Forex Tips & Daily Analysis

Economical News

USD

A batch of disappointing economic data left the greenback in bearish territory on Friday to end what had been a positive week for the USD. Amidst an already shaky US economic outlook, personal consumer spending indices showed a slowdown in April as both income and spending numbers came in at 0.2%. The drop in consumption numbers left some investors worried that the US is a long way from the recovery that has been mentioned for the last month or so. Combined with rising food and oil prices, and the abysmal housing market, a poor showing from the University of Michigan Consumer Sentiment report, listed at its lowest mark in 28 years resulted in a correction of the weeks bullish dollar trend.

The USD spent the early part of the week recovering versus a batch of its major currency rivals, most notably the EUR. The EUR/USD pair spent most of the week in a bearish trend of just under 400 pips, until Friday as the pair re-adjusted to close the week at 1.5557. Friday's hefty US news day was the major factor in the 84 pip rise in the EUR/USD. Along with Personal Spending and Consumption indices and the Michigan Consumer Sentiment report discussed earlier, we also saw Core PCE Price Index and Chicago PMI. Both provided little to turn around bearish results.

Looking ahead to this week, an array of US data on tap should prove to be essential to dollar movement. The news week will be highlighted by ADP Nonfarm Employment Change, ISM Non-Manufacturing Composite, Unemployment Claims and a busy Friday which will include Nonfarm Employment Change and the Unemployment Rate. Friday will likely be the main contributor to USD volatility, as historically Non Farm Payrolls is one of the more volatile events on the news calendar. The mark is expected to show a falling trend for the fifth consecutive month. We will also hear twice from Fed Chairman Ben Bernanke, who is expected to address the delicate US economic situation.

On tap for today, we expect the release of ISM Non-Manufacturing Prices and Index. The indices are not expected to vary much from last month's marks, which should turn investor attention to outside news events. Still expect steady liquidity in and around the 14:00 GMT release of the ISM figures.

EUR

Last week the EUR saw bearish trends against most of its major currency counterparts. At the beginning of the week the EUR\USD pair was set at 1.5780 and by the end of the week it fell as low as 1.5474.

Last week some crucial data was delivered regarding the EUR. The German Consumer Confidence demonstrated an ongoing decrease in confidence within German consumers regarding their economy. The German Consumer Price Index showed a 0.6% price increment, reflecting an increase in inflation in the Euro-Zone's strongest economy. The Consumer Price Index Flash Estimate reflected increasing inflation in the Euro-zone as well. At the end of the week the German Retail Sales fell unexpectedly for the second month in a row, enhancing investors' concerns regarding a forthcoming recession.

Today, the Manufacturing Purchasing Manager's Index will be published, and it is forecasted by analysts to come at 50.5, similar to last month's figure, yet it should not have a large impact over the EUR. Later on, European Central Bank (ECB) President Trichet will deliver a speech at the ECB's 10th Anniversary conference. Investors are advised to search for clues regarding future monetary policy and interest rate shifts.

Traders should also focus on news arriving from the U.S, as they should have an influence on EUR developments for today.

JPY

The Yen saw bearish momentum against most of its currency pairs losing tens of pips against each one. This trend took place last week during the last trading session on Friday. The only JPY related cross or pair that was not wise to go short on was the USD/JPY as the pair range traded for the day. The Japanese Housing Starts did not help the Yen, as the new housing market in Japan continued to decline by -8.7%.

The Average Cash Earnings came in earlier today at 0.6%, which is 0.9% less than the previous publication. Later on today, the Monetary Base result is expected to have a positive effect on the Yen, since the forecast is higher than the previous reading. The only other indicators expected to come out of Japan this week and have any potential to significantly impact the JPY are BOJ Governor Shirakawa's speech and Capital Spending. Both releases should be announced on Tuesday, which will cause the Yen to experience a lot of volatility.

It is advisable for investors to follow the news of the Yen's counterparts today to derive a superior strategy.

Technical Analysis

EUR/USD

After the sharp drop to the 1.5450 level there has been a local bullish correction to the 1.5500 zone. The pair is now shaping into a bearish formation again which is supported by a strong bearish cross on the Slow Stochastic of the 4 hour chart. It appears that the pair is accumulating bearish momentum and that going short might be a good choice today.

GBP/USD

The cable is the middle of a bearish trend which appears to still have a strong bearish momentum. There has been a bearish cross on the daily Slow Stochastic which implies that the bearish price direction might have some more steam in it for the next move. Going short appears to be preferable today.

USD/JPY

The bullish channel continues with full steam after a small set back of range trading which occurred for the last 10 days. All oscillators are showing regenerated bullish momentum, and being on the buy side looks like the right side to be on.

USD/CHF

The daily chart is showing range trading with no specific price direction and oscillators that float in neutral territory. The 4 hour chart is showing moderate bullish momentum due to a bullish cross on the Slow Stochastic, which means that forex traders might have a good shot at going long with very tight stops.

