Forex Tips & Daily Analysis

Economical News

USD

Yesterday the US dollar continued its week long success as it gained against a basket of major currencies, namely the Euro. The popular pair traded in the mid 1.54 level as it looks prime to post two straight weeks of gains for the first time in 2008. The bullish movement for the greenback kept strong despite concerns over today's non-farm payroll figures.

The overall impression by investors regarding the dollar is improving, as many believe the worst of the US economic problems are behind us. Following Wednesday's US Interest Rate cut by the Federal Reserve will likely curb any short-term involvement, unless a tragic change comes about within the US. After the EUR/USD hit all time highs just over 1.60 in late 3rd week of April, the dollar has responded by gaining nearly 3.5%. Though many key investors, most notably Warren Buffett are still convinced that the US is currently in recession it is hard to deny the substantial change in the dollar trends, as gains have been seen against the EUR, JPY and GBP.

Yesterday was an important news day on the US economic calendar. The release of some key economic indicators showed that some improvement or more importantly stability has returned to the US economy. Challenger Job Cuts, Core PCE Price Index and Personal Spending all came back with better than expected results. Though the figures don't contribute much to volatility in the market, the overall economic outlook in light of the positive results added to dollar bullishness. Still suffering losses were US employment figures as unemployment rose to 380K, a bit less than 20K more than forecasts. The unemployment figures will likely worsen before an improvement as seen, as the US job market will not see recovery as easily as its currency Personal income also suffered fairly insignificant losses, from last months figure. The important data for the day were ISM manufacturing figures. April's index was released on par with last month's figure of 48.6, 0.6 points higher than expected. Still though manufacturing still fell as a index of 50 and above denotes an expansion. It looks as if the overall dollar outlook was enough to push the currency up another day.

Today should provide some expected volatility in the market, ahead of a full day of US news events highlighted by ADP Non-Farm Payrolls and the Unemployment rate. Construction PMI Average Hourly Earnings and Factory Orders are expected to contribute little toward market movement as most of the investor attention will be geared toward highlighted events. ADP numbers are expected to stay on forecast with forecast of 80K (equal with last months) are on tap. Unemployment rates are expected to rise a small amount, however if the general consensus regarding the dollar is that of some positivity expect gains to last till the weekend.

EUR

The EUR has been forced to play second fiddle to the dollar lately as it has seen record highs against the Greenback slowly disappear. The reasoning behind such drops can be a cause of many different economic factors. As the EUR hit a one month low versus the dollar speculation over continued sell-offs have risen.

Absent from yesterdays' news calendar in observance of EU Labor Day, the 15 Nations currency could do little to recover against a basket of crosses and pairs. The new hawkish trend of the Federal Reserve in the US, coupled with many statistical and technical indicators the EUR could break the 1.54 level in a bearish trend.

Today we are expecting German Retail Sales and Manufacturing PMI from the Euro-Zone economies. PMI numbers are expected to see equal figures from last month's event and German Retails Sales is forecasted to show a rise in the value of sales at the retail level in Germany. A rising trend should have a positive effect on the Euro-Zone nations because Retail Sales makes up a large portion deal of Consumer Spending.. Still though expect the EUR to find little solace from investors as trends should likely continue into the closing of the market, as the momentum with the EUR hasn't improved.

Look for the EUR to respond to US data, most notably Non-farm payrolls. If US data comes back with negative results the EUR could recover a bit before market closing.

JPY

Yesterday, the JPY gained vs. the USD and traded at a high of 104.58 and a low of 103.55, before closing at 104.39 in New York trading session. Nevertheless, the Yen still remains weak against the greenback owing to rising U.S equity markets and more confidence in the Fed's rate stance prompting investors toward the higher yielding dollar.

With stocks heading north, a probability of a resurgence of the carry trade once again hit the market. A carry trade is when investors use a currency from a country with a low cost to borrow such as Japan and invest in higher yielding currencies from a country with a higher interest rate such as New Zealand or Australia.

In addition, yesterday's Labor Cash Earnings and Vehicle Sales were increased from the prior month. However it remains to be seen whether this strength can continue since inflation is expected to take a big toll on Japanese consumer demand.

