Forex Tips & Daily Analysis

Economical News

USD

It was a relatively hectic day for the greenback yesterday, as we saw the EUR/USD climb back to 1.4220 just to drop sharply into the 1.4140 zone and then make it back to 1.4190, and all in a relatively short period of time.

Most of that price movement was caused by several important releases from the US market, starting with the Treasury International Capital (TIC) Net Long-Term Transactions. The TIC measures the monthly difference in cross-border foreign and domestic purchases of long-term securities, and is a great indicator for international money flows. The TIC release came out way off expectations at -69.3B, with a previous release of 19.5B and expectations for 60.0B. The figure might indicate that the TIC is at a critical point, and we must wait for the next release to understand if this was a one time fall, or a deeper problem in the US money flow.

Following the TIC, we saw the release of the Industrial Production and the Capacity Utilization Rate; both were released inline with expectations, and caused little effect as traders were getting ready for Treasury Secretary Paulson's Speech.

It seems that despite Paulson's opinion that American investors will get used to the credit situation and find inductive solutions which could expand to the US market, the US government and top Treasury officials are together prodding and pushing Wall Street firms and the mortgage industry to come up with solutions - and helping devise some of them as well.

Paulson is becoming more active on other fronts as well. In his speech, he called for a new nationwide set of rules for mortgage lenders, changes in the practices of credit-rating agencies and tougher scrutiny by U.S. banking regulators. He plans to step up pressure on mortgage lenders and mortgage-servicing companies to renegotiate terms for people in danger of defaulting on expensive subprime loans.

As for today, traders are expecting two major releases, the first will be the US CPI (12:30 GMT) with a consensus of 0.2% and a previous figure of -0.1%. Housing starts and building permits will follow, and will probably pull a bit more attention as they involves the struggling housing market. Housing starts are expected to be released at 1.28M and building permits at 1.29M.

Today's events might shed more light on the USD situation, and add some information to the ongoing speculation around the Fed's rate hike expectations.

EUR

After starting yesterday off slowly, the Euro gained steam toward the end of the trading day. After the release of the Euro CPI at 2% over last year's figure, confidence in the Euro grew. German ZEW numbers were also released yesterday and were steady at -18.1%, amongst predictions of a drop by as much as 4 %. With continued fluctuation within the US and Asian markets the Euro has continued to be a steady choice. President Trichet's acknowledgment of "verbal discipline" in the Euro zone has allowed the Euro to continue its rise. Yesterday forced some unexpected movement in the Euro when Swedish giant Ericsson reported negative earnings. Today the Euro looks to be in for a test, with numerous key figures to be released in the UK. Bank of England Minutes and the AEI release will almost certainly affect the Euro directly. If votes from Bank of England come back anything less than the predicted unanimous vote of 9-0, we will likely see sharp movement in the GBP even further strengthening the Euro. It looks to continue to be a sunny forecast for the Euro as its "discipline" seems to be paying off.

JPY

The JPY grew steadily over yesterday's trading, due in large part to rising oil prices and the sale by most of high-yielding assets subsidized by the low rates on carry trades. If yesterday was any indication, we should see a repeat performance today. With most of the day's more pressing news not involving the Asian market, it should be assumed that the JPY will continue to strengthen against its crosses. Financial institutions are still quite skeptical of the current equity markets and rising oil prices, which should show a trend of less volatile trading. This should allow the JPY to continue its strength. However, it should be stated that more likely than not majors will eventually catch up.

Technical Analysis

EUR/USD

The positive momentum is growing stronger, and the 4 Hour chart is showing some room to run on the bullish side. The daily chart supports the bullish notion with RSI and slow stochastic floating around the 50 level. Next target price should be around 1.4230.

GBP/USD

The cable is continuing to float in a wide range with a slight signal for the bearish side. The 4 Hour chart is showing a bearish cross and the dailies are indicating a moderate downtrend in the making. Next target price should be around 2.0260.

