USD	Wholesale Inventories	m/m	0.5%	0.5%