Forex Tips & Daily Analysis

Economical News

USD

The USD fell vs. the EUR on Wednesday after the previous day's 0.25 point rate cut from the Federal Reserve disappointed investors hoping for more aggressive action to help the economy and credit markets. It actually looks as if the Fed delivered the bare minimum of what was possible. Some investors expected a larger reduction of a 0.5 point to stave off a recession. The Fed's board also reduced the discount rate, covering direct loans to banks, by 0.25 point to 4.5%, half of what many economists predicted.

In addition, a joint decision by the U.S. Federal Reserve and other major central banks to increase liquidity available to private institutions also helped to ease fears over the current credit market crisis. The Federal Reserve plans to reduce the "elevated" short-term funding pressures by injecting cash to banks through auctions and providing $24 billion in currency swaps.

This negative USD momentum was further exacerbated yesterday by the weaker than expected U.S. trade balance with the final figure of -57.8B.

Today's the US calendar is expected to be more supportive of the USD. The most significant news coming out of the US will be the Retail Sales and the PPI. Both of these indicators are expected to fair better than in the previous month figures.

EUR

The EUR made strong gains against some of the majors yesterday, particularly against the USD and the JPY. The EUR gained against the JPY as there was a resurgence of risk-appetite among investors thereby bringing the carry trade strategy back into action. The EUR rose from 1.4639 to 1.4748 against the greenback during the European trading session. This sharp rise against the USD was mainly driven by the negative sentiment surrounding the greenback in the aftermath of the disappointing 0.25% rate cut by the Fed. Many investors felt that a 0.5% discount rate cut, which is the rate that banks pay to borrow directly from the Fed, would have been more adequate in terms of alleviating the credit crisis. Therefore the EUR gained strongly yesterday as the dollar sell-off continued.

The main news yesterday was the Fed's decision to make up to 24 Billion dollars available to the ECB in order to increase the supply of dollars in the Eurozone and help alleviate the current credit squeeze. Analysts still view the European economy as being robust, but the ECB has been struggling to balance inflation versus growth, nevertheless yesterday's decided cash injection was seen as a positive sign for the Eurozone as it will provide credit relief . This will also set up a potential interest rate hike for the ECB, whose hands have been tied with regards to raising the interest rate at its last meeting because a rate hike would have caused further credit problems. There was more positive news for the Eurozone yesterday as Industrial Production released better-than-expected at 0.4%, thereby indicating an increase in the total value of output produced by factories, mines, and utilities.

Looking ahead to today, there is a string of news events to be released from the Eurozone and they are not expected to be market moving, however they will provide investors with another piece in the complex puzzle that is the state of the European economy. The greater outlook for the EUR remains bullish and yesterday's strong momentum could push the EUR up further today but traders should be cautious of an intraday correction as the EUR has lost some steam since its peak yesterday.

JPY

Amidst the release of the US Interest Statement yesterday, the Yen rose from a one-month low against the greenback. Speculation by investors was that growing losses in the credit market would trigger investors to shy away from high-yielding assets funded by Japanese loans.

The JPY posted a strong Wednesday as it gained versus 15 of the 16 most-actively traded currencies on the market, as the BoJ announced its attention to sufficiently fund its currency until years end, as its own exporters once again began to settle payments by way of the JPY.

As the JPY started yesterday's trading day it was slowly weakening its position against its major counterparts until just around 14:00 GMT shortly after the US Trade Balance was released to relatively expected results, when it saw a significant drop. EURJPY quickly went from 164.00 to just over 165, GBPJPY climbed from 228.30 to 230.25. Finally, the USDJPY jumped from 111.44 to hit a one month low of 112.47. The JPY than turned around and posted steady gains for the rest of the trading day, recovering from what at the time was unexpected price change.

On tap today in the Japanese economic calendar is the release or the Tankan Large Manufacturers and Non-Manufacturers Indices. The figure is expected to show that business confidence regarding profit and credit is dwindling. Indices are expected to be released at 23:50 GMT.

