Forex Tips & Daily Analysis

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USD

Dollar bulls took their chance yesterday following the release of a report that showed a marked rise in private-sector jobs, giving the greenback a lift against its major rivals. Yesterday, the U.S. currency gained 1% against the EUR, 0.9% versus the JPY and 1.6% against the GBP.

The USD strengthened yesterday after reports showed that U.S. job growth and factory orders quickened, both of which are reducing concerns that the world's largest economy will head into a recession. The Labor Department said worker productivity rose the most since 2003, while labor costs posted the biggest drop in 4 years. A report from ADP Employer Services showed companies last month added 189,000 jobs, more than triple the average forecast, prompting economists to raise estimates for the government's payroll report scheduled for release tomorrow. The surprise jump in the ADP Nonfarm Employment report suggests that we could see a better-than-forecast reading of Friday's Nonfarm Payrolls number, prompting the market to trim back chances of a 50 basis points interest rate cut by the Federal Reserve next week.

Futures contracts show that the odds of a 0.5% point cut by the Fed are currently standing at 42%, down from 48% yesterday. Futures are pricing in a 58% chance of a 0.25 point cut to 4.25%.

Part of the reason for yesterday's stronger dollar is also the hope that Treasury Secretary Paulson will announce an Interest Rate freeze on subprime mortgages today, thus saving many homeowners from foreclosure. If this manages to work, we could have some respite for the US economy.

As for today, there is only an Unemployment Claims figure expected from the U.S. market. The expectations are currently standing at 335K, 17K down from the previous month's one.

EUR

The EUR reduced gains after the U.S. ADP report on private payrolls showed an unexpectedly strong 189K in November, following expectations of only a 50K. The stronger than expected ADP report has dragged the EUR/USD down to 1.46, suggesting that the U.S. economy will probably avoid a recession. Also, European Retail Sales fell sharply in October, with the index registering the biggest monthly decline in 6 months.

The thirteen nation's currency may sustain further decline at the press conference that will follow the European Interest Rate announcement during the day. Even though the rates are not expected to be changed, the ECB decision could still be a big market mover. Let's not forget that Europe still faces uncertain future as local markets continue to provide us with mixed economic data. Inflationary pressures remain very high in the Euro zone with Consumer and Producer Prices well above their target level - but growth is beginning to slow. Therefore, the tone of Trichets' comments will be dependent upon whether he recognizes the trend of recent economic data or bases his views on the forecasts for growth in the months ahead.

The Bank of England is also expected to set borrowing costs today. By now, the U.K. Central Bank is forecasted to hold borrowing costs at a 6 year high of 5.75%. Nonetheless, recent speculation rose that the BoE may cut interest rates as soon as today after the U.K.'s biggest mortgage lender said that home prices posted yesterday their biggest decline since 1995. As a result, the GBP fell to the lowest level in 4 years against the EUR and the weakest since October vs. the USD.

JPY

Almost a 200 point rally in the Dow yesterday has triggered a rebound in carry trades as the strong U.S. ADP Nonfarm Employment numbers helped to boost risk appetite. The USD/JPY rose to a session peak of 110.96 as traders took profits on the Yen's rise from the previous 2 days - a move which had been fueled by worsening credit market conditions before the usually illiquid year-end.

Meanwhile, a weakening Japanese currency turns to be positive for the local stocks. The Yen's retreat is helping to lift major local exporters, while buying of retailers provided additional upward momentum.

Today's Japanese economic calendar is quite empty with only a quarterly GDP figure due to be released. The expectations are currently standing at 0.6%, the same as in the previous quarter. Apart from that, most price movement on JPY pegged currencies will be derived from the European and American market events.

Technical Analysis

EUR/USD

On the 4 Hour chart, a bearish channel is establishing which implies a continuation of the current trend as next target price is located at 1.4532 and going short from 1.4630 appears to be a lucrative trade. A breach through the target price will validate a much deeper bearish move that might take the pair beyond the 1.4500.

GBP/USD

Yesterday, on the 4 Hour chart a descending triangle structure was breached which carried the pair to 2.0235, it looks clear that an upcoming reversal is expected as the Slow Stochastic (19) and RSI (14) both are in over sold territory and have a positive slope. The bearish momentum is very strong, and going short might be the best call today.

