Forex Tips & Daily Analysis

Economical News

USD

Continued speculation about the further slowdown in the US economy proved to be detrimental yesterday, as a large number of world markets plunged. Shortly following remarks by President George W. Bush about plans to bolster the US economy with tax breaks, markets around the world began to sink, at an alarmingly fast pace. Markets in Asia, Europe and other key regions saw sharp drops, some of which came close to all-time record lows. Markets could not withstand growing concerns that a US recession will lead to a string of recessionary issues around the globe.

Investors saw the greenback make significant gains, mostly against its European counterpart, dropping under 1.45, something that had not been seen since the very end of 2007. The dollar was able to sustain positive movement due to the absence of the US stock market as the Martin Luther King Jr. Holiday was celebrated yestarday. Although it did escape the initial brunt of losses, the US stock markets should see heavy losses today, as Dow futures dropped 4.5 %. If indications stay as planned, there will be a similar drop in actual indices today.

Today's economic calendar contains no really important US news events. At 13:00 GMT, US Treasury Secretary Henry Paulson will speak in Washington D.C. followed by the 15:00 GMT release of the Richmond Fed Index. Most eyes will be on how stock exchanges in the US will react to yesterday's abysmal day, and if Asian and European markets can turn yesterday's misfortunes around.

Initial pressure from economic policy makers in the US to force a more constructive solution succeeded, as Fed Chairman Ben Bernanke's request for a stimulus package looks as if it will be granted by the Bush administration. The question for many is if it will be able to withstand mounting pressure on the US economy and the dollar. Look for the dollar to continue to make gains once again today, as we await the opening of the US stock market.

EUR

European financial markets were hit hard yesterday, as growing fears of recession in the US took its toll on stock markets within the Eurozone. UK's FTSE index dropped by over 5 % and the German DAX dropped over 7 %, its worst performance in six years. Free falling numbers like what was seen yesterday, had been absent since the 9/11.

Drops in the stock markets of Europe contributed to an even bigger drop in EUR strength, as it fell nearly 200 points. Yesterday's economic data from Europe was limited, as German PPI was the only index released. PPI numbers came back lower than expected and added to the already tense conditions in the market place.

While ECB President Jean Claude Trichet has been hawkish with economic policy during the last several months, recent dovish comments by a host of ECB officials only strengthened the drop in markets and currency yesterday.

Today's economic calendar is absent of any Eurozone news, as investors brace themselves for what could be yet another record day of lows for the 13 nation currency.

JPY

The JPY was the one currency that rallied against the USD boosted by risk aversion and plunging global stocks. No surprises from the Bank of Japan which unanimously voted for unchanged rates for the 12th consecutive month. Clearly the market has been marking forward the next anticipated hike from the BOJ further and further out and now most are not expecting a hike until next year.

With central banks and finance ministers all admitting that forecasts have dashed by the stronger than expected impact of the subprime induced slowdown the outlook for Japanese exporters remains bleak.

The BOJ has been adamant that Japan's long, but extremely shallow, recovery is still in place. However, without the foundation of a healthy domestic economy the risks are high for Japan to return into a recession.

Today's publication of year to year Supermarket Sales in Japan released at an abysmal -1.8% as compared with forecasts calling for a -0.4% release.

Technical Analysis

EUR/USD

The 15-nation currency is in a strong bearish momentum and losing strength versus the U.S. dollar, the daily chart is bearish, and the hourlies support the notion with a bearish cross above the 80 level on the slow stochastic. It appears that the pair is heading to the 1.4300 level.

GBP/USD

After a short correction, the pair regains the bearish path and seems to be quite confident to reach the target point of 1.9300. The hourlies are quite bearish, as the dailies produce mixed signals. At the moment, GPB/USD is trading in the 1.9250 to 1.9500 range. The volatility is high and we should expect to see also today a continuation of bearish pressure on the cable.

USD/JPY

A falling wedge structure is forming on the 4 hour chart, implying on the continuation of the current bearish trend as next target price is located at 104.37.

Going short seems to be preferable.

USD/CHF

The pair is still in the beginning of the uptrend correction initiated at 1.0858. Dailies are bullish, and the hourlies are a bit overbought. Buying on dips might be a preferable strategy.

Wild Card

Gold

There is a bearish channel forming on the daily chart, as gold is floating at the upper level of it. The slow stochastic has completed the cross above the 80 level, which validates the move as bearish. This provides forex traders with a great opportunity to enter a short position with strong bearish momentum.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4630	1.9600	107.37	1.1167	0.8702	0.7560
	1.4570	1.9557	107.06	1.1131	0.8645	0.7509
	1.4500	1.9529	106.70	1.1098	0.8601	0.7483
Support	1.4430	1.9465	106.00	1.1000	0.8512	0.7400
	1.4400	1.9425	105.81	1.0968	0.8478	0.7372
	1.4322	1.9380	105.42	1.0900	0.8445	0.7355

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-01-22		JPY	Interest Rate Announcement		0.50%	0.50%
		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.
2008-01-22		JPY	BOJ Governor Fukui Speaks		-	-
2008-01-22	08:15	CHF	Retail Sales	y/y	2.2%	3.9%
		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.
2008-01-22	11:00	GBP	CBI Industrial Trends Orders		2	3
		CBI Industrial Trends Orders The Confederation of British Industry (CBI) Industrial Trends Orders measures the value of new purchase orders placed with domestic manufacturers. A rising trend has a positive effect on the nation's currency. A busy manufacturing industry is a positive sign that the economy is expanding, and this survey points to how busy manufacturers will be in the months to come as they work to fill new orders.
2008-01-22	13:00	USD	Treasury Secretary Paulson Speaks		-	-
		Treasury Secretary Paulson Speaks US Treasury Secretary Henry Paulson will hold a press conference with French Finance Minister Christine Lagarde, in Paris.
2008-01-22	13:30	CAD	Retail Sales	m/m	0.1%	0.2%
		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.
2008-01-22	13:30	CAD	Core Retail Sales	m/m	0.0%	0.4%
		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.
2008-01-22	14:00	CAD	Interest Rate Statement		4.25%	4.00%
		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.
2008-01-22	19:00	GBP	BOE Governor King Speaks		-	-
		BOE Governor King Speaks NULL