Forex Tips & Daily Analysis

Economical News

USD

The dollar returned from a strong Wednesday to once again drop against most major currencies amidst heightened pressure from soft economic data. Yesterday's main culprit, for the greenback weakness, was manufacturing data as the Philadelphia Federal Reserve Bank's regional manufacturing index dropped to -20.9, far off of its adjusted forecast of -1.3. This coupled with failing numbers in Housing Starts data and Building Permits curtailed any greenback progress which accorded the day before.

Yesterday, Fed Chairman Ben Bernanke appeared before the US House of Representatives Committee on the Budget, to testify about the outlook of the US economy. Bernanke stated to the committee that any monetary package granted by the government should be done quickly and concisely. He went on to say that "Stimulus that comes too late will not support economic activity in the near term" adding that "it could be actively destabilizing if it comes at a time when growth is already improving."

As the greenback dropped marginal amounts versus the EUR, JPY and GBP, the real significant movement came with the Swiss Franc, as the USD/CHF currency cross hit a new all time low, sparking increased speculation in future prospects that a 75bp rate cut is on tap soon.

Today to close out the week, US economic data will be released at 15:00 GMT as we await the figures from Consumer Sentiment and Leading index. So the greenback may continue to slightly weaken today, as negative economic data continues to mount pressure on the U.S economy.

EUR

The EUR ended Thursday trading relatively unchanged against the greenback. With a lion's share of the media attention being put on the failing US economy, the slowdown in the Eurozone economies continued. A large part of the European economic problem is due to the severity of the US slowdown as the 13- Nation currency has been thrust into a position of sturdiness.

Two separate currency crosses involving the EUR hit record highs yesterday. EUR/CAD hit 8 month record highs and EUR/GBP saw its highest levels ever as we close out another week of trading.

Yesterday saw the release of the European Trade Balance shortly before remarks from ECB President Jean-Claude Trichet at “The Creation of Economic and Corporate Wealth in a Dynamic Economy” conference, in Frankfurt. Trichet explained that price stability and well timed inflation expectations would spur on steady economic growth in the long term view of the European economy.

Today will be a quiet day on the European economic calendar. At 10:00 GMT today the release of the Italian Trade Balance will precede President Trichets speech to welcome Cyprus into the European economy. Look for the EUR to continue to gain strength on most currency pairs, namely those that don't include JPY and USD.

JPY

The JPY continued its bullish rampage yesterday as most of the JPY crosses closed the trading day noticeably lower on the back of soft U.S economic data. The continued stream of negative data from the U.S has been the main driver of the sustained carry trade unwind that the market has been experiencing over the last few weeks. In contrast to the U.S, the Japanese economy has been showing positive signs because inflation is finally on the rise, in an economy that has been experiencing a situation of deflation over long periods. Also earlier this week the Japanese Current Account data surprised on the upside, indicating that exports are in healthy state. If inflation figures in the Japanese economy continue to rise then it may finally enable the BoJ to raise its interest rate, which is currently the lowest in the world making the JPY a carry trade favorite. The JPY should maintain its bullish momentum as the US economy continues to disappoint and if the BoJ does eventually manage to hike rates then we could see the JPY spike sharply as carry trades unwind.

Technical Analysis

EUR/USD

After dipping sharply on Wednesday this pair manage to recover slightly yesterday before going on another dip. This pair will once again target the 1.4600 as all indications are still bearish today. If this level is breached we may see another sharper move downwards.

GBP/USD

The RSI and Momentum on the daily chart are positively sloped indicating that this pair still has steam left in its bullish movement. However the 4 H is slightly bearish, so the preferred strategy today will be to buy on a dip as the daily movement should still be bullish.

USD/JPY

The downtrend the pair is going through seems to still be very robust and the daily chart validates that there is still room to run. . However the Momentum and Stochastic Slow are positive indicating that the local correction may continue. Therefore traders may be able to take advantage of a short term early long position before the pair resumes its downward movement.

USD/CHF

This pair has been trading in a steady downward channel over the last two. However it seems to have breached the upper side of this channel and all indications are that there will be further bullish movement. This pair will be targeting the 1.1100 price level today.

Wild Card

Gold

After appreciating sharply over the last month this commodity is now forming a steady downward channel. The charts indicate that within this downward trend we should see a local correction before the downward momentum takes over again. Therefore Forex traders can maximize gains by entering a stable short position after the local correction has taken place.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4833	1.9780	108.27	1.1135	0.8882	0.7512
	1.4700	1.9757	108.00	1.1100	0.8858	0.7478
	1.4670	1.9729	107.65	1.1072	0.8832	0.7455
Support	1.4620	1.9675	107.10	1.1030	0.8770	0.7400
	1.4600	1.9649	106.83	1.1000	0.8747	0.7372
	1.4572	1.9624	106.58	1.0968	0.8715	0.7355

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-01-18	01:50	JPY	Tertiary Industry Activity Index	m/m	1.1%	-
		Tertiary Industry Activity Index Measures the change in spending for services. A rising trend has a positive effect on the nation's currency because about half of the nation's workers are employed in the service industry. Strong spending in the services sector not only signals higher employment rates, but can also be a sign of strong consumer spending in the future.
2008-01-18	11:30	GBP	Retail Sales	m/m	0.4%	-
		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.
2008-01-18	15:30	CAD	Manufacturing Shipments	m/m	-	-
		Manufacturing Shipments Measure the total value of shipments made by manufacturers.
2008-01-18	17:00	USD	Consumer Sentiment (p)		75.5	-
		Consumer Sentiment (p) Measures consumer attitudes concerning both the present situation and future expectations. It's derived from a monthly 500-person survey conducted by the University of Michigan. Higher sentiment levels are a leading indicator of rising consumer spending, which accounts for two-thirds of the economy.