Forex Tips & Daily Analysis

Economical News

USD

The bearish trend on the greenback continued yesterday as it once again got weaker against the sixteen most actively traded currencies, but mainly against the Cable and the 13 nation currency. The greenback's value kept falling yesterday, and has reached a new record low against the EUR at 1.4663.

The belief of many Forex traders has been that even more pain is yet to come for the U.S. economy. We are only in the first phase of the tumultuous state of the weakening US economy, as banks in the United States are yet to reveal all the losses that have occurred in the mortgage sector.

We are still expected to witness additional downward slides which will create further pressure on the greenback in the short and long term, as we saw on Sunday when Chuck Prince, CEO of the U.S. bank Citigroup quit, taking the blame for unexpected losses of $8-11 billion before taxes.

The greenback is 12.5% weaker against the EUR than it was a year ago, compared with a 3 percent slide against the JPY and a 5.4% drop against the Chinese Yuan.

The dollar looks to decline more as the outlook of lower Fed rates will stimulate investors to alter assets into higher-yielding currencies. It seems like the huge losses from subprime-mortgage and the credit crisis will continue to grow and emphasize uncertainty, which will only obligate the Federal Reserve to cut interest rates on Dec. 11, the third time this year.

EUR

The EUR kept up its forward progress in a firm and solid direction against the US dollar on Tuesday, even after the U.S. Federal Reserve cut interest rates by a quarter of a point last week. The EUR and the GBP have been hiking steadily against the US dollar since August, due to uncertainties in the strength of the U.S. economy, on the basis of the subprime credit crisis.

Yesterday the 13-nation EUR traded at $1.4556 in morning sessions, down from its record high of $1.4545, and as it is expected the US dollar may fall to $1.50 against the EUR by the end of the year.

The U.S. economy is on course for a serious slowdown and still faces upcoming pressure. Outside of the US growth and a weaker dollar there are boosting exports from the US to Europe. Many investors began recently to relocate numerous funds to European countries where their deposits and mixed income investments can obtain higher returns.

The Euro is being pushed forward by sentiment that the European Central Bank is working slowly but surely to increase rates. The pound will benefit from expectations that the Bank of England will not touch rates, and will leave them safe and sound rather than follow the Fed in cutting the cost of borrowing.

JPY

Yesterday, the JPY fell against all sixteen of the most-actively traded currencies. The JPY declined to 166.74 per euro, and may fall to 167.50 per euro today. Australia's dollar strengthened 1 percent against the JPY while New Zealand's currency gained 2%. In addition, yesterday saw Japan's index of leading economic indicators published. The index dove to zero for the month of September after a mark of 27.3 in August. The index hit zero for the first time since December 1997.

The Bank of Japan kept again its benchmark borrowing cost at 0.5% last week, the lowest among major economies but still the JPY is being considered as a favored currency among many investors for carry trade positions for the long term.

Technical Analysis

EUR/USD

The 4 Hour bullish channel was breached and the new all time high was set at 1.4664.

The Momentum and RSI indicators still correlated and have a positive slope, thus indicating a possible continuation of the current bullish trend.

Traders should wait for the reversal which may take place soon and is expected to test the 1.4577 Fibonacci support level.

GBP/USD

An opposite head & shoulder structure is establishing on the 4 Hour chart, indicating the continuation of the current bullish trend. 2.1050 is the next resistance level which this pair is going to test.

Going long seems to be preferable.

USD/JPY

A falling wedge structure in a bearish trend has been established on the 4 Hour chart which may bring this pair to test the 113.00 support level. It should not however break the level and therefore going long at this value might be preferable.

USD/CHF

An opposite 1 2 3 wave structure is establishing on the daily chart offering this pair to consolidate at 1.1100 in the long term.

An opposite 5 Elliott waves is establishing telling us that this pair should test the 1.1300, in case of a breakout the next support level is located at 1.1253.

