Forex Tips & Daily Analysis

Economical News

USD

Today, the US calendar is packed with important releases such as the Housing Starts,

Building Permits, Philadelphia Fed Manufacturing Index, and the speech by Federal Reserve Chairman Ben Bernanke, who will speak about the US economic outlook before the US House of Representatives Committee, in Washington DC.

As it seems, weaker-than-expected figures can trigger the Fed to cut interest rates by 75 basis points instead of 50, a move that will make it harder for the U.S. dollar to rebound in the midterm. It's likely, though, that the U.S. economy will be relatively weak through the first half of 2008 - and possibly for most of the year.

Inflation data was released yesterday. The U.S. government reported that the Core CPI rose just 0.2% in December, which was right in line with expectations, indicating that inflation remains in check.

December's CPI increase followed a sharp 0.8% jump in November and was modestly ahead of economists' forecasts. The department reported both food and energy costs rose during the full year of 2007 at the fastest rates since 1990. Energy costs in the last 12 months were up 17.4% while food gained 4.9%. The Federal Reserve is closely watching to see whether the jump in food and energy becomes more widespread and starts pushing core inflation higher.

On the basis of yesterday's Capacity Utilization Rate report, Industrial production was unchanged in December, against the median forecast for a drop. Capacity utilization, which measures the proportion of plants in use, fell to 81.4% from 81.6% in November. Workers' salary failed to keep up with the higher inflation and Average weekly earnings, after adjusting for inflation, dropped by 0.9 percent in 2007, the biggest slow down since a 1.5 percent fall in 2005.

Although a local strengthening move did occur for the USD, it still appears like a minutes before the rate statement will be quite violent and the state of the greenback will continue to be quite bearish in the near future.

EUR

Yesterday, we noticed an impressive recovery of the USD versus the Cable and the 15-nation currency, this progress began after the Federal Reserve report showed the US economy increased at a humble pace at the end of 2007.

The Euro traded at 1.4721, down from 1.4833 late Tuesday in New York. Later, in midday trading in New York, it reached the 1.4637 at its lowest point.

An additional fact which assisted to weaken the Euro was the warning which arrived from the European Central Bank (ECB) policy maker Yves Mersch who suggested that the Euro zone economy is facing a significant faze of a slowdown, he also mentioned several dovish comments about a possible up coming risks to the Euro zone economy due to slowdown in the world's economy.

As for today's European calendar, the Euro-Zone Trade Balance is expected to be released with a consensus of 3.8B after a previous release of 4.0B, and together with the ECB monthly bulletin might take the EUR further down if the trade balance comes out lower than expected.

It appears that most of today's movement will derive from the US, as most of the important economic events will be coming from there, and attract most of the traders attention.

JPY

Yesterday, the Japanese Yen gained against 15 of the 16 most-active currencies after economists in the U.S. and in the European central bank said that western economic growth is slowing down.

Japanese economic data was mixed with machine orders and CGPI beating expectations but the trade numbers fell short of expectations.

The yen climbed for a third day against the euro, but the most significant move was made in the USD/JPY and the NZD/JPY pairs. The Japanese currency stroke new two-and-a-half-year highs against the USD and traded around 106.00 at several points.

Japan's Nikkei 225 Stock Average advanced 1.1 percent to 13,656.95, rising from its lowest close since October 2005. The Topix Index, valued at 16 times earnings compared with its average 29 times for the past four years, advanced 0.9 percent.

As for today, the Japanese calendar will be void of any major releases, which will probably cause the positive JPY momentum to continue, and for all the crosses to react more with US and EUR markets.

Technical Analysis

EUR/USD

An opposite head & shoulders structure is forming on the daily chart which indicates on an upcoming bullish trend with a first target price of 1.4713 (Fibonacci 61.8%), and a second of 1.4811 (Fibonacci 76.4%). This trend is expected to be quite aggressive, and if key levels mentioned above will be breached the momentum will become slightly stronger.

GBP/USD

A bearish channel is forming on the 4 hour chart, indicating a continuation of the bearish trend, however 1.9633 is a key resistant level as it is considered as the top barrier of the channel.