USD/JPY

The pair is in the middle of a correction move that seems to be losing the negative momentum. The 1 Hour chart is showing a bullish cross as the daily chart indicates that the ongoing uptrend will probably resume in the following 48 hours. Target price for the pair should be around 116.90.

USD/CHF

After a touch in the 1.1770 area, the pair now corrects up and is trading around 1.1810. The 4 Hour chart is showing moderate bullish momentum and the daily chart is signaling that a strong bullish move is quite imminent. Going long appears to be a preferable strategy today.

Wild Card

Crude Oil

Oil is trading around all time high and shows no willingness to stop. The uptrend appears to be healthier than ever, and the upwards channel is very strong. This is a great opportunity for forex traders to enjoy the rest of the positive momentum, which is still very strong. Target price should be around 88.00

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4290	2.0456	117.78	1.1905	0.8967	0.7045
	1.4243	2.0412	117.12	1.1875	0.8934	0.7015
	1.4198	2.0350	116.64	1.1830	0.8890	0.6998
Support	1.4150	2.0278	116.12	1.1760	0.8800	0.6924
	1.4123	2.0213	115.78	1.1700	0.8778	0.6901
	1.4100	2.0178	115.56	1.1678	0.8756	0.6878

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2007-10-17	00:00	USD	Wholesale Sales	m/m	2.0%	-0.5%
		Wholesale Sales Measures the total value of sales at the wholesale level. A rising trend has a positive effect on the nation's currency because increased sales at the wholesale level are a good indication that there is high consumer demand at the retail level.
2007-10-17	00:30	AUD	WMI Leading Index	m/m	0.2%	-
		WMI Leading Index The Westpac Melbourne Institute (WMI) Leading Index measures overall economic health by combining several indicators reported earlier in the month.
2007-10-17	05:00	JPY	Leading Index	m/m	30.0%	27.3%
		Leading Index Measures overall economic health by combining ten leading indicators including average weekly hours, new orders, consumer expectations, housing permits, stock prices, and interest rate spreads. The index is published monthly by The Conference Board, a leading private US research group, but traders tend to pay little attention because the components that make up the index are reported at an earlier date.
2007-10-17	08:30	GBP	MPC Meeting Minutes		9-0
		MPC Meeting Minutes The Bank of England (BOE) Monetary Policy Committee (MPC) Meeting Minutes are a detailed record of the committee's interest rate meeting held about two weeks earlier. The minutes expose the votes cast at the meeting and can give traders further insight into the central bank's stance on monetary policy. Traders carefully comb the minutes for clues regarding future interest rate shifts.
2007-10-17	08:30	GBP	Average Earnings Index +Bonus		3.5%	3.6%
		Average Earnings Index +Bonus The Average Earnings Index (AEI) measures the average wage, including bonuses, paid to employees. The indicator reading represents the change in the current quarter when compared to the same quarter in the previous year.
2007-10-17	08:30	GBP	Claimant Count Change		-4.2K	-4.0K
		Claimant Count Change Measures the change in the number of people claiming unemployment related benefits over the previous month. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy.
2007-10-17	08:30	GBP	MPC Meeting Minutes		9-0	-
		MPC Meeting Minutes The Bank of England (BOE) Monetary Policy Committee (MPC) Meeting Minutes are a detailed record of the committee's interest rate meeting held about two weeks earlier. The minutes expose the votes cast at the meeting and can give traders further insight into the central bank's stance on monetary policy. Traders carefully comb the minutes for clues regarding future interest rate shifts.
2007-10-17	08:30	GBP	Average Earnings Index +Bonus q/y		3.5%	3.6%
		Average Earnings Index +Bonus q/y The Average Earnings Index (AEI) measures the average wage, including bonuses, paid to employees. The indicator reading represents the change in the current quarter when compared to the same quarter in the previous year.
2007-10-17	08:30	GBP	Claimant Count Change		-4.2K	-4.0K
		Claimant Count Change Measures the change in the number of people claiming unemployment related benefits over the previous month. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy.
