Forex Tips & Daily Analysis

Economical News

USD

Yesterday we could notice a considerable movement in the market especially after the publication of several significant indexes in the US market;

Retail sales index increased by 1.2 percent last month after rising by 0.2 percent in October. A separate report, which was published by the Labor Department showed that higher energy costs pushed wholesale prices up 3.2 percent, which increased twice as much as forecast in November.

The core index, which excludes food and energy, also raised yesterday a much more than predicted by 0.4%, which again was above the Wall Street's forecast of 0.2 percent.

The rising prices set off the Federal Reserve's alarm that energy and commodity costs may increase inflation in the short run at the consumer level and the high inflation could force the Fed to pull back on future rate cuts.

Treasury notes slipped down after the publication of the reports, which were published the same time. Stock-index futures pared their decline, while the dollar remained significantly higher against the EUR and other major currencies.

Also yesterday, the Labor Department report showed that the state of employment in the U.S economy seems to be holding up. Last week, jobless claims declined to 333,000; which was to some extent better than expectations.

New applications for state unemployment insurance benefits fell to a seasonally adjusted 333,000 in the week ended Dec. 8 from an upwardly revised 340,000 the week before. The quantity of people enduring to receive jobless benefits after an initial week of aid rose to 2.64 million in the week ended Dec. 1.

Today, allot of awareness will revolve around the announcement of the US CPI inflation data. In the case that the CPI will spring an upside surprise and release higher than expected, it will give an additional element to the Federal Reserve's uncertainty whether to make an additional move regarding cutting interest rates further in the short run.

EUR

Yesterday was a relatively empty economic calendar suggesting that the direction of the EUR may depend on shifts in global risk sentiment. The US dollar continued to move forward and increased against the EUR and other major currencies., striking a six-day high especially against the 13 nation currency, principally after the publications of stronger than expected US retail sales and PPI data. It is almost a week since the EUR/USD encountered a rough patch and will face allot of difficulty to maintain gains over the 1.4725 level.

The main question at the moment which is being asked by many traders is if the greenbacks strength has returned and little by little we will notice positive signs from the US market after the credit and the mortgage crises. As it seems at the moment, if we will witness better news coming from the US then the probability is that the market will notify a bullish USD and possibly a turnover of the pessimistic sentiment.

In addition, The Swiss National Bank kept interest rates unchanged on Thursday for the first time at a policy meeting in over two years. The NSB raised its inflation forecast for 2008 to 1.7 percent from 1.5 percent but lowered it for 2009 to 1.5 percent from 1.8 percent.

JPY

Today during the early trading ours in Asia, Japanese large manufacturers' business sentiment descended to a two-year low, The Tankan index of manufacturer sentiment fell to 19 points in December from 23 in September, providing once again a potential of a BOJ rate hike during next year. As a consequence, the Japanese currency began to depreciate against the US dollar and as it seems we may see the USD JPY pair reach the 113.00 level. The JPY traded at 112.50 per dollar at 11:10 a.m. in Tokyo from 112.33 before the report was published, and after the report came out, the USD JPY peaked to 112.63.

The economy of Japan developed much slower than was estimated by the Japanese government in the three months ended Sept. 30. The growth of many large companies decreased to 1.3% in the third quarter from 14% in the second, as a 10% gain in the JPY over the earlier six months cut margins, and in addition to this fact, in many small and medium companies, salaries dropped by 4%. The direction of the JPY remains heavily depended on the performance of U.S stocks and the Nikkei, as this will influence the level of investor's risk appetite, which drives carry trades. In the short term the JPY should remain under pressure, as the confidence of investors to take risks is returning.

Technical Analysis

EUR/USD

After touching a base at 1.4575, the pair now consolidates higher at 1.4655. All oscillators show that the bullish momentum will probably continue, and that a breach through the next key level of 1.4680 is quite imminent. If the key support level will hold, we might see a correction back to the 1.4600 levels.

GBP/USD

In the past few days the pair is going through a choppy period, and is giving mixed signals on the daily charts. However the hourlies remain bullish and it looks as if this pair could breach the 2.0500 level again. A preferable strategy might be going long on an intraday trade.

USD/JPY

On the 4 H chart we notice that the bullish trend is running ahead. The volatility is increasing, especially after the pair has broken the 112.00 resistance level. The price should continue to move upwards in a range of 112.50-113.00. As it stands, the bullish pressure will continue to gather momentum on the USD JPY today as well.

USD/CHF

This pair is still in the midst of a steady bullish channel that has continued over the last 2 weeks. However it is now hovering near the top of this channel setting up the potential for a mini-correction downwards. Nevertheless the longer term outlook remains bullish, so the preferred strategy here could be a buy and hold scenario.

Wild Card

Gold

On the 4 H chart we can see that gold is in the middle of an upward channel. It was heading back towards the top of this channel but now it seems that it may correct again before moving up. So this gives Forex traders the opportunity to maximize profits by waiting for the correction and then enter an early long.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4730	2.0490	113.35	1.1520	0.8882	0.7262
	1.4700	2.0468	113.00	1.1488	0.8840	0.7233
	1.4665	2.0430	112.70	1.1450	0.8800	0.7200
Support	1.4600	2.0380	112.00	1.1400	0.8745	0.7146
	1.4570	2.0359	111.72	1.1372	0.8700	0.7116
	1.4540	2.0330	111.48	1.1347	0.8673	0.7090

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2007-12-14	13:30	USD	CPI	m/m	0.3%	0.6%
		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.
2007-12-14	13:30	USD	Core CPI	m/m	0.2%	0.2%
		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%.
2007-12-14	13:30	CAD	Industrial Capacity Utilization Rate		83.0%	82.5%
2007-12-14	14:15	USD	Industrial Production	m/m	-0.5%	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.
2007-12-14	14:15	USD	Capacity Utilization Rate		81.7%	81.7%
		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.