Data On Tap - US Core CPI ,Housing Starts and Building Permits.
Economical News
USD
Despite yesterday's sharp interest rate cut by the Fed the market anticipated the move. Stocks jumped on the news that the Federal Reserve decided to cut its key interest rate by a 0.5% to 4.75% and the dollar crashed to its historic lowest level against the EUR. The Fed slashed interest rates in order to protect the U.S. economy from sinking into a recession; sparked by the turmoil in the credit and housing markets. During the FOMC meeting, Fed chief Ben Bernanke stressed that the central bank will continue to act as needed to promise price stability and sustainable economic growth.
According to Fed's chief Bernanke's latest move, we can understand that he is more concerned by the sign's of a possible recession which are caused by the tumble in the housing market, jobs market, and the significant reduction in retail sales.
Along with an Interest Rate decision, although somewhat overshadowed by it, other U.S economy news continued to flow yesterday prior to the interest rate news, further exacerbating the currently limping U.S economy. The USD PPI index released at -1.4%, down from last month's figure of 0.6% and well below the forecasted figure of -0.2%. Housing Market Index released inline with expectations at the level of 20, yet down from the previous month's figure of 22.
The U.S CPI index is on tap today along with the Housing Starts and Building Permits. All of the latest are expected to come out quite negative.
EUR
Traders drove the EUR to a record high against the USD yesterday after the Fed cut its target rate for overnight loans between banks by 0.5% as rising defaults on subprime mortgages rippled through global credit markets. In total, the European currency has gained 5.5% this year versus the USD as traders bet the Fed would cut rates as the U.S. economy slowed. The EUR traded as high as $1.3987 against the USD although exporters/importers may weigh in on any attempt by the market to surpass the psychologically critical 1.40 level.
Yesterday, there was no significant news released from the EUR zone, apart from the German ZEW Economic Sentiment, which came in weaker than expected at -18.1. However this soft data did not manage to slowdown the European currency from extending its gains across the board after a significant Interest Rate cut by the Fed.
Today is also expected to be devoid of data so we should see the EUR continue range trading on it's heights and will heavily depend on the volatility of the equity markets.
JPY
Yesterday, the Japanese currency dropped against all 16 major currencies after the Fed rate cut fueled a rally in U.S. stocks, spurring investors to buy riskier assets funded by borrowed yen.
The dollar pared some of its early gains against the yen to trade at 115.90 yens per one USD.
Some traders are moving back into risky positions, buying the high-yielder's and selling the yen, so-called carry trade bets, investors buy high-yielding currencies with funds borrowed in Japan, where the benchmark interest rate is 0.5%.
The yen traded as weak as 115.98 per dollar after the Fed interest rate cut, down 3.9% since it appreciated to 111.61 per dollar on Aug. 17, the strongest since June 2006, as investors exited carry trades.
BOJ kept its benchmark rate at 0.5%, the lowest among industrialized nations and we expect the greenback to continue its recovery against the JPY despite the interest rate differential moving towards JPY favorability.
Technical Analysis
EUR/USD
The weekly chart implies on an upcoming reversal as a bullish channel is observed and the price is currently touching the upper barrier. In case of breach through this barrier we may see an aggressive bullish movement.
Today, a bullish flag structure is shown on the 15 min. chart which may indicate an upcoming bullish movement which is also supported by the Slow Stochastic (14).
Going long seems to be preferable.
GBP/USD
On the 4 hours chart, the slow stochastic is crossing 89 clearly in over bought territory, which implies on an upcoming bearish trend.
There is an opposite head & shoulders pattern which is reflected on the 4 hour chart which also indicates on an upcoming bearish trend.
Going short seems to be preferable today.
USD/JPY
The 4 hour chart indicates an upcoming bearish trend when a rising wedge is observed and the pair failed to breach the upper barrier.
Forex traders need to pay attention for the 115.46 Fibonacci 38.2% levels because in case of a breakout the next barrier is located at 114.72 which is the lower boundary.
USD/CHF
On the 1 hour chart a falling wedge structure is shown which implies on an upcoming bullish trend however , on the 15 min. a descending triangle is establishing which indicates on an upcoming bearish trend especially if the 1.1802 level would be breached. If this level will not be breached, we expect to a bullish trend to take place.
Wild Card
Crude Oil
Today we may see the Crude Oil weakening as the bullish trend seems to be out of steam. The 4 hour chart is bearish and the Slow Stochastic is crossed on overbought territory (84) and having a negative slope.
Going short seems to be preferable today however Forex traders need to pay attention for a possible 80.80 breakout.
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 | 1.4005 | 2.0200 | 116.40 | 1.1900 | 0.8600 | 0.7035 |
| 1.3980 | 2.0175 | 116.15 | 1.1850 | 0.8580 | 0.7015 | |
| 1.3970 | 2.0150 | 115.90 | 1.1830 | 0.8550 | 0.6985 | |
| Support | 1.3955 | 2.0100 | 115.55 | 1.1800 | 0.8500 | 0.6925 |
| 1.3933 | 2.0085 | 115.30 | 1.1770 | 0.8480 | 0.6900 | |
| 1.3900 | 2.0050 | 115.10 | 1.1750 | 0.8455 | 0.6875 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 19/09/2007 | 4:21a | JPY | Interest Rate Announcement | 0.50% | 0.50% |  | |
| 19/09/2007 | Tenta | JPY | BOJ Governor Fukui Speaks |  | |||
| 19/09/2007 | 7:15a | CHF | Retail Sales | y/y | 1.0% | 5.2% | |
| 19/09/2007 | 8:30a | GBP | MPC Meeting Minutes | 9-0 | 9-0 | | |
| 19/09/2007 | 11:00 | CAD | Core CPI | m/m | 0.1% | 0.1% | |
| 19/09/2007 | 12:30 | USD | Core CPI | m/m | 0.2% | 0.2% | |
| 19/09/2007 | 12:30 | USD | Housing Starts | 1.38M | 1.36M | | |
| 19/09/2007 | 12:30 | USD | Building Permits | 1.37M | 1.35M | | |
| 19/09/2007 | 2:30p | USD | Crude Oil Inventories | -7.0M | - | | |
| 19/09/2007 | 10:45 | NZD | Current Account | -2.22B | - | | |
| 19/09/2007 | 11:50 | JPY | BSI Large Manufacturing Conditions | q/q | -2.2 | - | |