Forex Tips & Daily Analysis

Economical News

USD

The USD lost steam from last week's strengthening vs. most of the major currencies as investors continued to feed their risk appetite, leading the higher-yielding commodity currencies higher. The greenback also weakened amid renewed concerns that the Federal Reserve could still have to cut Interest Rates to boost growth. As a result, the USD dropped 0.2% on the day to 1.5513 vs. the EUR having earlier hiked above the 1.54 mark.

Yesterday's speech by Chicago Fed President Evans lowered the growth prospects for the U.S. economy. In his speech he highlighted the growing weakness in household spending, and said that economic growth will probably remain stagnant throughout 2008. U.S. inflation prospects also remain quite gloomy. Economists expect it to fall to within 1.5% to 2%, signaling the slowdown in countries productivity.

Looking ahead to today, we have a batch of very important US data. With many speeches to follow, the most important speech will be delivered by Fed Chairman Bernanke. High volatility is expected during his speech as investors will attempt to decipher Interest Rate clues. Traders will also focus their attention today on Core Retail Sales and the Retail Sales figures. These indices shall give a more accurate picture 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.

Today traders may expect another volatile trading session for the U.S. currency as negative data can retain greenback's bearish trend. Overall, we expect the greenback to remain consistent, as it could see small drops against its European counterpart.

EUR

Yesterday, the EUR gained against most its major counterparts as confidence in the market prompted a return to demand for the single currency.

The largest gain was vs. the USD (- 127 points) which is a 0.82% ascent. The news was dominated by European Central Bank President Trichet Speech. In his speech, President Trichet claimed that even though Euro zone inflation reached 3.3% in April, its monetary policy will ultimately be the one to determine the inflation rate for the long term. Yet despite Trichet's calming attempts, voices stating that the U.S subprime crisis has already seeped into the European economy are much more vociferous, and rising commodities prices, especially Crude Oil, are cultivating that assumption.

Today will be a slow news day for Europe. The only indicator being published today is the Eurogroup Meeting, and is not expected to greatly influence over the EUR.

Traders should mainly focus on the USD movements, as a bundle of data is due for that currency. Large volatility will also be demonstrated in EUR/USD fluctuations.

JPY

Yesterday the JPY saw bearish trends versus most of the major currencies. The most fascinating and unusual pair was the USD/JPY. The pair open and closed at 103.77 including a movement of 50 points through out the day, between the low and the high of the day.

Bank of Japan Governor Shirakawa spoke yesterday. In his speech, the Governor indicated that if the Japanese economy achieves a sustained expansion from a long term viewpoint, Interest Rates might be gradually raised. Yet he warned that downside risks still remain. Additionally, Machine Tool Orders came in at 0.3%. This decline of 3% from the previous year signals a decline in the manufacturing industry. Today we expect conflicting trends to come in. First will be the Corporate Goods Price Index which measures the inflation rate felt by corporations. This index is forecasted to decline 0.3% to 3.6%, and is expected to have a negative effect on the Japanese currency. On the other hand, the Current Account figures are expected to come out at 1.95T, which is 0.39T above the previous quarter. Such an increment should have positive effect on the JPY.

Given all the enthralling data coming out of Japan, this may be the time investors were looking for to price their positions and take advantage of future developments.

Technical Analysis

EUR/USD

There has been a strong breach through the upper level of the bearish channel on the 4 hour chart. The momentum on the daily chart is now bullish, yet the hourlies indicate a possible local bearish correction. Buying on dips might be a good strategy today.

GBP/USD

The float within the narrowing bearish channel on the daily chart continues. The cable now floats in the middle of the channel with moderate bullish momentum. The daily Slow Stochastic is showing a strong bullish cross which implies an upcoming bullish correction. Going long with tight stops might be wise today.

USD/JPY

There has been a very strong bullish cross forming on the daily chart which indicates the continuation of the bullish channel. The RSI of the 4 hour chart supports the bullish notion and it appears that the next target price might be around 104.50. Going long appears to be preferable today.

USD/CHF

The typical range trading on the 4 hour chart continues. Both the hourly RSI and Slow Stochastic are floating in neutral territory. The daily chart is showing moderate bullish momentum with diminishing strength. Forex traders are advised to wait for a clearer signal before entering the market n this pair.

