Forex Tips & Daily Analysis

Economical News

USD

The USD was up against the EUR and held steady against its other European rivals early Thursday in New York as the Bank of England cut interest rates. The BoE's Monetary Policy Committee cut its key interest rate to 5.5% from 5.75% yesterday, the first cut in 2 years, as evidences mounted that the economy is slowing.

Overall, the USD remained relatively unchanged after the U.S. jobless claims fell. President Bush is set to unveil plans to help struggling homeowners to avoid foreclosure and this move is expected to help circumvent a U.S. economic recession. However the U.S. still faces a deteriorating housing market for at least another 6 months.

Despite the greenbacks' strong performance over the past 2 days, however, analysts cautioned against jumping on a dollar-recovery bandwagon too soon. There are still a lot of reasons for the EUR/USD to hold above 1.4500. Financial markets remain susceptible to bad news flow and rate differentials are unlikely to move substantially in the dollar's favor too quickly.

Today, traders may expect USD moves to be choppy as the Nonfarm Employment Change figure is expected to be released. This is indeed one of the most market-moving indicators, and with the FOMC rate decision and policy statement looming on the horizon next week, equity markets could see wild price action. The change in the U.S. Non-Farm Payrolls for the month of November is anticipated to rise to 75K, down from 166K in October.

However, following last Wednesdays' surprising jump in the ADP Nonfarm Employment report, the Nonfarm Employment Change figure is difficult to predict. A weaker-than-expected reading could send EUR/USD towards 1.4750 once again, as traders increasingly bet that the FOMC will indeed cut rates next week. On the other hand, a surprisingly strong NFP report could help EUR/USD continue its descent towards 1.4350.

EUR

The EUR extended gains vs. the USD yesterday after European Central Bank left interest rates unchanged at 4.0% as expected. Investors focused on the ECB President Trichet's comments where he stated that some governors at the bank would have supported a rate increase. The ECB President also added that the risk in financial markets is still evolving and is accompanied by continued uncertainty about the potential impact on the real economy.

The EUR last traded 0.2% higher at $1.4627, after touching a session high of $1.4636.

But the biggest story yesterday came from the GBP side. The BoE's Monetary Policy Committee cut its key interest rate to 5.5% from 5.75% yesterday, for the first time in 2 years, casting aside inflation concerns as the surging cost of credit threatens to derail economic growth. The Central Bank said in a statement that ``conditions in financial markets have deteriorated,'' adding to ``downside risks'' to consumer prices and the economy.

In response, the GBP fell to near a 2 1/2-month low against the USD after the decision. It touched $2.0254 by 4:01 p.m. in London, compared with $2.0266 yesterday. The U.K. currency also traded at 72.220 per EUR, from 72.11 yesterday.

As for today, there is no real market moving news expected to come out of the European markets. The German Industrial Production and the Composite Leading Indicators are due to be released during the morning trading session. Both of the indicators are of a minor importance. Later, traders will follow the ECB President Trichet speech in Hamburg. 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.

JPY

The JPY continued to weaken against the USD after leading indicator index continues to signal economic contraction. Japan's leading economic indicator index rose to 20, but has been below 50 for the third straight month. A reading above 50 indicates economic expansion in months ahead. Economists are predicting the JPY to remain range bound at the 110 level till the year end.

Today no news is expected from Japan, so the JPY should continue its downward trend, particularly against the high yielders, as long as carry trades are back in action. However it is also important for traders to follow the correlation between U.S equities and carry trades as this could give a strong indication as to the future direction of the JPY. Also it is important to note that the recent currency volatility could once again create risk averse sentiment and discourage carry trades, thereby rallying the JPY.

Technical Analysis

EUR/USD

This pair weakened sharply yesterday and it lost over a hundred pips, targeting the key 1.4500 support level. However after failing to breach this key support level the pair rallied back up. There is a downward channel appearing on the 4 H chart and this pair is now trading in the middle of this channel. The preffered strategy today will be to buy on dips and sell on highs. However traders should exercise caution as volatility is up and the possibility a violent breakout exists.

GBP/USD

After a downward breach of an upward channel on the 4 H chart, this pair weakened sharply yesterday is now hovering around the 2.0250 level. The momentum and RSI are relatively flat on the 4 H chart but they are still sloped negatively on the daily chart. This gives us a strong indication that the bearish trend has not yet run out of steam, with further possibility of sharp downward movement.

USD/JPY

This pair is in the middle of a steady uptrend and all indicators still support the bullish movement. This pair's next target will be the key resistance level of 112.00. However although the indicators are still positive we are in deep overbought territory, so there is a possibility for this pair to make a downward correction before making another surge upwards. The preferred strategy will be to wait for a dip before going long.

USD/CHF

This pair is now just above the bottom of a steady bullish channel on the 1 H chart and should now be heading towards the top of this channel. This pair will now target the 1.1350 level, although we are nearing overbought territory and the bullish rally maybe running out of steam.

Wild Card

Crude Oil

There is an upward channel appearing on the 4 H chart. This commodity is now trading near the top of this channel and since the stochastic slow is crossing at 80 combined with a negatively sloped RSI and momentum, we have a strong indication that this pair will now head towards the 787.80 mark, which is the bottom of this channel. This is a good opportunity for Forex traders to maximize profits by entering an early short position.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4735	2.0400	112.30	1.1390	0.8832	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	2.0155	109.80	1.1190	0.8635	0.7090

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2007-12-07	12:00	CAD	Employment Change	m/m	63.0K	-
		Employment Change Measures the number of new jobs created in the previous month. A rising trend has a positive effect on the nation's currency. The number of new jobs being created is one of the most important indicators of the economy's health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises
2007-12-07	12:00	CAD	Unemployment Rate	m/m	5.8%	-
		Unemployment Rate Measures the percentage of the total work force that is unemployed and actively seeking employment. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy. However, unemployment usually draws little attention because traders view it as a lagging indicator.
2007-12-07	13:30	USD	Nonfarm Employment Change	m/m	166K	-
		Nonfarm Employment Change Measures the number of new jobs created in the previous month, excluding the farming industry. A rising trend has a positive effect on the nation's currency. The number of new jobs being created is one of the most important indicators of the economy's health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.
2007-12-07	13:30	USD	Unemployment Rate	m/m	4.7%	-
		Unemployment Rate Measures the percentage of the total work force that is unemployed and actively seeking employment. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy. However, unemployment usually draws little attention because traders view it as a lagging indicator.
2007-12-07	13:30	USD	Average Hourly Earnings	m/m	0.2%	-
		Average Hourly Earnings Measures the rate of inflation found in the wages paid to nonfarm jobholders. 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.
2007-12-07	15:00	USD	Consumer Sentiment (p)	m/m	76.1	-
		Consumer Sentiment (p) Measures consumer attitudes concerning both the present situation and future expectations. It's derived from a monthly 500-person survey conducted by the University of Michigan. Higher sentiment levels are a leading indicator of rising consumer spending, which accounts for two-thirds of the economy.