USD/JPY

There is a very distinct bearish channel on the daily chart, as the pair now floats on the upper level. A breach through the 111.00 will validate a very strong bullish move that might take the pair beyond the 112.00. if a breach will not occur, the bearish channel is most likely to continue.

USD/CHF

The bullish channel on the 1 Hour chart continues with full steam. RSI and Slow Stochastic are floating around the 50 level which indicates that the pair still has plenty of room to run. The 1.1300 level have been breached which strengthen the general bullish direction. Next target price might be 1.1350.

Wild Card

Crude Oil

After peaking at the 99.00 level, Oil's journey to break the 100$ price level was interrupted. The bearish correction appears to be very strong, and might continue to the 81.00 levels next week. Oscillators show that forex traders have a great opportunity to take profit on this very intensive bearish correction move, and enter in a relatively great price.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4730	2.0400	112.30	1.1390	0.8825	0.7300
	1.4685	2.0370	111.95	1.1350	0.8800	0.7265
	1.4650	2.0325	111.45	1.1315	0.8775	0.7230
Support	1.4570	2.0250	110.75	1.1250	0.8700	0.7147
	1.4548	2.0200	110.45	1.1200	0.8670	0.7118
	1.4500	2.0180	109.90	1.1190	0.8635	0.7095

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2007-12-06	09:30	GBP	Industrial Production	m/m	-0.4%	-
		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.
2007-12-06	09:30	GBP	Manufacturing Production m/m	m/m	-0.6%	-
2007-12-06	12:00	GBP	Interest Rate Statement		5.75%	-
		Interest Rate Statement The Central Bank Governing Council releases an Interest Rate Statement each month. The statement contains the latest decision regarding changes to the countries short term interest rate ("minimum bid rate"). A rising trend has a positive effect on the nation's currency. Short term interest rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. What makes interest rates so important is that high rates attract foreigners looking for the best "risk-free" return on their money, which significantly increases demand for 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 in an attempt to bring prices down. This is what makes inflation-predicting indicators so important. Traders know that rising prices will lead the central bank to raise interest rates, which ultimately leads to a more valuable currency.
2007-12-06	12:45	EUR	Interest Rate Statement		4.00%
		Interest Rate Statement The Central Bank Governing Council releases an Interest Rate Statement each month. The statement contains the latest decision regarding changes to the countries short term interest rate ("minimum bid rate"). A rising trend has a positive effect on the nation's currency. Short term interest rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. What makes interest rates so important is that high rates attract foreigners looking for the best "risk-free" return on their money, which significantly increases demand for 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 in an attempt to bring prices down. This is what makes inflation-predicting indicators so important. Traders know that rising prices will lead the central bank to raise interest rates, which ultimately leads to a more valuable currency.
2007-12-06	13:30	USD	Unemployment Claims		-	-
		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.
2007-12-06	13:30	CAD	Building Permits	m/m	-1.7	-
		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.
2007-12-06	13:30	EUR	ECB President Trichet Speaks		-	-
		ECB President Trichet Speaks European Central Bank (ECB) President Jean-Claude Trichet will hold a press conference in Frankfurt following the Governing Council's interest rate announcement. The ECB's announcement is void of commentary, so traders look to Trichet's press conference for clues on future monetary policy action. Heavy market volatility is often experienced during these press conferences as traders attempt to decipher Trichet's clues. As head of the central bank's governing body, which is responsible for setting the euro zone's short term interest rate, his speeches can sometimes cause market volatility as traders react to clues regarding future monetary policy.
2007-12-06	15:00	CAD	Ivey PMI		57.1	-
		Ivey PMI The Ivey Purchasing Manager's Index (PMI) measures the activity level of purchasing managers from all sectors of the economy, 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.
2007-12-06	23:50	JPY	GDP	q/q	0.6%	-
		GDP Gross Domestic Product (GDP) measures the total value of all goods and services produced by the economy. A rising trend has a positive effect on the nation's currency. GDP is the broadest measure of activity and the primary gauge of the economy's health. To foreign investors, a strong economy is viewed favorably because it spurs investment opportunities in the domestic stock and bond markets. More importantly, the central bank is more likely to raise interest rates in the face of a strong and growing economy. The combination of these effects can have a large impact on the demand for the nation's currency.