Forex Tips & Daily Analysis

Economical News

USD

On Wednesday the greenback saw gains against its major counterparts, amidst negative world economic data. The greenback was not able to hold on to such gains as early morning trading on Thursday from Asia, saw the dollar once again slip against the Euro and the Yen.

The release of weak German industrial data along with equally poor retail numbers from the euro-zone state, sparked investors to push the EUR/USD back under 1.47, dropping as low as 1.4640 during Wednesday's trading. With continued speculation over Fed interest rate cuts, the dollar was not able to sustain its momentum as it once again crept toward 1.47 against it European rival.

Two economic events were released from the US on yesterday's calendar, as St. Louis Fed President William Poole gave a speech at the Financial Planning Association of Missouri, in St. Louis. Poole was adamant that the investors should not take the US financial market problems and assume they will bring a recession. He went on to add that "2008 looks to be a year of rising growth," as he looked to make positive light of the greenback gains during yesterday's trading. The release of Housing Starts did little to change trading behavior yesterday, as investors expected very little to begin with.

Today is a day largely dominated by European economic events with a host of important data to be released. The US will release Unemployment Claims today, at 13:30 GMT, followed by a speech at 1800 GMT by Fed Chairman Ben Bernanke. Bernanke will give a speech titled "Financial Markets, the Economic Outlook, and Monetary Policy" which should clarify a great deal regarding interest rate speculation. The dollar will most likely move in the direction that the European economic takes it. Another day of poor European economic data should spur gains in the dollar.

EUR

Europe was taken a bit off guard yesterday by a string of negative data from Germany and France as the EUR suffered some losses against the dollar. German industrial production numbers came back 1.2% below initial forecasts at -0.9%. German retail sales, which were expecting a 3.5% increase, only managed 1% as the December figure came in at -1.3%. French Trade Balance was released with an unexpected 1.2 Billion decrease to bring its total to -4.8 Billion. This data sparked a quick increase in dollar confidence, as investors questioned how much longer the ECB could keep up its hawkish stance on European monetary policy.

Today's economic calendar is posted with several important economic events form Europe. At 7:45 GMT the release of French industrial production and government budget balance is expected as industrial numbers are slated for a 2.5% decrease. The day will continue with several UK events followed by the Sterling and Euro Interest Rate Statements at 12 and 12:45 GMT, respectively. To finish up, ECB President Jean-Claude Trichet will hold a press conference in Frankfurt following the Governing Council's interest rate announcement. Expect high volatility as the Interest Rate press conference normally delivers a clear message of EU monetary policy.

JPY

The JPY traded with gains on 15 of the 16 major currencies yesterday, amidst disappointing results from the Nikkei. Investors were inclined to cut holdings in high-yielding assets that were directly being funded by Japanese loans. As Japanese stocks continue to weaken speculation over the effect on the JPY is still unclear.

Carry trades resumed heavy volume as well yesterday, as the Dow Jones Industrial average showed significant gains as it rose by 148 points. Resumption of carry trades came during a very volatile point in the market day which magnified the JPY gains in the Forex market.

The Japanese economic calendar posts no significant events today as the main focus regarding the JPY will be the movement in the Nikkei and Dow Jones.

Technical Analysis

EUR/USD

The pair has been floating in a relatively tight range for several days and now shows some moderate bullish sentiment. There is a bearish channel forming on the 4 hour chart with a top barrier of 1.4705. A breach over that level will validate the next bullish move to 1.4800.

GBP/USD

Yesterday's bearish momentum continues to build up as the pair reached the level of 1.9550. It looks as if there isn't any bullish sentiment to indicate even the slightest corrective move, and the bearish steam appears to be blowing at full strength. It appears that going short still looks like the right choice today.

USD/JPY

The daily chart indicates that the next key level for the bullish correction move is 110.20 which are the 23.6% Fibonacci level of the 117.90/107.85 move. The will most likely test it soon, and if the breach will occur we should see the pair correcting further, possibly back to the 111.00/112.00 zone.

