Forex Tips & Daily Analysis

Economical News

USD

The USD reversed its gains vs. the EUR yesterday as traders concluded that the FOMC Statement that came right after its Interest Rate policy meeting left the door opened for further rate reductions. Shortly after the Interest Rate announcement, the greenback dropped 0.4% to a low rate of 1.5637. With the threat of growth cooling further, the FOMC trimmed the Interest Rate by 25bp to 2% and stated that the financial markets remain under considerable stress.

The greenback has been receiving support after the recent stabilization of the financial markets in the US. Although the sentiment towards the dollar has significantly improved after yesterday's various positive US data, the Fed members still continue to express their concerns regarding the growing inflation in domestic markets. Tight credit conditions and the deepening housing contraction are likely to continue, weighing on US economic growth over the next few quarters. However, despite these cautious projections for economic activity, the market took the quarter point cut in stride with confidence that the Fed would now turn to a neutral policy stance to monitor inflation and financial market conditions.

Looking ahead to today, after the effect caused by the Interest Rate reduction, there is more intriguing data scheduled to come out. During the day, traders will primarily be concentrated on the ISM Manufacturing Index - a leading indicator of overall economic performance. This indicator measures the activity level of purchasing managers in the manufacturing sector and reflects the inflation experienced by them.

A lower than forecasted print should produce bearish momentum for the USD, as it would be clear proof that the world's largest economy is still in a stage of contraction. On the other hand, a reading in line or above expectations isn't likely to spark much reaction as traders will be anxiously waiting for Friday's Nonfarm Employment Change.

EUR

Yesterday the EUR experienced a rising trend against most of its currency rivals. Although it saw bullish trends vs. the USD and the JPY, it still depreciated against the GBP. The main reason for the EUR's bullish trend was yesterday's rate cut in the U.S. The U.S. rate cut led to a strong increment vs. the USD, moreover strengthening the EUR in other pairs. Likewise, the Consumer Price Index Flash Estimate expressed a slight lowering of the inflation rate, which should have had a negative influence against the EUR. In addition, the European Central Bank President Trichet, spoke yesterday stating that for the first quarter of 2008 the Euro-zone economy appeared to be strong and healthy, and declared that he expects the economy to be "reasonably resilient" for the next few months. He continued saying that the International Monetary Fund is forecasting a 1.4% growth for the Euro-zone this year. He ended his speech with dismissing the proposition of a future interest rate change, saying that the steady 4.00% interest rate enables the ECB to control inflation.

Today, the first of May, is the European Labor Day. This will bring the European business activity to a minimum. Therefore, very low liquidity is expected today. Traders should keep their eyes open for developments from the US. These developments should be the main reason in determining the EUR's development today.

JPY

Yesterday, the Yen was extremely volatile during trading hours versus its major currency pairs. Although the Yen experienced a sharp decline and rise during the day, ultimately it finished near the opening rate. Yesterday some crucial Japanese data was announced.

The data began with an Interest Rate Announcement, which remains the lowest in the industrial world, setting it at 0.5%. Later on, The Bank of Japan (BoJ) published its Monthly Report. In the report, the BoJ stated that as a result of uncertainties in economic activity and prices, they will not predetermine the direction of future monetary policy. Furthermore, on condition that the BoJ's basic economic scenario will remain intact, they have agreed to adjust the level of interest rate in accordance to improvements in the economic and price developments. Even though the report did include the possibility of economic instability in the near future; the report ended with the expectation of gradual yet steady recovery for the Japanese economy. The BoJ continued a assess that growth will reach 1.7% for the coming fiscal year. The last influencing economic news was a speech by Boj's Governor Shirakawa. In his speech the governor stated that at present he is not inclined to adjust Japan's interest rate level. Saying that the BoJ first must prudently examine the income data, before it can decide which policy direction should be taken.

As for today, there is no significant economic data expected to be published. Investors should mainly determine their acquisitions according to the USD developments. Given that the Euro-zone is on holiday, US influence should increase over the JPY.

Technical Analysis

EUR/USD

After several days of drops, the pair is showing a strong bullish signal on the daily chart. The daily Slow Stochastic is showing a bullish cross, and the 4 hour chart is supporting the bullish notion. There seems to be fresh reversal momentum that might take the pair back to the 1.5720 level.

GBP/USD

There is a bearish channel forming on the 4 hour chart, as the cable now attempts to breach through the upper level. If the breach validates, there could be much stronger bullish momentum created post breach. The 4 hour chart indicates that the possible breach might be quite imminent.

USD/JPY

The narrowing bullish channel continues, as the pair now floats near the bottom barrier of it. 103.10 should be a very strong support and a failed breach should probably stir fresh bullish momentum. Traders should wait for a dip around that support level before considering a long position.

USD/CHF

The daily chart is showing flat consolidation around the 1.350 level with no distinct price direction. The 4 hour chart is showing mixed signals, and the daily chart is dwelling in neutral territory. Traders are advised to wait for a clear signal on any direction or keep out of that one today.