Wild Card

GOLD

A bullish channel was established on the 4 Hour chart and a breakout took place which caused the Gold to strengthen to 845.28. Currently, the slow stochastic and RSI indicators are clearly on overbought territory and Forex traders should anticipate a reversal. There is still room for the Gold to strengthen before any such reversal takes place.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4735	2.1080	114.06	1.1400	0.9425	0.7050
	1.4716	2.1059	113.80	1.1377	0.9399	0.7027
	1.4692	2.1036	113.52	1.1350	0.9376	0.7000
Support	1.4643	2.0999	113.08	1.1300	0.9330	0.6951
	1.4615	2.0967	112.80	1.1275	0.9306	0.6923
	1.4590	2.0940	112.55	1.1248	0.9280	0.6901

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2007-11-07	00:01	GBP	Consumer Confidence Index		99	97
		Consumer Confidence Index The Nationwide Consumer Confidence Index (NCCI) measures the mood of consumers in regard to economic conditions. The reading is derived from a monthly survey that asks respondents to evaluate the prospects for the economy in the future.
2007-11-07	00:30	AUD	Home Loans	m/m	1.6%	0.0%
		Home Loans Measures the number of commitments for owner occupied home financing. A rising trend has a positive effect on the nation's currency because large purchases tend to be made by consumers that are optimistic and confident in their financial position. Additionally, consumer borrowing has a high degree of historical correlation with consumer spending, which is a major driver of the overall economy.
2007-11-07	00:30	AUD	House Price Index	q/q	3.2%	3.0%
2007-11-07	10:30	GBP	BRC Shop Price Index	y/y	0.4%	-
		BRC Shop Price Index The British Retail Consortium (BRC) Shop Price Index measures the rate of inflation (i.e., the rate of price changes) at surveyed retailers.
2007-11-07	13:30	USD	Nonfarm Productivity	q/q	2.6%	3.0%
		Nonfarm Productivity Measures the annualized quarterly growth in labor efficiency for producing goods and services outside the farming sector. A rising trend indicates future inflationary pressures as manufacturers raise prices in response to an at-capacity factory environment.
2007-11-07	13:30	USD	Unit Labor Costs	q/q	1.4%	1.1%
		Unit Labor Costs Measures the relationship between compensation per hour and productivity, or output per hour minus inflation. Higher hourly compensation increases unit labor costs; labor productivity improvements offset compensation increases and lower unit labor costs. A rising trend has a positive effect on the nation's currency. When businesses pay more for labor, they are likely to pass the higher costs to the consumer, so traders view wage inflation as a leading indicator of consumer inflation.
2007-11-07	15:00	USD	Wholesale Inventories	m/m	0.1%	0.2%
		Wholesale Inventories Measures the value of goods held by wholesalers. A falling trend has a positive effect on the nation's currency because wholesalers order more goods from manufacturers when they have depleted inventories.
2007-11-07	15:30	USD	Crude Oil Inventories		-3.9M	-
		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.
2007-11-07	18:00	USD	Fed Governor Warsh Speaks		-	-
		Fed Governor Warsh Speaks Federal Reserve Governor and FOMC voting member Kevin Warsh will speak about the financial markets at the New York Association for Business Economists Luncheon, in New York. Audience questions expected. FOMC voting members are responsible for setting the nation's short term interest rate, so traders scrutinize their speeches closely for clues regarding future monetary policy.
2007-11-07	20:00	USD	Consumer Credit	m/m	12.2B	10.0B
		Consumer Credit Measures the total value of outstanding consumer installment debt, such as credit cards and auto loans. A rising trend has a positive effect on the nation's currency because historically consumer borrowing and spending have a high degree of correlation.
2007-11-07	22:30	AUD	Construction PMI		55.2	-
		Construction PMI The Chartered Institute of Purchasing and Supply (CIPS) Construction Purchasing Manager's Index (PMI) measures the activity level of purchasing managers in the construction sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation's currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
2007-11-07	23:50	JPY	M2+CD Money Supply		1.7%	1.7%
		M2+CD Money Supply Measures the annual change in currency outstanding. Higher levels of currency can have a devaluing effect on the currency. M2+CD is calculated as follows: M1 = currency in circulation + overnight deposits M2+CD = M1 + Quasi-Money (Time Deposits etc.) + CDs