Forex Tips & Daily Analysis

Economical News

USD

The greenback continued to see significant decline yesterday, as it posted close to record lows against several major currency pairs. Concerns over the state of the US economy are still dismal, as the dovish stance taken by the Feds has done nothing to change current trends.

Investors are gearing up for what most feel will be another interest rate cut from the Fed, by as much as 0.5%. With the EUR/USD already traded well within the range of its all-time high of 1.4960, speculation that it will break the 1.50 support level is gaining steam.

One of the main issues for the Feds is whether or not the problems from the failing credit and housing markets will spill over into other economic sectors, such as retail and consumer confidence. With the mostly disappointing figures that have been released in 2008 so far, there is little that can be expected in the way of drastically changing the dollar's downward pile.

Today is expected to produce a host of key economic data from the US. Events from the US start at 13:30 GMT, as the release Retails Sales, Core PPI, PPI, and the Empire State Business Conditions Index are on tap. The aforementioned events will be followed by the 14:00 GMT of Business Inventories for the month of December. The real standout figure of the bunch should be Retail Sales, which could single-handedly drive the dollar down, if already poor expectations return even worse.

If US economic data returns with negative results, it could very well be the day that the EUR/USD makes a serious push toward 1.50 and even further as the market approaches the rate statement. It appears that from all points of view the greenback's near future looks extremely gloomy.

EUR

The strength of the EUR has become a point of regularity, as the 15-nation currency continues to perform well against all of its major counterparts. As the EUR/USD slowly closes in on the 1.50 level, speculation is rising as to the behavior of the ECB after such levels are achieved. Investors must question whether or not President Jean-Claude Trichet's hawkish stance toward monetary policy in the EU could continue if the Euro keeps rising toward "inflationary" levels against its counterparts. A considerable rise in the Euro could directly contribute to the slowing of Euro-zone growth, especially in industries in direct competition with the US and Asia.

As we enter the second day of what has been the busiest economic event week in 2008, we are due to hear back about two low-volatility news events today. Today at 10:00 GMT will see the release of ZEW Economic figures from Germany and the whole of Europe. Figures are expected to be positive and could help push any negative US data toward the 1.50 break point for EUR/USD.

The EUR will likely take a backseat to investor's focus on the dollar today; however it will be intriguing to see if the ECB hint to any change in their current monetary policy if the Euro-zone currency continues to strengthen.

JPY

The Yen was rewarded with positive gains against all 16 major currencies, as a combination of foreign economic data and the recovery in the Dow helped instill more investor confidence.

The Dow rallied yesterday to finish 171 points up, and was critical in resurrection carry trading for the day. Though the recovery did not initially affect the Yens big pairs (USD/JPY, GBP/JPY, and EUR/JPY), a string of unexpected data from the US helped the Yen sufficiently increase their gains for the day.

In addition to outside factors, news that Japan will exchange roughly sixty million dollars of coupons and principal payments to Euro, (which will be claimed by a handful of European nations this week) sparked a local growth in the Japanese currency as well.

The Japanese economic calendar was empty yesterday, as the country celebrated the coming of age holiday. Today we expect to see the release of Core Machinery Orders as well as current account information. Expectations show a significant drop in Core Machinery orders as the month December failed to produce expected growth.

Those news events are expected to generate relatively small interest amongst traders, as most of the focus will be on USD related events. This situation will probably be quite common in the near future, as the fate of the greenback will have much more effect on global economic events.

Technical Analysis

EUR/USD

The pair is in the middle of a bullish trend which was initiated in the end of December. The 4 hour chart is showing a bearish cross on the slow stochastic, and a breach of the 80 level on the RSI. It looks as if there might be a bearish correction before the pair resumes the journey to 1.50.

GBP/USD

The intensive bearish trend is calming on the hourly charts, yet shows no real indication of a halt or a correction move. The cable is now at the lowest level it has been since mid August, and will probably continue its road south even further. Being on the sell side still appears to be the right move.

USD/JPY

The key level of 107.80 was breached, as this level was the last support on the daily chart which the pair touched in the middle of November. This break validates the next bearish move and might take the pair beyond the 106.50 even before the weekend.

USD/CHF

The pair is floating at a very strong support level of 1.0920 which is the bottom of the recent downtrend the pair had. A violent breach beyond that level would indicate that the bearish momentum might continue at a higher strength. Next target price appears to be around 1.0860.

Wild Card

Gold

Gold is trading at records levels with incredible momentum, as yesterday's all time high touch strengthens the notion that we might see gold hit the 920.00 level soon. This is a great opportunity for Forex traders to enjoy the very high profit potential and enter the market on a very healthy trend.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance
Support

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-01-15	02:00	GBP	RICS House Price Balance		-40.6%	-
		RICS House Price Balance The Royal Institution of Chartered Surveyors (RICS) House Price Balance measures the price change of homes in the UK. This leading indicator represents the percentage of chartered surveyors reporting a price rise in their designated area. For instance, a reading of 50% means that 50% more surveyors reported a rise than reported a fall in prices.
2008-01-15	11:30	GBP	CPI	y/y	2.1%	-
		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.
2008-01-15	11:30	GBP	Core CPI	y/y	1.4%	-
		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%.
2008-01-15	12:00	EUR	ZEW Economic Sentiment		-37.2	-
		ZEW Economic Sentiment Zentrum für Europäische Wirtschaftsforschung (ZEW) Economic Sentiment measures institutional investor sentiment. The monthly indicator reflects the difference between the share of investors that are optimistic and the share of investors that are pessimistic. For example, if 30% of participants expect the economic situation to improve within the next six months, 30% expect no change and 40% expect the economic situation to deteriorate, the ZEW Indicator of Economic Sentiment would take a value of -10. Thus, a positive number means that the share of optimists outweighs the share of pessimists.
2008-01-15	15:30	USD	Retail Sales	m/m	1.2%	-
		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.
2008-01-15	15:30	USD	Core Retail Sales	m/m	1.8%	-
		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.
2008-01-15	15:30	USD	PPI	m/m	3.2%	-
		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.
2008-01-15	15:30	USD	Core PPI	m/m	0.4%	-
		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.
2008-01-15	15:30	USD	Empire State Business Conditions Index		10.3	-
		Empire State Business Conditions Index Measures the general business conditions of manufacturers in New York State. 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 good manufacturing conditions are a sign of a strong economy. Although this survey is limited to manufacturers in New York only, traders pay close attention because the New York Federal Reserve releases it weeks before other major reports on manufacturing (e.g., Industrial Production, ISM Manufacturing Index).