Forex Tips & Daily Analysis

Economical News

USD

Yesterday, the greenback saw mixed results as it was in a bearish trend versus its major currency rivals during the first half of the day. Later on throughout the day it managed to gain some bullish momentum, the most notable and volatile loss in the first half of day for the USD was 111 pips against the EUR. The pair eventually evened out mid-day to close at 1.5531.

May 6th was a slow news day for the U.S. economy with Fed Chairman Ben Bernanke's speech the only scheduled event of relevance. In his speech, Fed Chairman Bernanke spoke about the need of finding new ways to combat homeowner foreclosures. As most of the important news came from Europe and Canada yesterday, the Dollar traded largely off of investor speculation,

Today at 12:30 GMT, quarterly Nonfarm Productivity will be released and will likely contribute to some volatility within the market. Expectations are for a decreasing trend of about 0.4% compared to the previous announcements. This negative trend should have a positive effect on the USD as it helps drive down consumer prices due to salary increases. Today we expect Unit Labor Costs, Pending Home Sales and Crude Oil Inventories results to be published. Along with the aforementioned events, we will also be expecting to hear from Fed Governor Kroszner. Kroszner has affected the market in a volatile manner recently with some outgoing statements regarding the current state of the US economy. Investors should note that on Friday the Trade Balance will be published and it could be profitable to hear his words and get in on early and insightful investments.

EUR

Investors who kept their positions open yesterday in favor of the EUR profited throughout the trading day. The most notable gain in half an hour was 43 points versus the GBP. And the largest daily gain was 55 points against the CHF which closed at 1.6335.

Yesterday saw a batch of news from Europe; however the real relevant news came from outside of the Euro-Zone economy. Services PMI and PPI figures were released with no real change from previous months. ECB President Jean-Claude Trichet did speak yesterday at the formal site for the new ECB grounds in Frankfurt. The market didn't experience very much volatility as the events yesterday hardly affected the EUR traders.

Better economic results are expected today. The most important factors to emerge will be the Euro-Zone Retail Sales and German Factory Orders that are both expected to see positive results. Any positive trend by the two events should help continue to facilitate a bullish EUR. Nevertheless, more important factors, e.g. UK Industrial Production and US Nonfarm Productivity, will be published outside of the EZ, as investors should pay close attention to those scheduled events. The EZ Interest Rate Statement will be released on Thursday. The importance of the statement can not be overemphasized as it gives clues for future shifts concerning economic policy in the Euro-Economic Zone.

Given the expectations and depending on whether the policy comments will be in line with expectations, Forex Investors should look ahead to more EUR bullish movement.

JPY

Yesterday the JPY lost ground against most of the major currencies, and the USD/JPY closed at approximately the rate it opened. The Yen's movement during the day was fairly notable, including a 55 pip change in the USD/JPY.

Since Friday news halted out of Japan due to the long holiday week. The lack of news is expected to continue until this coming Friday, with the publication of the relatively minor indicator, the Leading Index.

On Saturday, the major Japanese banks publicized the loss of 1.7 trillion JPY which was affected by their undertaking of sub-prime-mortgage debts. Furthermore, in the concluding year, the Tokyo Stock Exchange lost 29.2% in the aggregate market value of firms. These two factors hurt the weakening Yen. Investors ought to be aware that Japan has championed a currency swap valued at $80 billion with the 10- member Association of Southeast Asia. The swap was initiated in order to avoid type of crisis similar to the 1997-1998 Asian financial disaster.

Today we will likely see the continuation of yesterday's JPY trading, as investors will have to be wary of JPY bearishness trend. Consequently, Forex traders should pay close attention to the subtleties of the Japanese economy as well as major economic and political news from elsewhere in the world.

Technical Analysis

EUR/USD

After a short bullish correction the pair now resumes the bearish move. The attempt to breach the 1.5600 has failed yesterday and now all oscillators are showing fresh bearish momentum. Going short with very tight stops might be the right thing to do today.

GBP/USD

The bearish price movement within the bearish channel on the daily chart continues. The Slow Stochastic is showing sharp negative slope and the RSI and if floating at the 50 level which indicate a possible continuation of the bearish move. Going short might be the right choice today.

USD/JPY

The narrowing bullish channel on the daily chart still remains intact, as the pair now floats near the bottom barrier of it. The Slow Stochastic is pointing to fresh bullish momentum, and the RSI confirms. Going long might be preferable today.

USD/CHF

The bullish break through the horizontal channel is still showing its effect. The momentum is now very high and the Slow Stochastic of the daily chart confirms the bullish momentum with no upcoming crosses on key levels. A breach through the 1.0600 level will probably unleash a much stronger move. Going long appears to be the right direction today.

