Forex Tips & Daily Analysis

Economical News

USD

The greenback resumed its downhill slide against the EUR yesterday, although it did recover slightly later on, as problems in the U.S housing sector coupled with credit woes still making investors negative towards the U.S currency. Although the USD slipped against most of the high yielding currencies, it did manage to gain some noticeable ground against the GBP on the back of the BoE's disappointing inflation report, which highlighted the fact that the BoE is facing weaker growth and higher inflation. There are many analysts that believe that the Fed is intentionally keeping the greenback at low levels in order to improve the competitiveness of U.S exporters against the Chinese in the global market and this is possibly the main driver of the current negative market sentiment surrounding the dollar. The Fed has lowered its key interest rate in its last two meetings and it is expected to do so again next month, with the main aim of preventing the U.S economy from hitting a recession. However the main sector that this rate cut has benefitted so far has been the U.S stock market which has recently been reaching all time highs, but the financial, automobile, manufacturing and housing sectors are all in a slump or in a so-called “recession”. Therefore maintaining a weak dollar may be the best option for the Fed in order to maintain growth and prevent the economy as a whole from falling into the recession pit.

There was also a string of significant data released from the U.S yesterday that did not help the greenback's cause. Although the headline Retail Sales figure released inline with expectations at 0.2%, the core figure came in slightly below the previous figure of 0.3% at 0.2%. Also both the headline and core PPI figures released lower than expected at 0.1% and 0.0% respectively. Looking ahead to today we are expecting the CPI figures along with the Empire State and Philly Fed manufacturing surveys. These figures may surprise on the upside which will temporarily boost the fledgling greenback. However it will be important to note if the lower producer prices have been passed on to the consumer. The general picture for the greenback is very much bearish as this seems to be inline with the Fed's long term objective of sustainable growth, however there will be rallies on its way down as the market continues to push the USD into oversold territory.

EUR

The EUR resumed its bullish rampage against the greenback yesterday as the grey cloud continued to hover over the U.S currency. However the EUR did struggle to maintain its gains despite the strong European economic data released yesterday.

The most significant news released from the Eurozone yesterday was the German GDP figure which released slightly better than the expected figure of 0.6% at 0.7%. The stronger EUR may be explained as the main driver of Tuesday's weaker German investor sentiment report, as the German economy is heavily reliant on exports, and this may have raised speculation that the ECB will intervene to halt the EUR's sharp climb. However yesterday's positive German GDP report negates the possibility of ECB intervention as there is no reason for the ECB to intervene if the economy is expanding.

It must be stated that the possibility of a direct ECB intervention in the currency markets is highly unlikely but nevertheless it will be considered if the strengthening EUR begins to dampen Eurozone growth. In the meantime the ECB seems to be moving step-in-step with the Fed with regards to its view on the current price of the greenback and the EUR. Therefore although the EUR is currently faltering slightly due to European inflation concerns still being skewed on the upside, the longer term picture for the EUR is still rosy.

JPY

The direction of the JPY is heavily reliant on whether carry trades are the preferred strategy. There has been a strong correlation between carry trades and the performance of the Dow Jones, and therefore the JPY has had a sharp rise of late. However earlier today, during the Asian trading session, the JPY lost some of its gained ground against most of the majors. This hiccup in the JPY bullish path was as a result of speculation that Japanese mutual funds were investing in higher yielding countries, in other words carry trades were once again the name of the game. Also there was negative news released out of Japan as the Tertiary Industry Activity Index released below the expected figure of -1.0% at -1.6% and this did not help the JPY's cause. There will be more news out of Japan tonight as the BoJ Monetary Policy Meeting Minutes will be released. It seems that the future direction of the JPY could heavily depend on the performance of the Dow, however in the meanwhile the carry trade unwind may be set to continue.

Technical Analysis

EUR/USD

The pair is showing signals of fresh bullish momentum, and has already corrected back the entire fall to 1.4540. Traders should observe the 1.4700 level as an additional break through that resistance level would validate the bullish move.

GBP/USD

After dropping 600 pips, the cable is consolidating around 2.0590. The hourlies are showing moderate bullish momentum, yet the overall direction is surely down. 2.0550 is a key support level, and a breach will confirm that the pair is going to the 2.0400 levels, probably before the weekend.

USD/JPY

After a touch in the 109.00 level and a correction back to the 111.50, the bearish momentum is back. There is a bearish cross on the 4 hour chart that indicates a correction, probably to the 110.00 levels. The dailies are showing that the bearish momentum is also valid for the longer run.

USD/CHF

The pair is showing strong bearish momentum and is now testing the 1.1200 level. A violent break through that level will probably take the pair to the 1.1140 zone quite quickly. On the upper side, 1.1250 is a very strong resistance, that if breached we might see a correction to the 1.1320 level, before resuming the bearish grand move.

Wild Card

Gold

The bearish momentum is accumulating power, and appears to be back on track. There was a 130 pips correction that appears to be over, and gold is now ready to continue its bearish move to the 780.00 level. This could be a great timing for forex traders, as gold is still traded at a relatively high price which could be an excellent entry point.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4780	2.0745	112.75	1.1335	1.0100	0.7265
	1.4740	2.0700	112.30	1.1285	1.0055	0.7220
	1.4700	2.0620	111.80	1.1240	1.0010	0.7165
Support	1.4640	2.0500	110.75	1.1185	0.9045	0.7100
	1.4600	2.0465	110.25	1.1140	0.9000	0.7070
	1.4575	2.0420	110.00	1.1100	0.8980	0.7000

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2007-11-15	09:30	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.
2007-11-15	13:30	USD	CPI	m/m	0.3%	0.3%
		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.
2007-11-15	13:30	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%.
2007-11-15	13:30	USD	Empire State Business Conditions Index		28.8	18.8
		Empire State Business Conditions Index Measures the general business conditions of manufacturers in New York State. The index is derived from a survey that asks respondents to rate the level of general business activity as 'decrease', 'increase', or 'no change'. A rising trend has a positive effect on the nation's currency because good manufacturing conditions are a sign of a strong economy. Although this survey is limited to manufacturers in New York only, traders pay close attention because the New York Federal Reserve releases it weeks before other major reports on manufacturing (e.g., Industrial Production, ISM Manufacturing Index).
2007-11-15	13:30	CAD	Manufacturing Shipments	m/m	-1.7%	-0.6%
		Manufacturing Shipments Measure the total value of shipments made by manufacturers.
2007-11-15	17:00	USD	Philadelphia Fed Manufacturing Index		6.8	5.0
		Philadelphia Fed Manufacturing Index Measures the general business conditions of manufacturers in the Philadelphia Federal Reserve district. The index is derived from a survey that asks respondents to rate the level of general business activity as 'decrease', 'increase', or 'no change'. A rising trend has a positive effect on the nation's currency because good manufacturing conditions are a sign of a strong economy. Although this survey is limited to manufacturers in Philadelphia only, traders pay close attention because the Philadelphia Federal Reserve releases it weeks before other major reports on manufacturing (e.g., Industrial Production, ISM Manufacturing Index).