Forex Tips & Daily Analysis

Economical News

USD

Yesterday, the greenback was revived after several days of bearish behavior. Investors seem to have kept faith about the dollar as traders pushed it toward sharp profits versus most of its currency rivals. It has been briefly touched upon before in fundamental reports that global investors take any positive trend from the US economy and run with it, as the greenback has proven in history that it can take a severe hit and recover. What made the bullish trend even more significant was the overall market condition surrounding it as scheduled events didn't deter profits. Yesterday's US economic calendar was sprinkled with news that returned to negative results and should have had equal effect on the currency. Some though, did contribute to the rise, as Non Farm Productivity returned with higher than expected results at 2.2%. The figure was forecasted to come back at 1.7% annual quarterly gain. Unit Labor Costs came in at 2.2% down 0.4% from its expected return. Pending home sales came back as forecasted at -1.0%, kept the housing crisis as a cloud over many investors heads. Consumer Credit numbers were more than double their previous figure, as it seems that US consumers have taken on credit to do most of their shopping.

As a whole though it seemed that Productivity numbers helped justify the already lop-sided thinking behind investors of a change in dollar trends as most dollar pairs saw sharp gains immediately following its release. When glaring at the currency charts this morning, the USD finds itself in uncharted territory for 2008. The EUR/USD coming ever so close to 1.52, GBP/USD back down to 1.95 and USD/JPY back to 104 technical levels.

Today, Unemployment claims and Wholesale Inventories are on tap. Dollar bullishness will likely continue regardless, but any improvement from the last figure of 370K from unemployment claims will likely magnify bullishness.

EUR

The Euro saw a second straight day of losses yesterday, most notably against the greenback as economic concerns within the Euro-Zone are rising. On April 22nd the EUR/USD pair hit an all time high of just over 1.60, since then investors have seen nearly a 4.5% drop. The bearishness from the 15-Nation currency can be attributed to several factors. Firstly, yesterday's news releases from the Euro-Zone, brought back less than favorable results for lagging indicators. Euro-Zone Retail Sales fell by 0.4% last month, 0.3% more than the expected drop. The number backed up indications by investors that Europeans simply do not spend as much as they could, in order to push the overall economy in the right direction. Also released to negative results was German Factory Orders, which has become a solid indicator as to the overall state of the E-Z. Orders dropped off by 0.6% and didn't help curb speculation over the slowdown in the E-Z economy.

ECB President Jean-Claude Trichet has been hawkish regarding his monetary policy and most notably his unchanged benchmark interest rate of 4% for quite some time. Unfortunately for the ECB, such hawkish ness that led to a rising EUR and EZ prosperity was not backed up by actual consumer behavior. Now, with rising inflationary concerns and an obvious slowdown in the Euro-Zone economy, the ECB and its head honcho might very well have to ease the very interest rate they longed to keep constant. The GBP, which had an abysmal day didn't do very much good either as the proximity and close ties to the Euro-Zone economy made wary investors even more skeptical about the EUR.

Today, on tap from the EZ we can expect the Minimum Rate, which is the Interest Rate on the main refinancing operations that provide the bulk of liquidity to the banking system, and will remain unchanged at 4%. German Trade Balance (expected to remain steady at 16.9B) and German Industrial Production are also expected. If Production numbers come back as forecasted with negative results expect a continuation of EUR bullishness, as German figures are normally a precursor to overall EZ numbers. At 12:30 GMT there will be an ECB Press Conference with President Trichet and VP Lucas Papademos. Volatility should be expected, as the question and answer portion of the conference coupled with Trichet's speech generally gives way to many clues as to future policy changes.

JPY

Yesterday, JPY crosses saw bearish results, as the Japanese currency reacted toward a rising trend of risk aversion throughout the Forex market. With a halt in any Japanese news this week due to the Golden Holidays week, the Asian powerhouse has been subject to external news and movement in the markets. Similar to the Euro-Zone, the Japanese economy is juggling rising inflationary pressures and a stall to any consistent growth within its National economy. With such inflationary pressures at nearly a decade high, many investors believe that the Bank of Japan and its new leadership will be forced to raise the lending rate. Market makers have begun to see futures movement that shows such a change coming within the next year by almost 100%.

Until the return of the JPY to the news cycle, investors should expect to see mixed results as the currency reacts toward outside events.

Technical Analysis

EUR/USD

The pair is the middle of a very strong downtrend and is testing fresh lows on a daily basis. The very important key support level of 1.5400 has been breached and fresh bearish momentum has been injected. Next target price might be around 1.5310.

GBP/USD

The float within the narrowing bearish channel on the daily chart continues, as no significant breach has been made. The negative slope on the daily Slow Stochastic indicates the continuation of the bearish movement within the channel. Going short with tight stops appears to be the preferable strategy.

USD/JPY

There is a very accurate bullish channel forming on the daily chart, as the pair now floats in the bottom barrier of it. The Slow Stochastic is showing that a bearish breach is very unlikely and that the bullish price movement will probably continue. Going long might be the right way today.