Today Japanese markets are closed due to the national holiday. The JPY trade will probably remain light ahead of an extended holiday from the weekend, with markets closed also on Monday and Tuesday.

Technical Analysis

EUR/USD

The key Fibonacci level of 1.5500 was breached and the bearish move is now validated with a full bar on the 4 hour chart. The momentum is very bearish and it appears that the next target price might be 1.5390. going short appears to be favorable today.

GBP/USD

The daily chart is showing that the cable is still floating within the bearish channel with moderate bullish momentum. The 4 hour chart is showing that the bullish momentum is slowly diminishing, and a bearish signal was seen on the Slow Stochastic. Selling on highs appears to be a smart thing today.

USD/JPY

The bullish channel on the daily chart still remains intact, as the pair now floats on the bottom barrier. The momentum is bullish and very strong. The hourlies support the bullish notion, and it appears that the pair still has much more room to run. Going long is a preferred strategy today.

USD/CHF

After a relatively long dwell in neutral territory, the pair shows first signs of bullish momentum on the 4 hour chart. The daily chart is slowly joining the bullish sentiment, and it looks like the next target price might be 1.0530. Going long with tight stops could be a good move today.

Wild Card

Crude Oil

The momentum that was created by the bearish breach through the bottom of the channel in the daily chart is growing stronger. The 4 hour chart is supporting the very strong bearish notion, which creates a great opportunity for forex traders to join the trend created by that very strong signal.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5556	1.9850	105.30	1.0570	0.9420	0.8920
	1.5526	1.9820	105.00	1.0540	0.9390	0.7890
	1.5496	1.9790	104.70	1.0510	0.9360	0.7860
Support	1.5436	1.9720	104.00	1.0440	0.9300	0.7790
	1.5406	1.9690	103.70	1.0410	0.9270	0.7760
	1.5476	1.9660	103.40	1.0380	0.9240	0.7730

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-05-02	01:30	AUD	Retail Sales	m/m	-0.1%	0.3%
		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.
2008-05-02	06:00	EUR	German Retail Sales		-0.7%	0.6%
		German 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.
2008-05-02	07:00	GBP	Halifax House Price Index		-2.5%	-0.6%
		Halifax House Price Index Measures the monthly change in the average sale price of homes finances by the Halifax Bank of Scotland (HBOS). Halifax is the UK's largest mortgage lender uses internal mortgage lending figures to produce the index.
2008-05-02	07:30	CHF	SVME PMI		55.3	55.0
		SVME PMI uS stock markets will be closed in observance of the recent death of Gerald R. Ford, the 38th President of the US. Other US financial markets remain open.
2008-05-02	08:00	EUR	Manufacturing PMI (r)		50.8	50.8
		Manufacturing PMI (r) 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.
2008-05-02	08:30	GBP	Construction PMI		47.2	47.0
		Construction PMI The Chartered Institute of Purchasing and Supply (CIPS) Construction Purchasing Manager's Index (PMI) measures the activity level of purchasing managers in the construction 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.
2008-05-02	12:30	USD	Nonfarm Employment Change		-80K	-80K
		Nonfarm Employment Change Measures the number of new jobs created in the previous month, excluding the farming industry. 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.
2008-05-02	12:30	USD	Unemployment Rate		5.1%	5.2%
		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.
2008-05-02	12:30	USD	Average Hourly Earnings		0.3%	0.3%
		Average Hourly Earnings Measures the rate of inflation found in the wages paid to nonfarm jobholders. A rising trend has a positive effect on the nation's currency. When businesses pay more for labor, they are likely to pass the higher costs to the consumer, so traders view wage inflation as a leading indicator of consumer inflation.
2008-05-02	14:00	USD	Factory Orders	m/m	-1.3%	0.2%
		Factory Orders Measures the value of new purchase orders placed with domestic manufacturers for durable and non-durable goods. Factory Orders tend to have a low impact because it reports much of the same information contained in the Durable Goods Orders report released over a week earlier.