Forex Tips & Daily Analysis

Economical News

USD

Today, September 18th is the day that forex traders have been waiting for since mid-August, as the Federal Open Market Committee will meet and announce their interest rate decision at 18:15 GMT.

At this point, it is no longer a question of whether or not they will cut, but by how much. Currently, the Fed needs to decide on what kind of action it wants to take, an aggressive 0.50 % rate cut which may be considered as a stiff intervention and it could have far-reaching implications on the market or on the other hand, a 0.25 % rate cut which might be already embodied in the current market price.

We have to mention that the third alternative which would be that the Fed will leave the rates unchanged however unlikely that may be. In reality, Chairman Bernanke will probably be more concerned about recession risks so taking this road will be highly risky for the conservative Chairman and his staff. Furthermore, this rate decision has been built up so much that anything less than a 0.25% rate cut has the potential to send equities and forex carry trades plummeting, while the greenback would likely fall sharply against currencies like the EUR and GBP.

Alan Greenspan (the former Fed Chairman) said the odds of a recession have grown since earlier this year, even though "the economy is not doing badly at this stage."

Additionally MR. Greenspan added yesterday that: "US future economy seems pretty gloomy", however it might be a prominence for launching his new book so we need to put everything in proportion. Regardless, Tuesday promises to bring substantial volatility and a break away from range trading. Bottom line, a greenback recovery is closer then it looks.

EUR

Yesterday, the EUR experienced a flat trading session against the USD, as markets await the FOMC rate announcement. Interestingly, former Chairman of the Federal Reserve Alan Greenspan noted that the EUR could replace the USD as the world's primary reserve currency as quoted by a German Magazine. On the data front, the German ZEW survey is set for release, with views that the figure will be at 75 for the month of September, down from the previous 80.2.

Generally today's trading session will be fueled by the USD rate announcement and more likely the EUR will react to the USD developments today.

JPY

The effect of the global liquidity crisis, which has recently most been felt in the UK, is causing traders to look to unwind risky one way bets against the JPY and therefore the JPY gained 0.3 % against the EUR and the greenback. Traders said that Japanese investors are not really concerned about the Northern Rock situation, adding that much of today's selling was simply a reaction to Friday's short-covering gains.

The September Reuters Tankan survey showed that the ongoing global credit crisis and domestic political instability are having a major impact on Japan's corporate sentiment. Japanese manufacturers' business sentiment worsened to a two-year low in September, while the diffusion index for non-manufacturers was unchanged, matching the low seen in December 2004. Japanese bond prices remained well supported by the survey throughout the Asian morning. Overall the USDJPY traded with a low of 114.68 and a high of 115.37 before closing the day at 115.10 in the New York session.

Technical Analysis

EUR/USD

There is a flag formation appearing on the 4 H chart, although not a classical case of a flag formation it is still strong enough to indicate that we will see some sharp movement in the future. Bollinger bands are tightened and volatility is down. However the positive momentum and RSI both indicate that this pair will still go up further before making a reversal which is now almost imminent.

GBP/USD

The hourlies and the dailies are both bearish. However both momentum and RSI indicate that this pair is in oversold territory. So the preferred strategy today may be to buy on dips and sell on highs for intra-day trading, but as a daily position there is still room for further downward movement.

USD/JPY

There is a bearish cross forming on the 4 Hour chart, which could indicate that a small correction move might occur before the bullish trend continues. The daily charts are bullish, with more room to run. A preferable strategy for position traders might be to go long, as for day traders it might be to go short

USD/CHF

The USD/CHF is in a bearish configuration. The volatility decreases as the pair moves without a trend and swings around exponential moving average (EMA 50 and 100).the Bollinger bands are tightened and the 1H, 4H Elliott pattern implies a continuation of the bearish pressure. The target price should be around 1.1810.

Wild Card

Gold

Gold broke the 716.50 resistance level and is in an uptrend supported by 1H exponential moving averages. The volatility is low and the Bollinger bands are tightened. We should expect to see a bullish configuration. 1H, 4H Elliott pattern implies that the Gold should gather momentum today, which provides Forex traders with a great opportunity to go long. The target is expected at around 718.40.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.3940	1.9950	116.65	1.1950	0.8375	0.7035
	1.3925	1.9935	115.45	1.1930	0.8355	0.7015
	1.3890	1.9910	115.20	1.1900	0.8330	0.6985
Support	1.3830	1.9860	114.55	1.1830	0.8265	0.6925
	1.3805	1.9845	114.30	1.1810	0.8240	0.6900
	1.3790	1.9825	114.10	1.1790	0.8220	0.6875

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
18/09/2007	1.00a	USD	Alan Greenspan Speaks
18/09/2007	3:10a	AUD	RBA Governor Stevens Speaks
18/09/2007	7:15a	CHF	Industrial Production	q/q	-4.7%	5.2%
18/09/2007	8:30a	GBP	CPI	y/y	1.9%	1.9%
18/09/2007	8:30a	GBP	RPI	y/y	3.8%	3.9%
18/09/2007	9:00a	EUR	German ZEW Economic Sentiment		-6.9	-16.0
18/09/2007	12:30	USD	PPI	m/m	0.6%	-0.2%
18/09/2007	12:30	USD	Core PPI	m/m	0.1%	0.1%
18/09/2007	1:00p	USD	TIC Net Long-Term Transactions		120.9B	99.0B
18/09/2007	5:00p	USD	NAHB Housing Market Index		22	20
18/09/2007	6:15p	USD	Interest Rate Statement		5.25%	5.00%