Forex Tips & Daily Analysis

Economical News

USD

The USD gained for a 2nd straight week against the EUR as accelerating inflation encouraged traders to reduce bets that the Fed will cut its target lending rate of 4.25% at its next months' meeting.

Meanwhile, the U.S. Commerce Department report spurred concerns that the most successful shopping season in 5 years may have already pushed the economy into a recession. According to the report, the U.S. consumers spent more than they had made during the month of November. This caused Personal Savings to dip into negative territory for the first time in 15 months.

With high inflation still a problem, the Fed is running out of options. The housing slump has deepened since the subprime mortgage crisis in August led to a worldwide credit shortage. New Home Sales fell in November, signaling no end to the housing recession that threatens to stall economic growth. December's New Home Sales figure is also expected to set a low mark this Friday. Furthermore; According to several large mortgage buyers, sales of new houses probably will drop an additional 8.9% in 2008 after tumbling 25 % this year.

Apart from that, the main bulk of the U.S. data is expected on Thursday and Friday. There we'll see Durable Goods Orders, Consumer Confidence, Chicago PMI and the earlier mentioned New Home Sales. The question now is weather the recent turn in the USD will last or will the weakness resume after the New Year.

In the coming week, liquidity should be particularly thin with the currency market closed on the 25th and 26th. There will be no U.S. economic releases until Wednesday.

EUR

On Friday, the EUR was up 0.3 % against the USD at $1.4354, pushing away from a two-month low of $1.4308 touched on Thursday. Although, it appears as if the recent move was just a local rebound and nothing else. Last week's European economic data was strong with German Import Prices, French Business Confidence, French Consumer Spending and Producer Prices; all surprising to the upside.

Many countries have been lucky enough to dodge a major slowdown but if the U.S. growth continues to slow, problems next year could appear particularly from the Euro zone. If the American economy slows, the expectations in Europe could shift from a rate hike to a rate cut by the ECB, which in turn would be negative for the EUR. In fact, recent liquidity injections by the ECB, suggest that inflationary pressures are rising. Therefore, even if the European Central Bank wants to raise rates, it will not be able to do so anytime soon. The ECB President Trichet also repeated that the Central Bank's goal is to make sure that the inflation spike is short lived.

Like the U.S., the European economic calendar is exceptionally light in the coming week. The only potentially market moving report is Retail PMI on Friday. Switzerland, on the other hand, will be releasing the Consumption Indicator and the Leading Indicator.

JPY

The JPY fell to a six-week low against the USD and declined vs. the EUR as investors waded back into carry trades amid a rally in U.S. stocks, boosting demand for higher-yielding assets funded by loans in Japan. Also, the Japanese currency extended its loss after the Federal Reserve and the European Central Bank loaned $30 billion in 35-day funds through special auctions to ease a shortage in funding markets.

Large Manufacturing Conditions will be the only indicator to be released today. On Thursday, we also anticipate a Core CPI data, Industrial Production as well as a Retail Sales data from Japanese markets.

Technical Analysis

EUR/USD

An upcoming reversal is expected as a bearish channel structure is forming on the 4 Hour chart, offering to take the pair below 1.4300. The daily RSI floats around 50 which indicates that the bearish momentum might be very strong, and locating a short position might be wise even for the longer run.

GBP/USD

The Slow Stochastic, RSI and the Momentum have a positive slope indicating a bullish move for the GBP with a target price located at 1.9991 which is also the 23.6% Fibonacci of the big move initiated at 2.1100. A bullish correction appears to be imminent.

USD/JPY

The uptrend that the pair is going through is showing its first signs of a slowdown.

The Slow Stochastic crossed at 96 and RSI having negative slope which indicates upcoming bears.

The next target price is located at 113.39 (Fibonacci 76.4%), and going short appears to be the right move.

USD/CHF

On the daily chart, the Slow Stochastic, RSI and the Momentum all have a negative slope which indicates on an upcoming bearish trend with a next target price located at 1.1420 (Fibonacci 38.2%). The pair's direction appears to be south today.

Wild Card

Gold

The 4 Hour chart indicates on an upcoming bearish trend as a bearish channel structure is establishing and is supported by the Slow Stochastic with a negative slope.

The next target price is located at 804.88 (Fibonacci 76.4%) as the significant support level is located at 789.13. Forex traders might want to go short today, and enjoy a relatively strong correction move.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4483	1.9937	115.25	1.1660	0.8790	0.7354
	1.4450	1.9910	114.85	1.1620	0.8747	0.7315
	1.4420	1.9882	114.50	1.1590	0.8710	0.7285
Support	1.4340	1.9800	113.73	1.1500	0.8640	0.7200
	1.4300	1.9770	112.30	1.1472	0.8610	0.7173
	1.4275	1.9725	112.00	1.1444	0.8573	0.7142

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2007-12-24		JPY	Holiday: The Emperor's Birthday		-	-
		Holiday: The Emperor's Birthday Japanese banks will be closed in observance of The Emperor's Birthday. Low liquidity is expected for the Tokyo Forex session.
2007-12-24	23:50	JPY	BSI Large Manufacturing Conditions	q/q	7.7	-
		BSI Large Manufacturing Conditions The Business Survey Index (BSI) Manufacturing Conditions measures the general business conditions of large manufacturers. The index is derived from a survey that asks respondents to rate the level of general business activity as 'decrease', 'increase', or 'no change'. A rising trend has a positive effect on the nation's currency because manufacturers play a vital role in the large export industry. Traders also look to the BSI for clues on what to expect from the upcoming Tankan survey.