USD/CHF

The slow stochastic and the RSI on the 4 hour chart indicate that the local correction move still has some steam in it, as both figures float at around the 50 level. The daily chart supports the bullish notion with a slightly more moderate signal. It is advised to hold the entry for a stronger signal, as the sentiment is quite vague and a stronger one will surely appear soon.

Wild Card

Gold

There is a very distinct and sharp bullish channel on the 4 hour chart as Gold now floats at the bottom level of it. Its inability to breach the level indicates that the very strong bullish momentum is not over yet. This could be a great opportunity for Forex traders to go long at a bottom price and enjoy the high profit potential from the technical pattern.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4750	1.9642	110.49	1.1222	0.9010	0.7562
	1.4722	1.9615	110.20	1.1190	0.8880	0.7545
	1.4695	1.9590	109.95	1.1165	0.8855	0.7501
Support	1.4650	1.9540	109.50	1.1120	0.8800	0.7430
	1.4632	1.9513	109.22	1.1090	0.8770	0.7400
	1.4503	1.9494	108.99	1.1060	0.8741	0.7375

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-01-10	09:30	USD	Trade Balance		-7.1B	-
		Trade Balance Measures the difference in value between imported and exported goods and services. A positive Trade Balance indicates that more goods and services were exported than imported over a given period. A rising trend has a positive effect on the nation's currency. When higher levels of exports are sold to the world, demand for the nation's currency is elevated as foreigners convert their native currency to purchase the exports. The Trade Balance also has a sizable impact on GDP because high demand for exports creates increased employment and production, as domestic factories work to fill this demand.
2008-01-10	12:00	GBP	Interest Rate Statement		5.5%	-
		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.
2008-01-10	12:30	AUD	Trade Balance		-3.0B	-
		Trade Balance Measures the difference in value between imported and exported goods and services. A positive Trade Balance indicates that more goods and services were exported than imported over a given period. A rising trend has a positive effect on the nation's currency. When higher levels of exports are sold to the world, demand for the nation's currency is elevated as foreigners convert their native currency to purchase the exports. The Trade Balance also has a sizable impact on GDP because high demand for exports creates increased employment and production, as domestic factories work to fill this demand.
2008-01-10	12:45	EUR	Interest Rate Announcement		4.00%	-
		Interest Rate Announcement Each month the Bank of Japan (BOJ) Monetary Policy Committee (MPC) votes on where to set the nation's short term interest rate (i.e., "overnight call rate"). Shortly after each vote, the MPC releases a statement that contains the outcome of their vote. While no commentary is provided, a press conference regarding the economic conditions that effected their decision is held a few hours afterward. A rising trend in interest rates has a positive effect on the nation's currency. Short term 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. High interest rates attract foreigners looking for the best "risk-free" return on their money, which can dramatically increases demand for the nation's currency. The decision on where to set interest rates depends mostly on inflation. 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.
2008-01-10	13:30	EUR	ECB President Trichet Speaks		-	-
		ECB President Trichet Speaks European Central Bank (ECB) President Jean-Claude Trichet will hold a press conference in Frankfurt following the Governing Council's interest rate announcement. The ECB's announcement is void of commentary, so traders look to Trichet's press conference for clues on future monetary policy action. Heavy market volatility is often experienced during these press conferences as traders attempt to decipher Trichet's clues. 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.
2008-01-10	13:30	USD	Unemployment Claims		-	-
		Unemployment Claims Measures the number of individuals who filed for unemployment insurance for the first time during the past week. A falling trend has a positive effect on the nation's currency because working people tend to spend more money, and consumer spending makes up a large portion of GDP. This weekly indicator produces very timely data, but traders generally view unemployment as a lagging indicator that gives little indication of the economy’s future performance.
2008-01-10	13:30	CAD	Building Permits	m/m	6.8%	-
		Building Permits Measures the number of new construction intentions. This data is a leading indicator for the construction industry since the issuance of a building permit is one of the first steps in the construction process.