Forex Tips & Daily Analysis

Economical News

USD

The Greenback traded with mixed results last week as the turbulent relationship between the USD and the EUR grows even stronger. The oft traded pair saw record highs towards the end of the month of April. Since, the pair has faltered by just under 4%. The 1.6019 mark set on April 22nd saw it largest drop off in the middle of last week, when the pair dropped to the 1.52 support level. Forex traders looked prime to ride dollar bullishness, even as the progress halted going into Friday's market closing.

The US dollar reacted mainly to investor interest, as the economic data from America was mixed last week. Forex traders have regained some much needed confidence in the USD even amidst ongoing US economic concerns. The futures market is posting bullish trends by traders for the first time since late 2005 in regards to the US dollar. To add to the current positivity surrounding the greenback, the Chicago Board of Trade is showing an 80% chance that the Federal Reserve will leave the 2% interest rate as is. While investors are enjoying being on the positive side of the dollar, they must still be wary of a shaky US economic picture.

This week on the US economic calendar, we will be seeing data, which will likely contribute to liquidity and volatility in the Forex market. Core Retail Sales, Core CPI

Empire State Business Conditions Index, Unemployment Claims, TIC Net Long-Term Transactions, Industrial Production, Philadelphia Fed Manufacturing Index Housing Starts and Consumer Sentiment highlight a heavy week from the Greenback's home. If mediocre forecasts hold true, the dollar will have to fight hard to have a positive week, especially against its most traded currency rivals.

Today, the US is absent from the economic calendar. Expect the dollar to trade mostly off of investor speculation and in response to outside news events and Oil pricing. Forex traders are ready to continue to ride a bullish dollar; however the US economy will have to hold up, as investors cannot blatantly ignore important economic data.

EUR

Last week saw volatile sessions within Euro pairs. The EUR\USD first peaked to 1.5548, but later on made a straight downfall to 1.5311, to finish the trading week at the rate of 1.5482. Regarding other currencies, the Euro grew bullish momentum against the GBP, but underwent bearish trend vs. the JPY.

Amazingly enough, Jean Claude Trichet, President of the European Central Bank, remained hawkish once again during a speech at an ECB Press Conference. Amidst fears of economic slowdown within the Euro-Zone, Trichet signaled toward leaving interest rates for the EUR unchanged, stating in to be the leading key to control euro zone inflation pressures.

Skepticism grew last week over the bearishness of the EUR recently and the affect it was having on the EUR/USD pair. Economic data from the region though better than the week before was still bad enough to give Forex traders second thoughts about how much the EUR could see profits this week.

Today, Trichet is expected to deliver another speech, and traders should expect it to be the main volatile catalyst for today.

JPY

The JPY rose across the board, pushing its higher yielding counterparts lower. By selling these currencies, investors unwound positions where they borrow low-yielding currencies like the JPY to fund purchases of higher-yielding assets. Rise in risk aversion prompted by sagging stock markets and the jump in Oil prices to an all time high also helped bolster the Japanese Yen. Overall the USD/JPY traded yesterday with a low of 102.53 and a high of 103.46 before closing the day at 102.60 in the New York session

In the previous week the Japanese economic calendar was extremely light following the completion of the Golden Week holidays. This week's calendar is also expected to provide relatively few fundamental events. Yesterday's Money Supply released at 1.9%, down from last month's figure of 2.2%. This indicator measures the value of all currency and liquid cash assets held by the public. The commonly held theory is that elevated currency levels spur growth and have an inflationary effect, leading to higher Interest Rates. Meanwhile, the BoJ officials remain reluctant to increase liquidity in fears of fueling further inflation.

Nevertheless, it seems like the JPY rally is going on fairly independent from the Japanese News releases and pushed by an intense unwinding of the carry trades.

Towards the end of the week traders will also follow the Core Machinery Orders and the GDP printings.

Risk trends will remain the primary driver of the Japanese Yen. With carry trades unwinding, we should see the JPY fluctuations being dollar centered today.

Technical Analysis

EUR/USD

There is a very interesting bearish channel forming on the 4 hour chart as the pair now moves down within the channel. The Slow Stochastic is showing a strong bearish cross, as the RSI confirms. It appears that the pair is heading 1.5310 and going short might be a preferable strategy today.

GBP/USD

The cable is floating at the bottom section of the bearish channel on the daily chart. The Slow Stochastic has a bullish cross forming which indicates an upcoming potential reversal move. Going long with very tight stops might be the right way to go today.

USD/JPY

The attempt to breach through the bottom section of the bullish channel on the daily chart has failed. The 4 hour chart is showing fresh bullish momentum on the Slow Stochastic and RSI. Hourly Oscillators are indicating that the Momentum is now bullish and that going long might be wise today.

USD/CHF

The 4 hour chart is showing that the pair is floating in a range after the strong bullish momentum from the channel break was done. The daily chart is showing moderate bullish momentum, and traders should wait for a stronger signal before jumping into the bullish trend.