2007-10-17	08:30	GBP	Unemployment Rate		5.4%	5.4%
		Unemployment Rate Measures the percentage of the total work force that is unemployed and actively seeking employment. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy. However, unemployment usually draws little attention because traders view it as a lagging indicator.
2007-10-17	12:30	USD	CPI	m/m	-0.1%	0.2%
		CPI The Consumer Price Index (CPI) measures the rate of inflation (i.e., the rate of price changes) experienced by consumers when purchasing goods and services. A rising trend has a positive effect on the nation's currency. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates to bring prices down. Higher interest rates attract foreign investment, thus increasing demand for the nation's currency. CPI is one of the most closely watched indicators and will usually have a high impact upon release.
2007-10-17	12:30	USD	Core CPI		0.2%	0.2%
		Core CPI Derivative of the Consumer Price Index (CPI) that excludes the volatile Food, Energy, Alcohol and Tobacco items. CPI with the exclusion of these volatile components is thought to be a better indicator of the underlying inflation trend and the central bank uses it as their primary inflation gauge, aiming to keep it at an annualized rate of 2%.
2007-10-17	12:30	USD	Housing Starts		1.33M	1.28M
		Housing Starts NULL
2007-10-17	12:30	USD	Building Permits		1.32M	1.29M
		Building Permits Measures the number of new construction intentions. This data is a leading indicator for the construction industry since the issuance of a building permit is one of the first steps in the construction process.
2007-10-17	12:30	USD	CPI	m/m	-0.1%	0.2%
		CPI The Consumer Price Index (CPI) measures the rate of inflation (i.e., the rate of price changes) experienced by consumers when purchasing goods and services. A rising trend has a positive effect on the nation's currency. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates to bring prices down. Higher interest rates attract foreign investment, thus increasing demand for the nation's currency. CPI is one of the most closely watched indicators and will usually have a high impact upon release.
2007-10-17	12:30	USD	Core CPI	m/m	0.2%	0.2%
		Core CPI Derivative of the Consumer Price Index (CPI) that excludes the volatile Food, Energy, Alcohol and Tobacco items. CPI with the exclusion of these volatile components is thought to be a better indicator of the underlying inflation trend and the central bank uses it as their primary inflation gauge, aiming to keep it at an annualized rate of 2%.
2007-10-17	12:30	USD	Housing Starts		1.33M	1.28M
		Housing Starts NULL
2007-10-17	12:30	USD	Building Permits		1.32M	1.29M
		Building Permits Measures the number of new construction intentions. This data is a leading indicator for the construction industry since the issuance of a building permit is one of the first steps in the construction process.
2007-10-17	12:30	CAD	Wholesale Sales	m/m	2.0%	-0.5%
		Wholesale Sales Measures the total value of sales at the wholesale level. A rising trend has a positive effect on the nation's currency because increased sales at the wholesale level are a good indication that there is high consumer demand at the retail level.
2007-10-17	14:30	USD	Crude Oil Inventories		-1.7M	-
		Crude Oil Inventories The Energy Information Administration's (EIA) Crude Oil Inventories measures the weekly increase in barrels of commercial crude oil held in inventory by US firms. The level of inventories influences the price of petroleum products, which can have an impact on inflation and other economic forces.
2007-10-17	14:30	USD	Crude Oil Inventories		-1.7M	-
		Crude Oil Inventories The Energy Information Administration's (EIA) Crude Oil Inventories measures the weekly increase in barrels of commercial crude oil held in inventory by US firms. The level of inventories influences the price of petroleum products, which can have an impact on inflation and other economic forces.
2007-10-17	18:00	USD	Beige Book		-	-
		Beige Book Provides a look at how regional Federal Reserve branches view the economy in their area. It is produced two weeks before the monetary policy meetings of the Federal Open Market Committee (FOMC), who uses the book's anecdotal evidence to help determine the path for interest rates.