Forex Tips & Daily Analysis

Economical News

USD

Yesterday the USD fell against 15 of the most-actively traded currencies after a report showed U.S. housing starts dropped to a 14-year low in September. This housing data comes out only 1 day after Federal Reserve Chairman Ben S. Bernanke reminded the market that real estate is the major threat to growth with contraction expected to go on into at least the middle of next year. The latest housing figures strengthen the case for Fed policy makers to cut interest rates again. Interest-rate futures suggest more than a 50% chance the Fed will cut the target rate a 0.25% point on Oct. 31, up from 38 percent yesterday.

In addition, yesterday's U.S CPI data fell in line with consensus forecasts, easing fears that strong price pressures would keep the US Federal Reserve from cutting interest rates further in 2007. The CPI rose at the sharpest rate in 4 months in September, while core prices, which exclude volatile food and energy costs, came in line with expectations.

Traders cannot ignore the fact that Oil prices are on their way to $90 a barrel. The USD slipped broadly on Wednesday not only due to a sharp fall in U.S. Housing Starts for September, but also because of the surge in Crude Oil prices. Oil prices hitting new highs will continue to influence negatively on the US economy.

Looking ahead, there will be quite a few key US economic data releases today, kicking off with the Unemployment Claims at 12:30 GMT and the Philadelphia Fed Manufacturing Index later at 16:00 GMT. Both are expected to come out weaker than the previous month's figures, and should broadly cause the Greenback to continue its weakening move from recent days.

EUR

Since the middle of last week, the EUR/USD has been floating within a 100 pip range and yesterday was no exception. During the late afternoon trading session in New York, the EUR was trading 0.2% higher at $1.4191. Later, the European currency was pushed to $1.4230, but failed to sustain that level amid caution ahead of the Group of Seven finance ministers' meeting over the weekend. The G7 ministers will meet in Washington over the weekend and many analysts expect currencies to be one of the major topics for discussion given the recent market volatility.

The ECB has not wavered in its hawkish tone which is a strong signal to the market that the central bank has no plans to intervene in the currency or to lower interest rates.

There is no real market moving news to be released from the Euro zone today. The European Trade Balance is the only number due for release, with the expectations currently standing at 0.2B, significantly higher than the previous month's negative figure of -0.6B.

JPY

Yesterday, the JPY was the biggest gainer amongst major currencies, as a carry trade tumble forced similar drops for all JPY crosses.

Against the USD, the Yen strengthened 0.2% to 116.70. The JPY was little changed against the EUR and traded around the 165.60 level.

The JPY may continue its gains versus the USD for the fourth consecutive day today, after yesterday's reports showed that the U.S. housing recession deepened in September and raised concern that it may drag down the rest of the US economy. As a result, the Japanese currency has benefited as investors become more risk averse and repurchase the currency to exit trades financed in Japan. Carry trades are now going full steam as Japan's 0.5% benchmark interest rate, the lowest among major economies, encourages borrowing in the currency.

Today, no significant data is expected to come out of the Japanese markets, and the JPY is expected to continue to grow stronger on the local level.

Technical Analysis

EUR/USD

The pair is showing a solid uptrend on the 4 Hour and daily charts with strong momentum, as seen in the slow stochastic and RSI. The next resistance level will be the all time high of 1.4277. In case of a breach through that level we should see an additional bullish move that could be quite massive.

GBP/USD

There is a clear 5 Elliott waves pattern which suggests an imminent ABC wave pattern. This indicates that upon a target price of 2.0440, which is the peak of the last wave, we should see the bearish move beginning. Target price for the bearish move should be around 2.0320.

USD/JPY

The pair is in a corrective move from 117.80 and is now floating around 166.50. The hourlies are showing strong bearish momentum yet the dailies are indicating a bullish cross with a chance for a reversal move. A preferable strategy for the long run should be buying on dips.

USD/CHF

There is a bearish channel forming on the 4 hour chart as the pair is floating on the bottom section of the channel. A breach through the 1.1745 will validate the next bearish move. If the pair will continue to float above the support level, we might see a bullish correction in the short run.

Wild Card

Crude Oil

After a failed attempt to break the unbelievable 90$ barrier, the positive momentum is growing again with full strength. There is a great opportunity for forex trades to jump in this very strong uptrend, and enjoy trading all time high levels with unprecedented positive momentum.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4320	2.0485	117.30	1.1905	0.9035	0.7065
	1.4300	2.0460	117.00	1.1875	0.9000	0.7040
	1.4260	2.0430	116.75	1.1830	0.8970	0.7000
Support	1.4200	2.0370	116.00	1.1740	0.8900	0.6924
	1.4170	2.0340	115.75	1.1700	0.8870	0.6901
	1.4140	2.0300	115.50	1.1678	0.8840	0.6878

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2007-10-18	02:30	CAD	BOC Monetary Policy Report		-	-
		BOC Monetary Policy Report The Bank of Canada (BOC) Monetary Policy Report is published semi-annually in April and October, with updates published in July and January. The report gives traders insight into the bank's view of the economy.
2007-10-18	08:30	GBP	Retail Sales	m/m	0.6%	0.1%
		Retail Sales Measures the value of sales at the retail level. A rising trend has a positive effect on the nation's currency because Retail Sales make up a large portion of consumer spending, which is a major driver of the economy and has a sizable impact on GDP. Traders pay close attention to Retail Sales because it is usually the first significant indicator of the month that relates to consumer behavior and is susceptible to surprises.
2007-10-18	12:30	USD	Unemployment Claims		308K	315K
		Unemployment Claims Measures the number of individuals who filed for unemployment insurance for the first time during the past week. A falling trend has a positive effect on the nation's currency because working people tend to spend more money, and consumer spending makes up a large portion of GDP. This weekly indicator produces very timely data, but traders generally view unemployment as a lagging indicator that gives little indication of the economy’s future performance.
2007-10-18	12:45	USD	Kansas City Fed President Hoenig Speaks		-	-
		Kansas City Fed President Hoenig Speaks Kansas City Federal Reserve President Thomas Hoenig will speak about the economic outlook, in Missouri.