Forex Tips & Daily Analysis

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USD

The New Year has started with a negative sentiment for the greenback which now trades at 1.4650 against the EUR and 1.9860 against the GBP. 2007 was one the worst years the greenback has ever had, as it broke negative lows one after the other, as US economy faced a state of struggle that might even bring recession in 2008 will unfold. Many changes are expected to happen in the US this year, and it could be a major turning point that could have global implications. The new president that Americans will vote in this year will most likely determine the near future of the US economy, together with a halt in the Federal Reserve's rate cut policy; it could make the difference between a healing economy and recession economy.

The three remaining trading days of this week are expected to be extremely important as the US calendar is relatively packed, and all the financial bodies are going back to normal market activities. The first event will be the ISM Manufacturing Index (15:00 GMT) which is expected to generate little hype as the consensus for the release is quite close to last month's figure of 50.8. A bit later the Fed will publish its meeting minutes at 19:00 GMT, as this is always an important event that might generate massive volatility especially in this key period.

Looking ahead we should expect the ADP release for the Nonfarm Employment Change tomorrow that might set a reference point to the much expected Nonfarm Payrolls release and the unemployment rate on Friday. Both figures are expected to come out significantly weaker than last month, and it appears that the releases will probably drag the Greenback further down if no surprises occur.

EUR

The European Central Bank mentioned that it will seek to drain as much as 200 billion Euros ($293 billion) from the euro-region money market to keep short-term interest rates close to its benchmark. This kind of activity may cause the EUR to lose ground in the future.

The liquidity-absorbing operation will settle today and mature on Jan. 3, said the Frankfurt-based central bank in its recent statement. The bank called for bids to be submitted by 10:35 a.m. today. The operation will be offered at a fixed rate of 4 percent.

The ECB added an unprecedented 348.6 billion Euros in two weeks injecting money into the banking system on Dec. 18 to ease a gridlock in money markets. Since Dec. 19 it has been mopping up additional cash. The ECB said today that banks parked 9.135 billion Euros in its deposit facility on Dec. 31, the most since January 2001.

Cyprus and Malta adopted the euro on Tuesday, tying two tiny countries on the edge of Europe to its core institutions, however raising consumer fears of higher prices, which is the major concern of each economy that is being embraced by the Euro-zone.

The New Year Euro's expectations are to maintain it's strengthening against the majors in the first half of 2008, especially as non flattering figures are reflected from US and the UK.

As for the GBP, any weak reading from the economy just fortifies expectations for a rate cut this month as the highlight in January for all economies will the release of the first fourth quarter GDP reading as all are anxiously waiting for.

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It appears that the EUR future in the short run is very much clouded, and will most probably be determined by the US ability to stop the negative snowball that already cause a global damage.

JPY

The Japanese banking system will be closed till Friday and therefore low liquidity is expected in the Japanese pairs.

The yen fell as a report showing manufacturing expanded in Australia encouraged traders to buy higher-yielding assets with money borrowed in Japan in so-called carry trades as we expect that carry trades indeed would be the favorite's alternative for now.

In 2008 we are expected to see the JPY still being traded in the same levels at least till the mid range; however as in the start of the third quarter we expect the USD/JPY carry trade to be more attractive as the greenback forecasted to comeback to its last year's values.

Technical Analysis

EUR/USD

The pair has been ranging in the past few hours and it shows no distinct direction. The daily studies are showing bullish signals and the hourlies are currently neutral. A preferable strategy might be to wait for the hourlies to deliver a positive signal, and look for a good entry point for a long position.

GBP/USD

The cable is having difficulties breaking through the 1.9860 violently. If the attempts will succeed we will see the continuation of the downtrend, but if it will not, it will validate the correction back to the 2.0000 levels again.

USD/JPY

The pair has been dropping for the past week from 114.00 to 111.54 and is now consolidating around 111.65. The sentiment is mildly bearish as the negative momentum on the 4 hour chart is growing. A violent breach through the 111.30 will validate the bearish move and probably take the pair to 111.00.

USD/CHF

After shortly testing the 1.1350 area, the pair has corrected a bit back to the 1.1275 zone. The 4 Hour chart is showing bearish signals again and the daily chart's RSI and slow stochastic are floating on the 50 levels which indicates that we might see the pair hitting 1.1210 before the weekend. A break back below the 1.1244 will validate a deeper correction down.

Wild Card

Silver

Since last week there is an extremely accurate upwards channel forming on the 4 Hour chart. Silver has made a significant move and is displaying a healthy consistent move up with plenty of room to run. The next significant resistance level is around 14.97 which provides forex traders with a great opportunity to jump into this massive uptrend with large momentum still steaming.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4758	2.0015	112.31	1.1329	0.8849	0.7447
	1.4735	1.9997	112.17	1.1314	0.8835	0.7431
	1.4710	1.9982	112.00	1.1300	0.8820	0.7415
Support	1.4630	1.9775	111.20	1.1230	0.8775	0.7367
	1.4605	1.9760	111.05	1.1207	0.8754	0.7350
	1.4590	1.948	110.90	1.1190	0.8741	0.7333

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-01-02	17:00	USD	ISM Manufacturing Index		50.8	50.7
		ISM Manufacturing Index The Institute of Supply Management (ISM) Manufacturing Index measures the activity level of purchasing managers in the manufacturing sector, 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.
2008-01-02	17:00	USD	ISM Manufacturing Prices		67.5	65.0
		ISM Manufacturing Prices The Institute of Supply Management (ISM) Manufacturing Prices measures the monthly inflation experienced by manufacturing organizations when purchasing materials and services. The ISM surveys 400 firms to produce this index
2008-01-02	21:00	USD	FOMC Meeting Minutes		-	-
		FOMC Meeting Minutes NULL