Technical Analysis

EUR/USD

After a very choppy trading day yesterday, the pair now consolidates around 1.4710 as the volatility goes down. The daily chart is bullish as the RSI is floating at the 60 level, which indicates that the momentum is still up. The hourlies are showing mixed signals with a slight bullish tendency. Traders should wait for a clear signal on the hourly level before entering the market today.

GBP/USD

The cable spiked to 2.0570 on yesterday's peak point, and has been correcting to 2.0425 since. The momentum appears to be bearish on the hourlies and mildly bullish on the daily chart. It looks as if the next target price on the short run should be around 2.0400.

USD/JPY

The bearish channel on the daily chart has been breached yesterday, and the direction appears to be up. Next target will be 112.00 and if breached will validate the final stage of the bullish move that might take it to the 113.00 levels. Going long appears to be preferable today.

USD/CHF

The correction move that was initiated at 1.0900 continues with full momentum, as the daily chart is showing that there is still much more room to run. The bullish notion is supported by the 4 hour chart which shows the RSI at the 50 level and ads to the ongoing bullish move. Next target price might be around 1.1400.

Wild Card

Crude Oil

The bullish move has returned with full power, as Crude Oil now consolidates around 94.00. All oscillators are in a bullish formation, and forex traders now have a great opportunity to re-enter the very expected move up again to the 99.00-100$ a barrel. Being on the buy side appears to be very lucrative in the near future.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4862	2.0662	112.75	1.1405	0.8954	0.7300
	1.4800	2.0570	112.40	1.1364	0.8900	0.7272
	1.4725	2.0500	111.74	1.1313	0.8830	0.7228
Support	1.4700	2.0370	110.63	1.1261	0.8751	0.7160
	1.4630	2.0300	110.38	1.1200	0.8700	0.7126
	1.4575	2.0225	110.13	1.1153	0.8678	0.7100

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2007-12-13	00:30	AUD	Employment Change		12.9K	20.0K
		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
2007-12-13	08:30	CHF	Interest Rate Statement		2.75%	2.75%
		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.
2007-12-13	11:00	GBP	CBI Industrial Trends Orders		8	4
		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.
2007-12-13	13:30	USD	Retail Sales	m/m	0.2%	0.5%
		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.
2007-12-13	13:30	USD	Core Retail Sales	m/m	0.2%	0.6%
		Core Retail Sales Derivative of Retail Sales that excludes the Automobile Sales component. Automobile Sales make up roughly 25% of Retail Sales, but they can be very volatile from month to month and can distort the picture. Retail Sales with the exclusion of this volatile component is thought to be a better indicator of the underlying trend in consumer spending.
2007-12-13	13:30	USD	PPI	m/m	0.1%	1.6%
		PPI The Producer Price Index (PPI) measures the rate of inflation (i.e., the rate of price changes) experienced by manufacturers when purchasing goods and services. A rising trend has a positive effect on the nation's currency. When manufactures pay more for goods and services, they are likely to pass the higher costs to the consumer, so PPI is thought to be a leading indicator of consumer inflation. PPI is highly regarded, and at extremes will have a market impact equal to that of its CPI counterpart.
2007-12-13	13:30	USD	Core PPI	m/m	0.0%	0.2%
		Core PPI Derivative of the Producer Price Index (PPI) that excludes the Food and Energy items. Although Food and Energy can be very volatile from month to month, they play an important role in pass-through inflation. Therefore Core PPI usually has less impact than the overall PPI.
2007-12-13	13:30	CAD	Labor Productivity q/q		0.2%	0.1%
2007-12-13	13:30	CAD	Manufacturing Shipments m/m		-0.9%	-0.9%
2007-12-13	23:50	JPY	Tankan Large Manufacturers Index		23	21
		Tankan Large Manufacturers Index Measures the general business conditions of large manufacturers. The index is derived from a quarterly survey that asks respondents to rate subjects such as general business conditions, supply and demand conditions for products and inventories, prices, sales, and employment conditions. A rising trend has a positive effect on the nation's currency. The Tankan is released four times per year and is one of the nation's most respected gauges of economic health because manufacturers play a vital role in the large export industry. Traders pay special attention to the Tankan survey because it's one of the few growth indicators that is produced directly by the Bank of Japan.