In case of a breakout, the next target price is located at 1.9794 (Fibonacci 23.6%) which will create a good entry point for a long position.

USD/JPY

The 4 hour Slow Stochastic is crossing the 68 level from above which is a classic bearish signal; however the RSI and Momentum have a positive slope which contradicts the bearish signal. The direction of the future trend is a bit vague at the moment, and traders should wait for key level breaks on both sides to better determine the trend's momentum

USD/CHF

The daily chart implies a clear bullish trend as the Slow Stochastic crossed the 8 and have a positive slope. The momentum is bullish and RSI floating in neutral territory which may indicates on a possible long position with some steam is left in it.

At the moment, going long appears to be preferable.

Wild Card

Crude Oil

Oil is floating at the bottom barrier of a downwards channel on the 4 hour chart. It also crossed a key Fibonacci level of 91.30 which indicates an increasing bullish momentum. This is a great opportunity for forex traders to enter the market with a long position, and being supported by a strong technical formation.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4806	1.9861	109.03	1.1134	0.8867	0.7523
	1.4756	1.9799	108.45	1.1100	0.8906	0.7499
	1.4700	1.9750	108.00	1.1089	0.8860	0.7467
Support	1.4612	1.9689	107.01	1.0999	0.8790	0.7400
	1.4567	1.9634	106.67	1.0956	0.8745	0.7367
	1.4523	1.9578	106.12	1.0912	0.8699	0.7314

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-01-17	01:30	AUD	Unemployment Rate		4.5%	4.4%
		Unemployment Rate Measures the percentage of the total work force that is unemployed and actively seeking employment. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy. However, unemployment usually draws little attention because traders view it as a lagging indicator.
2008-01-17	02:30	AUD	Employment Change		47.6K	20.0K
		Employment Change Measures the number of new jobs created in the previous month. A rising trend has a positive effect on the nation's currency. The number of new jobs being created is one of the most important indicators of the economy's health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises
2008-01-17	12:00	EUR	Trade Balance		4.0B	3.8B
		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.
2008-01-17	12:00	CHF	ZEW Expectations		-29.7	-
		ZEW Expectations Zentrum für Europäische Wirtschaftsforschung (ZEW) Expectations measures institutional investor sentiment regarding the economic outlook. The monthly indicator reflects the difference between the share of investors that expect further improvement of economic conditions and those that expect growth to decrease.
2008-01-17	15:30	USD	Housing Starts		1.19M	1.15M
		Housing Starts NULL
2008-01-17	15:30	USD	Building Permits		1.16M	1.14M
		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.
2008-01-17	15:30	CAD	Foreign Securities Purchases		-24.3B	1.5B
		Foreign Securities Purchases Measures the monthly value of domestic securities, debt, and assets purchased by foreigners. A rising trend has a positive effect on the nation's currency because foreigners must first convert their domestic currency before they can purchase the nation's assets. This can dramatically elevate currency demand. Traders watch this indicator closely as it provides several insights into international currency flows.
2008-01-17	15:30	USD	Unemployment Claims		322K	330K
		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.
2008-01-17	16:00	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.
2008-01-17	17:00	USD	Philadelphia Fed Manufacturing Index		-1.6	-1.0
		Philadelphia Fed Manufacturing Index Measures the general business conditions of manufacturers in the Philadelphia Federal Reserve district. 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 Philadelphia only, traders pay close attention because the Philadelphia Federal Reserve releases it weeks before other major reports on manufacturing (e.g., Industrial Production, ISM Manufacturing Index).
2008-01-17	17:00	USD	Fed Chairman Bernanke Speaks		-	-
		Fed Chairman Bernanke Speaks Federal Reserve Chairman Ben Bernanke will speaks at the Charlotte Chamber of Commerce annualy meeting where he will recieve an award and talk about the regional economy. As head of the Federal Open Market Committee (FOMC), which is responsible for setting the nation's short term interest rate, Ben Bernanke is arguably the most influential figure in the currency markets. Bernanke is known to drop clues during his speeches, as it is the FOMC's tenet to keep the public aware of their monetary policy long before interest rates are changes. Heavy market volatility is often experienced during Bernanke's speeches as traders attempt to decipher his clues.