Forex Tips & Daily Analysis

Economical News

USD

As we have noticed during the last several days, the US dollar has continued its recovery progress against most of the 16 most activated currencies. The US dollar extended its gains against the EUR and the GBP after the poor British retail sales figures. The Sterling came under pressure after a 0.1% slip in UK retail sales in October and it amplified speculation that the UK central Bank will lower interest rates in order to stimulate consumer spending. The dollar rose against the EUR, as the 13-nation currency fell to $1.4612 in the late afternoon from $1.4676, and the pound dropped to $2.0434 from $2.0563.

The EUR continued to weaken as investors continued to cool down by following the yen-funded carry trades in the course of growing risk aversion stemming from the lingering credit problem. This risk aversion sentiment helps the greenback to get stronger as many investors invest back in the US currency.

In addition, The U.S. Labor Department reported yesterday that Consumer Price Index rose by 0.3 percent in October, the second month in a row with inflation at that level. The main reason was due to an additional increase in energy prices and an increase in food costs. On the other hand, also yesterday, The U.S. Labor Department announced that the amount of unwaged workers who filed claims for unemployment benefits increased by 20,000 last week to 339,000, the highest level in four weeks.

The Federal Reserve on Thursday injected its biggest daily infusion into the U.S. banking system since September 11, 2001 attacks. The Fed injected $47.25 billion in temporary reserves and by doing so the system increased by a net $6.75 billion, as the central bank added more liquidity to stem a rise in the federal funds rate in order to try to increase step by step the power of the US dollar. So we may see the dollar rally temporarily but the longer term outlook still looks bleak for the greenback.

EUR

As we have seen lately, the EUR has been heavily overbought and has reached a sequence of new peaks. due to this fact the EUR is in a stage of making a correction and because of this it is beginning to lose steam.

The ECB reported that rapid food price increases are fuelling consumers' fears about overall inflation in the 13-country region. The ECB official data confirmed that the rate of price rises had hit the highest level for more than two years.

Food prices “have been an important driver of consumers' inflation sentiment,” the ECB said in its latest monthly bulletin. A worsening could pose “an upside risk to inflation.”

The comments hinted at ECB fears that consumers' expectations about future trends have been distorted by recent sharp increases in food prices, even though they comprise only a part of the basket of goods and services monitored when calculating inflation rates. The danger is that such expectations feed through into actual inflation rates.

Since the global credit squeeze started, the ECB has held its main interest rate at 4 per cent. The strength of the euro and higher financing costs created by the credit squeeze have weakened the case for further rises in interest rates. But the ECB has pledged to act if necessary to keep inflation expectations under control.

JPY

Yesterday the Japanese yen strengthened against the 16 most-actively traded currencies, and as it seems at the moment this trend should to continue today as well, as the target is standing on 109.50.

The yen strengthened mainly versus the USD and the EUR, to 110.24 from 111.26 versus the greenback and it gained to 161.45 per EUR from 162.48. The yen increased versus the EUR and USD while nervousness over credit-market losses encouraged investors to cut high- yielding assets funded by loans in Japan. A stronger Japanese currency decreased the value of overseas earnings when translated into yen.

The Nikkei 225 yesterday fell 0.7 percent to 15,396.30, its ninth decline in the last 10 days. The broader Topix was little changed, adding 0.1 percent to 1,498.86. For the week, the Nikkei is set for its second straight weekly decline, falling 1.2 percent so far. The Topix has added 0.3 percent.

Technical Analysis

EUR/USD

This pair has been on a sharp depreciation since yesterday dropping from 1.4700 to the 1.4610 level. Bollinger bands are widened indicating that there is increased volatility. If this pair breaks the 1.4600 we can expect that it will target the 1.4550 mark. This notion is backed up by the bearish 4 H and daily charts.

GBP/USD

All charts are showing that this pair is deep in oversold territory. Nevertheless there is still room for this pair to head south as there exists very strong negative momentum. The stochastic slow is crossing below the 20 level and supports future downward movement. This pair's next target will be to breach the key 2.0400 support level.

USD/JPY

This pair is once again nearing the 1.1200 level. There is a steady downward channel appearing on the 4H chart. The RSI and momentum are flat, but the schocastic slow is giving a bearish signal. The preferred strategy today will be to buys on highs and sell on dips.

USD/CHF

This pair is once again nearing the 1.1200 level. There is a steady downward channel appearing on the 4H chart. The RSI and momentum are flat, but the schocastic slow is giving a bearish signal. The preferred strategy today will be to buys on highs and sell on dips.

Wild Card

Gold

There is a bullish configuration forming on the 4 H chart. The volatility is high and Gold is not in a consolidation stage, especially after breaking the 93.00 mark. The price should continue to move upwards in the 93.80-94.50 range. Forex traders may use this opportunity to go long which seems preferable today

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4702	2.0570	111.34	1.1321	0.9003	0.7265
	1.4667	2.0512	110.99	1.1289	0.8978	0.7221
	1.4620	2.0450	110.56	1.1254	0.8934	0.7184
Support	1.4567	2.0380	109.79	1.1185	0.8867	0.7100
	1.4505	2.0345	109.43	1.1156	0.8812	0.7078
	1.4489	2.0300	109.00	1.1102	0.8789	0.7019

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2007-11-16		USD	Fed Governor Kroszner Speaks
		Fed Governor Kroszner Speaks NULL
2007-11-16	08:15	CHF	Retail Sales	y/y	3.8%	4.1%
		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.
2007-11-16	14:00	USD	TIC Net Long-Term Transactions		-69.3B	72.0B
		TIC Net Long-Term Transactions Treasury International Capital (TIC) Net Long-Term Transactions measures the monthly difference in cross-border foreign and domestic purchases of long-term securities (i.e., bonds with an original maturity longer than one year). For example, if foreigners purchased $100 billion in US securities, and the US purchased $30 billion in foreign securities, the net reading would be $70 billion. A rising trend has a positive effect on the nation's currency because foreigners must first convert their domestic currency before they can purchase the nation's assets. This can dramatically elevate currency demand. Traders watch this indicator closely as it provides several insights into international currency flows.
2007-11-16	14:15	USD	Industrial Production	m/m	0.1%	0.1%
		Industrial Production Measures the total value of output produced by factories, mines, and utilities. A rising trend has a positive effect on the nation's currency because high levels of production are a sign of a strong economy. Industrial Production reacts quickly to the ups and downs of the business cycle and can be a leading indicator of manufacturing employment, average earnings, and personal income. Traders pay special attention to Industrial Production because it's one of the few growth indicators that is produced directly by the Federal Reserve.
2007-11-16	14:15	USD	Capacity Utilization Rate		82.1%	82.0%
		Capacity Utilization Rate Measures the percentage of available resources being utilized by factories, mines and utilities. A rising trend has a positive effect on the nation's currency because companies tend to raise their prices when nearing maximum capacity. This price increase (i.e., inflation) will eventually trickle down to the consumer, so capacity levels can act as a leading indicator of CPI and other consumer inflation gauges. Traders pay special attention to the Capacity Utilization Rate because it's one of the only inflation indicators that is produced directly by the Federal Reserve.