Forex Tips & Daily Analysis

Economical News

USD

The greenback range traded yesterday against the EUR and the Sterling on a day which was relatively devoid of significant economic data. The main U.S news release of the day was the NAHB Housing Market Index which came in slightly better than the expected figure of 17. This Index measures the demand outlook of single-family home builders, and the improved figure is a positive sign for the housing sector. Although the greenback was relatively stable against the EUR and the Sterling yesterday, it did strengthen sharply against the higher yielding currencies on the back of a noticeable carry trade unwind. The carry trade unwind was mainly driven by the risk averse attitude of investors which resulted from concerns of further problems in the troubled global financial sector and consequent falls in equity markets. Usually the risk-averse sentiment tends to benefit the greenback as investors seek a “safe-haven” for their funds. Now although the greenback did gain, it did not benefit as much as it should have indicating that it is beginning to lose its safe-haven status.

Looking ahead, later on today we are expecting the Housing Starts and Building Permits figures which will shed more light on the status of the troubled U.S housing sector. Both figures are forecasted to release weaker than last month, but there is strong possibility of an upside surprise as last months rate cut by the Fed should have provided the housing sector with some reprieve. Also due out today have the FOMC Meeting Minutes which will provide detailed insights regarding the FOMC's stance on monetary policy. Investors will be paying close attention to this report as they will comb it for hints regarding future interest rate changes. If yesterday's strong risk-aversion sentiment persists then we will see the greenback continue to gain against the high yielders, while on the other hand dropping sharply against the JPY. It may also experience some volatility today against the EUR and the Sterling if the FOMC Minutes are dovish with regards to future monetary policy.

EUR

The EUR traded relatively uneventfully yesterday, on a day that was light on significant economic news. However it did weaken sharply against the JPY as investors sold-off risky bets with the purpose of seeking a risk-averse environment. The main news from the Eurozone yesterday was ECB President Trichet's speech where he discussed growth and inflation risks. He mentioned that the risk to price stability is still on the upside although there is the possibility of slower growth. The EUR has been on a steady rise against the greenback over the last few months and its strengthening has protected the Eurozone economy from the negative impacts of the steep rise in oil prices. However the ECB will be hesitant to let the EUR continue to rise much further and if noticeable signs appear that the EUR is beginning to dampen growth, then we may see an intervention by the ECB in the currency markets.

Today, the only news expected from the EUR will be the German PPI which is forecasted to release stronger than last month's figure of 0.2% at 0.3%. The German economy is one of the key players in the EU and it is heavily dependent on exports so it will be closely followed by investors. The EUR should continue to rise against the greenback as the dollar sentiment remains bearish on expectations of a rate cut by the Fed next month. However with so many investors presently shorting the dollar we may see a short term correction.

JPY

The strong correlation between carry trades and the Dow was reaffirmed yesterday as the Dow dropped 200 points and carry trades continued to unwind sharply. The JPY strengthened all across the board, particularly against the high yielding currencies. Japan currently has the lowest interest rate of 0.5% from the other 16 most active nation currencies. The BoJ have been aiming to raise the interest rate in order to strengthen the previously fledgling Japanese currency but it has been restricted by the problematic state of Japanese inflation, which can actually be classed as deflation. Therefore another rate hike would have caused further deflation, but the Japanese currency has now received a helping hand from the carry trade unwind. Today the JPY should continue its bullish rampage against the high yielders which will be fuelled by the carry trade unwind and if the equity markets continue to tumble then it is very like that risk aversion will prevail.

Technical Analysis

EUR/USD

The pair is in the middle of a flat channel on the daily chart. The two consecutive doji bars indicate that a move is quite imminent, as the RSI is well below the 20 level. It appears that if the 1.4620 level will not be breached, than a bullish move will be initiated that might take the pair above 1.4750 again.

GBP/USD

The 4 hour chart implies that a bearish trend is continuing as the Slow Stochastic crossed at 78 and has a negative slope, however we need to pay attention to the current 4 hour bar, when a positive bar may indicate an upcoming bullish trend and negative bar will imply range trading. Traders need to be aware during the next 4 hours where the market is headed and to take action.

USD/JPY

The pair is in the midst of a downwards channel, and is now testing the bottom barrier. The oscillators show that a negative breach is quite unlikely, and the daily chart is showing bullish momentum. A preferable strategy might be to go long on dips.

USD/CHF

USD/CHF is in a downtrend supported by 1H exponential moving averages. The volatility is relatively low. Bollinger bands have tightened. We should expect to see a bearish configuration also today. 1H, 4H Elliott pattern implies that the USD/CHF will continue to gather momentum. Traders should pay attention to the fact that the dailies are still bearish, and there is still more room to go down on a longer time scale. The target is expected at 1.1050 level.

Wild Card

Crude Oil

The hourlies are bearish as the Gold is still floating on the upper level of the channel. The slow stochastic has completed the cross above the 80 level, which validates the move as bearish. This provides forex traders with a great opportunity to enter a short position with strong bearish momentum.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4865	2.0900	112.00	1.1245	0.9051	0.7265
	1.4830	2.0772	111.42	1.1190	0.8996	0.7221
	1.4780	2.0660	111.00	1.1150	0.8944	0.7189
Support	1.4700	2.0545	109.79	1.1085	0.8858	0.7121
	1.4665	2.0445	109.43	1.1050	0.8812	0.7100
	1.4620	2.0400	109.00	1.1000	0.8789	0.7043

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2007-11-20	11:00	USD	CBI Industrial Trends Orders		-6
		CBI Industrial Trends Orders The Confederation of British Industry (CBI) Industrial Trends Orders measures the value of new purchase orders placed with domestic manufacturers. A rising trend has a positive effect on the nation's currency. A busy manufacturing industry is a positive sign that the economy is expanding, and this survey points to how busy manufacturers will be in the months to come as they work to fill new orders.
2007-11-20	12:00	CAD	CPI	m/m	0.2%	0.1%
		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.
2007-11-20	12:00	CAD	Core CPI	m/m	0.4%	0.1%
		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%.
2007-11-20	13:30	USD	Housing Starts		1.19M	1.17M
		Housing Starts NULL
2007-11-20	13:30	USD	Building Permits		1.26M	1.20M
		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.
2007-11-20	19:00	USD	FOMC Meeting Minutes		-	-
		FOMC Meeting Minutes NULL