Forex Tips & Daily Analysis

Economical News

USD

Yesterday the greenback underwent coherent bearish trends against most of its major counterparts. The EUR\USD went up to 1.5674, the GBP\USD rose to 1.9717, and the USD\JPY fell down to 103.61.

The day began with some concerning news for the USD, after the Producer Price Index was published. The index came at 0.2% mark, lower than the expected 0.4%, and increased the worries from the rising inflation in the U.S. such a result suggests that local producers might pass through some of these increases to the retail level, especially considering the rising Oil prices. The Crude Oil reached another all time record, getting close to $130 per barrel. The Light Crude was trade at $129.46 in New York markets for delivers in June despite promises from Saudi Arabia to pump 300K barrels extra per day.

Also yesterday, Fed Vice Chairman Kohn gave a speech. In his speech Kohn pointed out that low Interest Rates are not the main reason behind the rising commodities prices in the U.S. markets. He also mentioned that he expects the U.S. economy to begin a slow recovery in the second half of the year, followed by a descending inflation threat.

Today, Fed Governor Warsh will deliver a speech in Washington D.C, in which he's expected to discuss Fed's role in manipulating Interest Rates. An hour later, the Federal Open Market Committee Meeting Minutes (FOMC) is scheduled. The Minutes provide detailed insights regarding the FOMC stance on monetary policy.

Trader's main focus for today should be the FOMC meeting which is expected to determine today's USD trend. Traders should pay attention for clues regarding future Interest Rate shifts. Traders should also closely follow the Crude Oil prices, which also have a broad impact over the U.S. currency.

EUR

Yesterday, the Euro recovered from losses it suffered on Monday against the Dollar, as the oft traded pair once again topped above 1.56. The EUR saw gains, amidst a mixed day of news events from the Euro-Zone. At the beginning of the trading day the EUR was helped by German PPI for April which grew 0.5% since last quarter. The rally however didn't last very long as the publishing of German ZEW Economic Sentiment fell to -41.4% from -40.7% due in large part to rising food prices and the prices of Crude Oil. After the release of the ZEW results for May the Euro fell from $1.5607 to 1.5563, but hawkish comments from the ZEW President Wolfgang Franz, that the European Central Bank (ECB) will increase interest rates in the coming months to combat inflation, helped revive bullish EUR trends as the EUR/USD jumped to 1.5652. Also contributing to the second bump in EUR were positive ZEW numbers for the whole of the Euro-Zone.

The ECB has kept with its hawkish monetary policy, even as it deals with rising inflationary scares. After yesterday's economic data, most notably PPI figures, and the ZEW Presidents comments, a EUR interest rate cut is unlikely to happen soon.

On tap today from the Euro-Zone, we will see German IFO Business Conditions figures. These numbers could prove to be crucial in determining both the overall outlook of the Euro-Zone economy, as well as the direction of EUR pairs. As the biggest EZ economy, German numbers normally serve as a precursor to news from the whole of Europe. If the results are within expectations this will could likely trigger the Euro to continue its rally against the USD.

JPY

Yesterday the JPY continued its volatile movement against the USD and the EUR, showing little response to the fundamental data from the local markets. Record Oil prices served as a drag on Asian stock markets, further supporting the JPY. USD/JPY drifted lower throughout the morning trading session finally consolidating around the 103.50 level. The JPY upside momentum accelerated after USD/JPY stops were triggered below 103.50, sending the pair all the way down to 103.20.

In a speech yesterday, Bank of Japan Governor Shirakawa, elaborated that he based his rate decision on the alarming rise in global inflation and the downside risk to the world economy. The BoJ's Governor warned also about a possible economic slowdown in Japan, as result of the increase in Crude Oil prices and raw material costs. These issues are hurting Japanese consumers, and squeezing the profit growth of most of corporate Japan.

Even within the current state of the world market the BoJ has made it clear that they are aware of inflation and downside risk and that they are prepared to deal with it, and shift policy appropriately if needed.

On tap today, we expect another volatile day for the JPY, due mostly to outside news events. From Japan, the only scheduled news will be the Industry Activity Index, and the Trade balance.

Technical Analysis

EUR/USD

The pair is still trading within its wide range with no specific direction.

However, after a short bullish correction the pair now seems to resumes the bearish move, according to a 4h. chart. The attempt to breach the 1.5700 level 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

After a recent bullish correction, the Slow Stochastic of the 4 hour chart is showing a negative slope which indicates that the pair might resume another bearish move. The hourlies are showing mixed signals, and the daily chart is dwelling in neutral territory with the RSI floating on the 50 level. Traders are advised to wait for a clear signal before entering short positions.

USD/JPY

According to the hourlies, the downtrend the pair is going through seems to be very strong and the daily chart validates that there is still room to run. The daily chart is confirming that the momentum down is still quite strong and that 108.80 is the next valid target. Selling on highs might be preferable today.

USD/CHF

The hourlies show that the pair is in a bearish configuration as volatility is increasing. However according to the daily chart, the USD/CHF moves without a clear trend and swings around Relative Strength Index (RSI) 50 implying the continuation of the larger bearish trend. The target is expected to touch in and around the 1.0200 level.