Wild Card

Crude Oil

The daily chart is showing that the bearish breach through the channel has been validated, and that the bearish momentum created by that breach might have enough steam to take Crude Oil back to the 112.00 zone before the weekend. Forex traders have a great opportunity to take advantage of a very strong technical breach with high profit potential.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5728	1.9984	104.58	1.0435	0.9486	0.7981
	1.5699	1.9946	104.31	1.0408	0.9459	0.7942
	1.5663	1.9910	104.02	1.0379	0.9422	0.7907
Support	1.5606	1.9835	103.43	1.0322	0.9366	0.7829
	1.5578	1.9798	103.16	1.0295	0.9339	0.7791
	1.5552	1.9761	102.87	1.0268	0.9312	0.7758

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-05-01		EUR	Holiday: Labour Day		*	*
		Holiday: Labour Day Many European banks will be closed in observance of Labour Day. Low liquidity is expected.
2008-05-01	01:30	AUD	Building Approvals	m/m	0.1%	-0.4%
		Building Approvals 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.
2008-05-01	01:30	JPY	Average Cash Earnings	y/y	1.5%	1.2%
		Average Cash Earnings Measures the monthly change in the wages paid to jobholders.
2008-05-01	06:30	AUD	Index of Commodity Prices	y/y	11.1%	-
		Index of Commodity Prices Measures the rate of inflation for commodities such as wheat, wool, rice, sugar, aluminum, copper, and gold. A rising trend has a positive effect on the nation's currency. Commodities account for more than half the nation's export earnings, and exports make up roughly 20% of total domestic income, so inflation of commodity prices is a positive sign for the nation's exporters and the Trade Balance. THe index is priced in SDR terms.
2008-05-01	08:30	GBP	Manufacturing PMI		51.3	50.7
		Manufacturing PMI The Manufacturing Purchasing Manager's Index (PMI) measures the activity level of purchasing managers in the manufacturing sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation's currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
2008-05-01	11:30	USD	Challenger Job Cuts	y/y	9.4%	-
		Challenger Job Cuts The Measures the change in number of job cuts. This indicator is released by Challenger, Gray & Christmas, a private placement firm
2008-05-01	12:30	USD	Personal Spending	m/m	0.1%	0.2%
		Personal Spending Measures the total amount spent by consumers on goods and services. A rising trend has a positive effect on the nation's currency because consumer spending is a major driver of the economy, accounting for about two-thirds of GDP.
2008-05-01	12:30	USD	Core PCE Price Index	m/m	0.1%	0.1%
		Core PCE Price Index The Core Personal Consumption Expenditures (PCE) Price Index measures the rate of inflation experienced by consumers when purchasing goods and services, excluding Food and Energy. Like CPI, it reflects the price change in consumer goods and services. PCE differs slightly from CPI in that it only measures goods and services targeted towards and consumed by individuals. Food and Energy account for roughly 25% of PCE, but they can be very volatile from month to month and can distort the overall picture. PCE with the exclusion of these volatile components is thought to be a better indicator of the underlying inflation trend. Traders watch the Core PCE Price Index closely because it's the Federal Reserve's preferred consumer inflation indicator.
2008-05-01	12:30	USD	Unemployment Claims		342K	363K
		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.
2008-05-01	12:30	USD	Personal Income	m/m	0.5%	0.4%
		Personal Income Measures the total amount of income received by individuals. A rising trend has a positive effect on the nation's currency because higher levels of income allow consumers to spend more.
2008-05-01	14:00	USD	ISM Manufacturing Index		48.6	48.0
		ISM Manufacturing Index The Institute of Supply Management (ISM) Manufacturing Index measures the activity level of purchasing managers in the manufacturing sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation's currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
2008-05-01	14:00	USD	ISM Manufacturing Prices		83.5	83.5
		ISM Manufacturing Prices The Institute of Supply Management (ISM) Manufacturing Prices measures the monthly inflation experienced by manufacturing organizations when purchasing materials and services. The ISM surveys 400 firms to produce this index
2008-05-01	14:00	USD	Construction Spending		-0.3%	-0.8%
		Construction Spending Measures the monthly change in value of new construction projects
2008-05-01	15:45	CAD	BOC Governor Carney Speaks		-	-
		BOC Governor Carney Speaks Bank of Canada (BOC) Governor Mark Carney, along with Senior Deputy Governor Paul Jenkins, will testify before the Standing Senate Committee on Banking, Trade and Commerce, in Ottawa. As head of the central bank's governing body, which is responsible for setting the nation's short term interest rate, his speeches can sometimes cause market volatility as traders react to clues regarding future monetary policy.
2008-05-01	18:00	USD	Domestic Vehicle Sales		11.1M	11.4M
		Domestic Vehicle Sales Measures the annualized number of vehicles sold by domestic manufacturers in the previous month. A rising trend has a positive effect on the nation's currency because demand for vehicles, as with other expensive durable goods, has historically been a leading indicator of trends in overall consumer spending.
2008-05-01	23:50	JPY	Monetary Base		0.0%	-2.3%
		Monetary Base Measures the annual change in Japan's outstanding currency in circulation, including banknotes, coins, and current account balances. It uncovers the level of additional currency being supplied by the Bank of Japan. An increasing monetary base generally results in higher inflation.