USD/CHF

The pair is showing consistent bullish momentum for a while now and today is no difference. The bullish breach through the flat channel on the daily chart has created strong bullish momentum that is carrying the pair up with no local correction. It appears that there is still more room to run and that going long is probably the best choice today.

Wild Card

Crude Oil

After breaking every possible resistance level, and setting all time highs on a daily basis, Oil is now traded around 124.00. The momentum is more bullish than ever, and it appears that the bonanza will continue, possible to the 126.00 level on this move. Forex traders have a great opportunity to dive into a very healthy up trend with great profit potential.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5343	1.9645	104.98	1.0635	0.9501	0.7945
	1.5298	1.9601	104.68	1.0604	0.9478	0.7904
	1.5257	1.9569	104.34	1.0589	0.9430	0.7889
Support	1.5200	1.9500	103.67	1.0539	0.9368	0.7823
	1.5168	1.9468	103.12	1.0520	0.9323	0.7798
	1.5134	1.9412	102.70	1.0459	0.9300	0.7768

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-05-08		GBP	MPC Rate Statement		*	*
		MPC Rate Statement Usual Effect More hawkish than expected = Good for currency; Frequency Monthly; FF Notes This is a "Tentative" event because the statement is not issued if the rate doesn't change (except under extreme conditions). If the statement is not issued this event will be removed from the calendar immediately following the release. If issued, the Tentative mark will be removed; Acronyms Bank of England (BOE), Monetary Policy Committee (MPC); Why Traders Care It's one of primary methods the MPC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates, commentary about the economic conditions that influenced their vote, and most importantly, clues on the outcome of future votes;
2008-05-08	01:30	AUD	Employment Change		18.2K	10.2K
		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
2008-05-08	01:30	AUD	Unemployment Rate		4.1%	4.1%
		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.
2008-05-08	05:45	CHF	Unemployment Rate		2.5%	2.5%
		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.
2008-05-08	06:00	EUR	German Trade Balance		16.9B	16.9B
		German 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.
2008-05-08	10:00	EUR	German Industrial Production	m/m	0.4%	-0.5%
		German 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.
2008-05-08	11:00	GBP	Official Bank Rate		5.00%	5.00%
		Official Bank Rate Measures Interest rate at which banks lend balances held at the BOE to other banks; Usual Effect Actual > Forecast = Good for currency; Frequency Monthly; FF Notes When there is a change in rates the MPC will also issue a statement. Rate shifts are usually priced in the market and thus overshadowed by the MPC statement which is focused on the future; Acronyms Bank of England (BOE), Monetary Policy Committee (MPC); Also Called Interest Rates, BOE Rate; Why Traders Care Short term interest rates are the paramount factor in currency valuation - traders look at most other indicators merely to predict how rates will change in the future; Derived Via The 9 members of the MPC vote on where to set the rate. The individual votes are published 2 weeks later in the MPC Meeting Minutes;
2008-05-08	11:45	EUR	Minimum Bid Rate		4.00%	4.00%
		Minimum Bid Rate Measures The interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system; Usual Effect Actual > Forecast = Good for currency; Frequency Monthly; FF Notes The rate shift is usually priced in the market and thus overshadowed by the ECB press conference held 45 minutes later. Acronyms European Central Bank (ECB); Also Called Refi Rate; Why Traders Care Short term interest rates are the paramount factor in currency valuation - traders look at most other indicators merely to predict how rates will change in the future; Derived Via The 6 members of the ECB and the 15 governors of the Euro area central banks vote on where to set the rate. The split of votes is not publicly revealed;
2008-05-08	12:15	CAD	Housing Starts		243K	225K
		Housing Starts Measures the annualized number of new residential buildings that began construction during the previous month. A rising trend has a positive effect on the nation's currency because the housing market is a leading gauge for the overall economy. A high level of housing activity signals that the construction industry is healthy and that consumers have the capital to make large investments. More importantly, new housing activity creates an economic ripple effect as home owners buy goods such as appliances and furniture for their homes, and builders buy raw materials and hire more workers to meet demand.
2008-05-08	12:30	EUR	ECB Press Conference		*	*
		ECB Press Conference Speaker ECB President Jean-Claude Trichet and Vice President Lucas Papademos; Usual Effect More hawkish than expected = Good for currency; Frequency Monthly, about 45 minutes after the rate release; FF Notes There are two parts to the press conference: first Trichet reads a prepared statement (a text version is made public at the start), then the conference is open to press questions. Since the questions are not known beforehand they can make for some unscripted moments that lead to heavy market volatility; Why Traders Care It's the primary method the ECB uses to communicate with investors. It covers in detail the factors that affected the most recent interest rate decision, the overall economic outlook, inflation, and most importantly, clues regarding future monetary policy;
2008-05-08	12:30	USD	Unemployment Claims		380k	370K
		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.
2008-05-08	14:00	USD	Wholesale Inventories	m/m	1.1%	0.5%
		Wholesale Inventories Measures the value of goods held by wholesalers. A falling trend has a positive effect on the nation's currency because wholesalers order more goods from manufacturers when they have depleted inventories.