Wild Card

Crude Oil

A very important key level has been breached, and Oil is now floating at an all time high level of around 122.00. The momentum is more bullish than ever, and it appears that there is much more room to run at the local level. Forex traders should try and utilize the momentum created by that violent breach and go long.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5597	1.9798	105.73	1.0609	0.9581	0.7962
	1.5576	1.9775	105.39	1.0584	0.9553	0.7934
	1.5548	1.9752	105.12	1.0556	0.9528	0.7906
Support	1.5473	0.9671	104.38	1.0487	0.9452	0.7835
	1.5449	1.9644	104.15	1.0461	0.9426	0.7813
	1.5224	1.9620	103.87	1.0433	0.9404	0.7786

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-05-07	06:45	EUR	French Government Budget Balance		-22.7B	*
		French Government Budget Balance Measures the difference between the central government's monthly income and spending. A positive number indicates more revenue was received than spent during the month.
2008-05-07	06:45	EUR	French Trade Balance		-2.8B	-3.0B
		French 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.
2008-05-07	08:30	GBP	Industrial Production	m/m	0.3%	-0.1%
		Industrial Production Measures the total value of output produced by factories, mines, and utilities. A rising trend has a positive effect on the nation's currency because high levels of production are a sign of a strong economy. Industrial Production reacts quickly to the ups and downs of the business cycle and can be a leading indicator of manufacturing employment, average earnings, and personal income. Traders pay special attention to Industrial Production because it's one of the few growth indicators that is produced directly by the Federal Reserve.
2008-05-07	08:30	GBP	Manufacturing Production	m/m	0.4%	0.0%
		Manufacturing Production Measures the total value of output produced by manufacturers. Manufacturing Production differs from Industrial Production in that it only measures the 13 sub-sectors of production that relate directly to manufacturing. Manufacturing industries make up about 80% of total Industrial Production.
2008-05-07	09:00	EUR	Retail Sales	m/m	-0.5%	0.1%
		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.
2008-05-07	09:30	GBP	BRC Shop Price Index	y/y	1.1%	*
		BRC Shop Price Index The British Retail Consortium (BRC) Shop Price Index measures the rate of inflation (i.e., the rate of price changes) at surveyed retailers.
2008-05-07	10:00	EUR	German Factory Orders	q/q	-0.5%	0.1%
		German Factory Orders Measures the value of new purchase orders placed with domestic manufacturers for durable and non-durable goods.
2008-05-07	12:30	USD	Nonfarm Productivity	q/q	1.8%	1.5%
		Nonfarm Productivity Measures the annualized quarterly growth in labor efficiency for producing goods and services outside the farming sector. A rising trend indicates future inflationary pressures as manufacturers raise prices in response to an at-capacity factory environment.
2008-05-07	12:30	USD	Unit Labor Costs	q/q	2.6%	2.6%
		Unit Labor Costs Measures the relationship between compensation per hour and productivity, or output per hour minus inflation. Higher hourly compensation increases unit labor costs; labor productivity improvements offset compensation increases and lower unit labor costs. 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.
2008-05-07	12:45	USD	Fed Governor Kroszner Speaks		*	*
		Fed Governor Kroszner Speaks Federal Reserve Governor and FOMC voting member Randall Kroszner will deliver a speech titled "Addressing Challenges to Innovative Community Development Investment Activities" at the Community Reinvestment Fund Community Development Forum, in Minneapolis. Audience questions expected. FOMC voting members are responsible for setting the nation's short term interest rate, so traders scrutinize their speeches closely for clues regarding future monetary policy.
2008-05-07	14:00	USD	Pending Home Sales		-1.9%	-1.0%
		Pending Home Sales Measures the number of signed real estate contracts for existing single-family homes, condos and co-ops. An index of 100 is equal to the average level of contract activity during 2001.
2008-05-07	14:30	USD	Crude Oil Inventories		*	*
		Crude Oil Inventories The Energy Information Administration's (EIA) Crude Oil Inventories measures the weekly increase in barrels of commercial crude oil held in inventory by US firms. The level of inventories influences the price of petroleum products, which can have an impact on inflation and other economic forces.
2008-05-07	19:00	USD	Consumer Credit	m/m	5.2B	6.0B
		Consumer Credit Measures the total value of outstanding consumer installment debt, such as credit cards and auto loans. A rising trend has a positive effect on the nation's currency because historically consumer borrowing and spending have a high degree of correlation.
2008-05-07	22:45	NZD	Unemployment Rate		3.4%	3.5%
		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.
2008-05-07	22:45	NZD	Employment Change	q/q	1.1%	-0.1%
		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
2008-05-07	23:01	USD	NIESR GDP Estimate		0.5%	*
		NIESR GDP Estimate The National Institute of Economic and Social Research (NIESR) Gross Domestic Product (GDP) Estimate is a prediction for the past month's official GDP using statistical projection techniques. NIESR is one of the UK's oldest independent economic research institutes and their estimates are widely reported in the press.