Wild Card

Crude Oil

Oil is showing violent bullish behavior for the past 2 weeks, and today is no different. Fresh all time highs are being breached on a daily basis and Oil is now floating at 125.60. The RSI is showing that the bullish momentum is still quite bullish and forex traders have a great chance of enjoying the additional momentum still left for the commodity.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5493	1.9563	104.20	1.0564	0.9466	0.7995
	1.5468	1.9534	103.95	1.0538	0.9439	0.7972
	1.5441	1.9506	103.69	1.0512	0.9414	0.7947
Support	1.5372	1.9434	102.97	1.0441	0.9343	0.7881
	1.5345	1.9408	102.72	1.0413	0.9315	0.7854
	1.5317	1.9381	107.46	1.0387	0.9288	0.7828

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-05-12		JPY	BOJ Governor Shirakawa Speaks		-	-
		BOJ Governor Shirakawa Speaks Bank of Japan (BOJ) Governor Masaaki Shirakawa will hold a press conference in Tokyo following the Monetary Policy Committee (MPC) interest rate announcement. The MPC's announcement is void of commentary, so traders look to Shirakawa's press conference for clues on future monetary policy action. Heavy market volatility is sometimes experienced during this press conference as traders attempt to decipher Shirakawa's clues. 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.
2008-05-12	01:30	AUD	Home Loans	m/m	-5.9%	-0.8%
		Home Loans Measures the number of commitments for owner occupied home financing. A rising trend has a positive effect on the nation's currency because large purchases tend to be made by consumers that are optimistic and confident in their financial position. Additionally, consumer borrowing has a high degree of historical correlation with consumer spending, which is a major driver of the overall economy.
2008-05-12	05:00	JPY	Economy Watchers Current Index		36.9	*
		Economy Watchers Current Index Measures the current mood of businesses that directly service consumers, such as barbers, taxi drivers, and waiters. A reading above 50 signals an improvement in sentiment. These businesses, dubbed "Economy Watchers" because they directly observe the economy during their everyday business, are thought to hold important insights from the microeconomic level.
2008-05-12	06:00	JPY	Machine Tool Orders	y/y	3.3%	*
		Machine Tool Orders Measures the total value of new orders placed with machine tool manufacturers. A rising trend has a positive effect on the nation's currency. When manufacturers increase their purchasing of machine tools it signals that the manufacturing industry is in an expansion phase.
2008-05-12	08:00	EUR	Italian Industrial Production	m/m	-0.2%	0.0%
		Italian 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.
2008-05-12	08:30	GBP	PPI Input	m/m	1.8%	1.8%
		PPI Input The Producer Price Index (PPI) Input measures the rate of inflation (i.e., the rate of price changes) experienced by manufacturers when purchasing goods and services. A rising trend has a positive effect on the nation's currency. When manufactures pay more for goods and services, they are likely to pass the higher costs to the consumer, so PPI is thought to be a leading indicator of consumer inflation. PPI is highly regarded, and at extremes will have a market impact equal to that of its CPI counterpart.
2008-05-12	08:30	GBP	Trade Balance		-7.5B	-7.5B
		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.
2008-05-12	08:30	GBP	PPI Output	m/m	0.9%	0.6%
		PPI Output The Producer Price Index (PPI) Output measures the rate of inflation (i.e., the rate of price changes) experienced by manufacturers when selling goods and services. Manufacturers are unlikely to pass Output inflation to the consumer, so it has much less market impact than its PPI Input counterpart.
2008-05-12	12:30	CAD	New Housing Price Index	m/m	0.3%	0.2%
		New Housing Price Index The New Housing Price Index (NHPI) measures monthly changes in the selling prices of new residential houses. The NHPI is used as the inflation measure of new home construction.
2008-05-12	15:00	EUR	ECB President Trichet Speaks		*	*
		ECB President Trichet Speaks European Central Bank (ECB) President Jean-Claude Trichet will speak at the 36th Economics Conference organized by Oesterreichische Nationalbank, in Austria. As head of the central bank's governing body, which is responsible for setting the euro zone's short term interest rate, his speeches can sometimes cause market volatility as traders react to clues regarding future monetary policy.
2008-05-12	22:45	NZD	FPI	m/m	0.7%	*
		FPI The Food Price Index (FPI) measures the rate of inflation for food and food services. FPI can give traders a peek into the upcoming quarterly CPI release since it is the only component of CPI that is reported on a monthly basis.
2008-05-12	23:01	GBP	BRC Retail Sales Monitor	y/y	-1.6%	*
		BRC Retail Sales Monitor The British Retail Consortium (BRC) Retail Sales Monitor measures the change in value of like-for-like (i.e. same-store) sales at surveyed retailers, which effectively excludes stores that have been open for less than a year.
2008-05-12	23:01	GBP	RICS House Price Balance		-78.5%	-80.0%
		RICS House Price Balance The Royal Institution of Chartered Surveyors (RICS) House Price Balance measures the price change of homes in the UK. This leading indicator represents the percentage of chartered surveyors reporting a price rise in their designated area. For instance, a reading of 50% means that 50% more surveyors reported a rise than reported a fall in prices.