Wild Card

Gold

The daily chart is showing a strong and distinct bearish channel. The Slow Stochastic is showing a strong bearish cross and it appears that a stronger bearish trend is quite imminent. Forex traders have a great chance of enjoying a very powerful technical signal with high profit potential.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5607	1.9592	104.48	1.0523	0.9565	0.8043
	1.5583	1.9570	104.22	1.0498	0.9539	0.8017
	1.5558	1.9547	103.94	1.0475	0.9512	0.7989
Support	1.5486	1.9478	103.20	1.0404	0.9438	0.7916
	1.5459	1.9451	102.97	1.0382	0.9411	0.7890
	1.5431	1.9426	102.71	1.0357	0.9384	0.7862

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-05-13	08:30	GBP	CPI	y/y	2.5%	2.6%
		CPI The Consumer Price Index (CPI) measures the rate of inflation (i.e., the rate of price changes) experienced by consumers when purchasing goods and services. A rising trend has a positive effect on the nation's currency. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates to bring prices down. Higher interest rates attract foreign investment, thus increasing demand for the nation's currency. CPI is one of the most closely watched indicators and will usually have a high impact upon release.
2008-05-13	08:30	GBP	Core CPI	y/y	1.2%	1.3%
		Core CPI Derivative of the Consumer Price Index (CPI) that excludes the volatile Food, Energy, Alcohol and Tobacco items. CPI with the exclusion of these volatile components is thought to be a better indicator of the underlying inflation trend and the central bank uses it as their primary inflation gauge, aiming to keep it at an annualized rate of 2%.
2008-05-13	08:30	GBP	DCLG House Price Index	y/y	6.7%	4.5%
		DCLG House Price Index Measures annual inflation in the housing market. The Department for Communities and Local Government (DCLG) bases this monthly index on about 25,000 completions supplied by a cross-section of mortgage lenders.
2008-05-13	08:30	GBP	RPI	y/y	3.8%	3.9%
		RPI The Retail Price Index (RPI) measures the rate of inflation experienced by consumers when purchasing goods and services. RPI differs from CPI in that it only measures goods and services bought for the purpose of consumption by the vast majority of households.
2008-05-13	10:10	USD	Cleveland Fed President Pianalto Speaks		*	*
		Cleveland Fed President Pianalto Speaks Cleveland Federal Reserve President Sandra Pianalto will speak about the economic outlook, in Ohio. Audience questions expected.
2008-05-13	12:20	USD	Fed Chairman Bernanke Speaks		*	*
		Fed Chairman Bernanke Speaks Federal Reserve Chairman Ben Bernanke will speaks at the Charlotte Chamber of Commerce annualy meeting where he will recieve an award and talk about the regional economy. As head of the Federal Open Market Committee (FOMC), which is responsible for setting the nation's short term interest rate, Ben Bernanke is arguably the most influential figure in the currency markets. Bernanke is known to drop clues during his speeches, as it is the FOMC's tenet to keep the public aware of their monetary policy long before interest rates are changes. Heavy market volatility is often experienced during Bernanke's speeches as traders attempt to decipher his clues.
2008-05-13	12:30	USD	Core Retail Sales	m/m	0.1%	0.2%
		Core Retail Sales Derivative of Retail Sales that excludes the Automobile Sales component. Automobile Sales make up roughly 25% of Retail Sales, but they can be very volatile from month to month and can distort the picture. Retail Sales with the exclusion of this volatile component is thought to be a better indicator of the underlying trend in consumer spending.
2008-05-13	12:30	USD	Retail Sales	m/m	0.2%	-0.2%
		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.
2008-05-13	12:30	USD	Import Price Index	m/m	2.8%	1.7
		Import Price Index Measures the monthly rate of inflation for imported goods.
2008-05-13	14:00	USD	Business Inventories		0.6%	0.4%
		Business Inventories Measures the value of goods held by manufacturers, wholesalers, and retailers. A falling trend has a positive effect on the nation's currency because retailers order more goods when they have depleted inventories. This creates more business for the wholesales, who in turn increase their orders to manufacturers.
2008-05-13	17:30	USD	Dallas Fed President Fisher Speaks		*	*
		Dallas Fed President Fisher Speaks Dallas Federal Reserve President and FOMC voting member Richard Fisher will speak about the Federal Reserve and the US economy, in Midland. 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.
2008-05-13	23:50	JPY	CGPI	m/m	3.9%	3.6%
		CGPI The Corporate Goods Price Index (CGPI) measures the rate of inflation (i.e., the rate of price changes) experienced by corporations when purchasing goods. A rising trend has a positive effect on the nation's currency because when businesses pay more for goods, they are likely to pass the higher costs to the consumer.
2008-05-13	23:50	JPY	Current Account		1.46T	1.95T
		Current Account Measures the quarterly difference in value between imported and exported goods, services, income flows, and unilateral transfers. A rising trend has a positive effect on the nation's currency. The Current Account is a comprehensive accounting of the nation's trade with other countries. It includes the previously reported Trade Balance (which covers trade of goods and services), so traders focus on the income flows and unilateral transfer portions of the report.