Wild Card

Crude Oil

Oil has been showing a very impressive bullish trend in the past two week, breaking all times on a daily basis. All oscillators are showing the continuation of the strong bullish trend. Forex traders have a great opportunity to join the bullish ride in its peak momentum, and entering a long position with high profit potential.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5753	1.9761	104.11	1.0448	0.9679	0.8067
	1.5729	1.9737	103.86	1.0424	0.9652	0.8034
	1.5702	0.9712	103.63	1.0401	0.9625	0.8001
Support	1.5628	1.9640	102.92	1.0332	0.9551	0.7928
	1.5605	1.9616	102.67	1.0307	0.9526	0.7903
	1.5582	1.9589	102.44	1.0283	0.9504	0.7875

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-05-21	00:30	AUD	WMI Consumer Sentiment	m/m	-1.3%	1.8%
		WMI Consumer Sentiment The Westpac Melbourne Institute (WMI) Consumer Sentiment measures the mood of consumers in regard to economic conditions. The reading is derived from a monthly survey that asks respondents to evaluate the prospects for the economy in the future.
2008-05-21	01:30	AUD	New Motor Vehicle Sales m/m		0.7%	*
		New Motor Vehicle Sales m/m Measures the unit sales for new vehicles. A rising trend has a positive effect on the nation's currency because demand for vehicles, as with other expensive durable goods, has historically been a leading indicator of trends in overall consumer spending. Vehicle sales accounting for roughly 25% of total retail sales.
2008-05-21	03:00	NZD	Credit Card Spending	y/y	3.3%	*
		Credit Card Spending Measures the total credit card expenditures for brand name credit cards. A rising trend has a positive effect on the nation's currency because consumer spending is a major driver of the economy, accounting for about two-thirds of GDP.
2008-05-21	08:00	EUR	German Ifo Business Climate Index		102.4	102.1
		German Ifo Business Climate Index The Information and Forschung (Ifo) Business Climate Index measures the mood of firms in manufacturing, construction, wholesale and retail. The index is derived from a monthly survey of over 7,000 firms where respondents are asked to give their assessments of the current business situation and their expectations for the next six months.
2008-05-21	08:00	EUR	German Ifo Business Ex. Index		96.8	96.5
		German Ifo Business Ex. Index The Information and Forschung (Ifo) Business Expectations Index measures the mood of firms in regard to future expectations for the economy.
2008-05-21	08:30	GBP	MPC Meeting Minutes		7-2 cut	8-1 hld
		MPC Meeting Minutes The Bank of England (BOE) Monetary Policy Committee (MPC) Meeting Minutes are a detailed record of the committee's interest rate meeting held about two weeks earlier. The minutes expose the votes cast at the meeting and can give traders further insight into the central bank's stance on monetary policy. Traders carefully comb the minutes for clues regarding future interest rate shifts.
2008-05-21	08:30	GBP	M4 Money Supply	m/m	0.8%	0.6%
		M4 Money Supply Measures the monthly change in currency outstanding. Higher levels of currency can have a devaluing effect on the currency. M4 Money Supply is calculated as M0 + UK residents' bank deposits + deposits made by the private sector.
2008-05-21	08:30	GBP	Public Sector Net Borrowing		10.2B	1.8B
		Public Sector Net Borrowing Measures the difference between spending and income for the government and public corporations. A rising trend has a positive effect on the nation's currency because high levels of borrowing are a signal of investment and economic expansion.
2008-05-21	09:00	USD	ZEW Expectations		-71.4	*
		ZEW Expectations Zentrum für Europäische Wirtschaftsforschung (ZEW) Expectations measures institutional investor sentiment regarding the economic outlook. The monthly indicator reflects the difference between the share of investors that expect further improvement of economic conditions and those that expect growth to decrease.
2008-05-21	11:00	CAD	Core CPI	m/m	0.2%	0.2%
		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%.
2008-05-21	11:00	CAD	CPI	m/m	0.4%	0.4%
		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.
2008-05-21	12:30	CAD	Leading Indicators	m/m	0.0%	0.0%
		Leading Indicators Measures overall economic health by combining ten leading indicators including average weekly hours, new orders, consumer expectations, housing permits, stock prices, and interest rate spreads.
2008-05-21	14:30	USD	Crude Oil Inventories		0.2M	0.5M
		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.
2008-05-21	17:00	USD	Fed Governor Warsh Speaks		*	*
		Fed Governor Warsh Speaks Federal Reserve Governor and FOMC voting member Kevin Warsh will speak about the financial markets at the New York Association for Business Economists Luncheon, in New York. 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.
2008-05-21	18:00	USD	FOMC Meeting Minutes		*	*
		FOMC Meeting Minutes The Federal Open Market Committee (FOMC) Meeting Minutes are a detailed record of the committee's interest rate meeting held about two weeks earlier. The minutes provide detailed insights regarding the FOMC's stance on monetary policy, so traders carefully comb them for clues regarding future interest rate shifts.
2008-05-21	23:50	JPY	All Industries Activity Index	m/m	-1.4%	-0.2%
		All Industries Activity Index Measures the change in spending for goods and services. This indicator is similar to the Tertiary Industry Activity Index released a few days prior, but it adds data from the primary sector, including fishing, farming, forestry, mining, and manufacturing.
2008-05-21	23:50	USD	Trade Balance		0.77T	0.79T
		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.