Wild Card

GBP/JPY

There is a very distinct flag forming n the daily chart, as the pair now approached the tip of the flag with moderate bearish momentum. It appears that a target price of 205.00 is quite imminent, and there is a possibility of a breach attempt. This gives forex traders a great opportunity to join in a bearish trend with a possible breach in the very near future.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5610	1.9760	106.00	1.0510	0.9610	0.7980
	1.5590	1.9740	105.80	1.0490	0.9590	0.7960
	1.5560	1.9710	105.50	1.0460	0.9560	0.7930
Support	1.5490	1.9640	104.80	1.0390	0.9490	0.7860
	1.5460	1.9610	104.50	1.0360	0.9460	0.7830
	1.5440	1.9590	104.30	1.0340	0.9440	0.7810

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-06-02	00:30	AUD	TDMI Inflation Gauge	m/m	0.5%	*
		TDMI Inflation Gauge The TD Securities Melbourne Institute (TDMI) Inflation Gauge measures the rate of inflation experienced by consumers when purchasing goods and services. The Melbourne Institute, in conjunction with TD Securities, releases this indicator monthly. This is a much more timely indicator then the official quarterly CPI.
2008-06-02	01:30	AUD	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.
2008-06-02	01:30	AUD	Company Gross Operating Profits	q/q	4.1%	1.5%
		Company Gross Operating Profits Measures the total amount of pre-tax profits earned by businesses with greater than 20 employees. A rising trend has a positive effect on the nation's currency because good business conditions are a sign of a strong economy.
2008-06-02	01:30	JPY	Average Cash Earnings	y/y	1.5%	1.3%
		Average Cash Earnings Measures the monthly change in the wages paid to jobholders.
2008-06-02	05:45	CHF	GDP	q/q	0.9%	0.3%
		GDP Gross Domestic Product (GDP) measures the total value of all goods and services produced by the economy. A rising trend has a positive effect on the nation's currency. GDP is the broadest measure of activity and the primary gauge of the economy's health. To foreign investors, a strong economy is viewed favorably because it spurs investment opportunities in the domestic stock and bond markets. More importantly, the central bank is more likely to raise interest rates in the face of a strong and growing economy. The combination of these effects can have a large impact on the demand for the nation's currency.
2008-06-02	06:30	AUD	Index of Commodity Prices	y/y	21.8%	*
		Index of Commodity Prices Measures the rate of inflation for commodities such as wheat, wool, rice, sugar, aluminum, copper, and gold. A rising trend has a positive effect on the nation's currency. Commodities account for more than half the nation's export earnings, and exports make up roughly 20% of total domestic income, so inflation of commodity prices is a positive sign for the nation's exporters and the Trade Balance. THe index is priced in SDR terms.
2008-06-02	07:30	CHF	SVME PMI		56.7	55.4
		SVME PMI The Schweizerischer Verband für Materialwirtschaft und Einkauf (SVME) Purchasing Manager's Index (PMI) measures the activity level of purchasing managers, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation's currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
2008-06-02	08:00	EUR	Manufacturing PMI (r)		50.5	50.5
		Manufacturing PMI (r) The Manufacturing Purchasing Manager's Index (PMI) measures the activity level of purchasing managers in the manufacturing sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation's currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
2008-06-02	08:30	GBP	Manufacturing PMI		50.8	51.0
		Manufacturing PMI The Manufacturing Purchasing Manager's Index (PMI) measures the activity level of purchasing managers in the manufacturing sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation's currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
2008-06-02	08:30	GBP	Mortgage Approvals		63K	64K
		Mortgage Approvals Measures the number of home loans issued during the previous month. 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.
2008-06-02	08:30	GBP	Net Lending to Individuals	m/m	7.9B	8.0B
		Net Lending to Individuals Measures the total value of outstanding home loans and 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.
2008-06-02	13:30	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.
2008-06-02	14:00	USD	ISM Manufacturing Index		48.6	48.6
		ISM Manufacturing Index The Institute of Supply Management (ISM) Manufacturing Index measures the activity level of purchasing managers in the manufacturing sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation's currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
2008-06-02	14:00	USD	ISM Manufacturing Prices		84.5	85.0
		ISM Manufacturing Prices The Institute of Supply Management (ISM) Manufacturing Prices measures the monthly inflation experienced by manufacturing organizations when purchasing materials and services. The ISM surveys 400 firms to produce this index
2008-06-02	14:00	USD	Construction Spending	m/m	-1.1%	-0.5%
		Construction Spending Measures the monthly change in value of new construction projects
2008-06-02	23:50	JPY	Monetary Base	y/y	-2.8%	-0.9%
		Monetary Base Measures the annual change in Japan's outstanding currency in circulation, including banknotes, coins, and current account balances. It uncovers the level of additional currency being supplied by the Bank of Japan. An increasing monetary base generally results in higher inflation.