Forex Tips & Daily Analysis

Economical News

USD

Yesterday the greenback experimented with high volatility as it opened the trading day with a bullish trend against the Euro after the release of the ISM Manufacturing Index saw a positive improvement of 49.6 in May. The Manufacturing indices sent the EUR/USD pair down to as low as 1.5487 from 1.5513.

However the USD rally didn't last much longer as several hours later the Euro experienced some relief and eventually saw full recovery from it losses against the greenback. The EUR/USD hit a session high of 1.5590 when rating agency Standard & Poor's downgraded the credit ratings of three of the fours biggest securities firms in the US sparking fears of consumer bankruptcies.

Also released yesterday, Construction Spending in the United States fell 0.4% in April, following a decline of 0.6% for March as reports showed from the U.S. Department of Commerce. For manufacturers the high prices and rising costs are having great impact on production, the only thing which is balancing the manufacturing numbers out is the weakness of the USD which made exports cheaper for overseas buyers by 2.8% in the first quarter, driving more business into the economy.

Today, the highlight of the US news calendar will be a speech by Federal Reserve Chairman Ben Bernanke. Bernanke will address the audience at the International Monetary Conference in Barcelona and should give some hints as to any news regarding possible interest rate cuts on the horizon, even as rising inflationary risk still haunts the US economy. His comments should give a boost to the USD. Also on the docket today, we will see the release of Factory Orders, and Domestic Vehicle Sales as well as the publishing of the TAF Summary. Factory Orders are expected to show little change this month, but if the numbers return in negative territory expect the USD to feel the effects.

EUR

Yesterday the EUR saw some losses against most of its currencies rivals during the early trading session. The Euro was traded down nearly 180 pips to162.28 against the JPY, and slipped against the USD, but gained back some territory after the Standard & Poor's accreditation of U.S. securities firms.

Also significant about yesterday's events was the release of the purchasing manager's indices for the most powerful economies from the Euro-Zone. The figures showed a slight decrease to 50.6, the lowest result since for nearly 3 years.

The low readings were a result of weak demand, a strong Euro and high Oil and commodity prices, as investors still have worries over the apparent E-Z economic slowdown.

Looking ahead to today, we can expect Euro-Zone Producer Price Index, as well as the revised GDP estimate for the first quarter of 2008. Traders should keep an eye on the release of the PPI, as it is forecasted to rise 0.1% from its last reading on May 6th. The big event of the day from the EZ, will be a speech by ECB President Trichet at the International Monetary Conference, in Barcelona where he is expected to maintain his hawkish stance in regards to EZ monetary policy.

JPY

The JPY yesterday gained against most of its rival currencies, encouraged mostly by an increase in risk aversion and weak Euro-zone PMI data. The USD fell 0.8% against the JPY to 104.70, while the Euro fell more than 1% to 162.61.

It has been demonstrated that the JPY is more demanded by buyers when risk aversion occurs as investors can borrow the JPY at a lower interest rate. This behavior is generally known as Carry Trading.

In addition to the host of outside events that effected the JPY, Japan's yearly Average Cash Earnings grew 0.6% from an estimated 1.3%, while the Monetary Base returned according to predictions dropping to 0.9% in May continuing a declining trend and forcing the BOJ to contemplate reforms.

Today, we await a speech by Ban of Japan (BOJ) Governor Shirakawa at the International Monetary Conference meeting in Barcelona. High volatility is expected to take place. Traders should pay attention to his speech to get a sense of the direction of the currency for the near future. We also expect readings from the Capital Spending in the first quarter of the year, estimated at -9.6% from the previous mark of -7.7% in the last quarter of 2007.

The JPY, will likely be effected greatly by the outcome of the speeches from the International Monetary Conference in Barcelona. The JPY should see volatility throughout the day.

Technical Analysis

EUR/USD

After bottoming out at 1.5450 the pair seems to be picking up fresh bullish steam and is now traded at around 1.5600. The Slow Stochastic on the daily chart is showing a bullish cross which indicates a possible target price 1.5700 on the current move. Going long appears to be preferable.

GBP/USD

There is a bearish channel forming on the daily chart, as the cable now floats in the middle of it with moderate bearish momentum. The daily Slow Stochastic is showing that the bearish cross still carries enough momentum to take the pair to 1.9550. Going short with tight spreads might be a good choice today.

USD/JPY

The daily chart is showing that the pair is trading in a tight range and is now heading to the bottom section of the range. All oscillators are floating on neutral territory without a distinct price direction. Forex traders should wait for a clearer signal before entering the market on the USD/JPY.

USD/CHF

There is a very strong bearish cross forming on the daily Slow Stochastic which indicates a possible violent bearish move. The 4 hour chart is supporting the bearish notion and it appears that the fresh bearish momentum is growing. Going short might be a preferable strategy today.

Wild Card

Gold

After a sharp drop in gold prices in the last 3 days oscillators are showing fresh bullish momentum. The 4 hour Slow Stochastic is showing a triple top formation with a positive slope which indicates that there is still much more room for improvement. Forex traders have a great opportunity to join the bullish trend at a very early stage and with a great entry price.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5590	1.9730	105.50	1.0480	0.9660	0.7960
	1.5560	1.9700	105.20	1.0450	0.9630	0.7930
	1.5570	1.9670	104.90	1.0420	0.9600	0.7900
Support	1.5500	1.9600	104.20	1.0340	0.9530	0.7830
	1.5470	1.9570	103.90	1.0310	0.9500	0.7800
	1.5440	1.9540	103.60	1.0290	0.9470	0.7770

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-06-03		USD	Halifax House Price Index	m/m	-1.3%	-1.1%
		Halifax House Price Index Measures the monthly change in the average sale price of homes finances by the Halifax Bank of Scotland (HBOS). Halifax is the UK's largest mortgage lender uses internal mortgage lending figures to produce the index.
2008-06-03		USD	Domestic Vehicle Sales		10.6M	10.8M
		Domestic Vehicle Sales Measures the annualized number of vehicles sold by domestic manufacturers in the previous month. 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.
2008-06-03	01:30	AUD	Building Approvals	m/m	-5.5%	-0.9%
		Building Approvals Measures the number of new construction intentions. This data is a leading indicator for the construction industry since the issuance of a building permit is one of the first steps in the construction process.
2008-06-03	01:30	AUD	Current Account		-18.7B	-20.4B
		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.
2008-06-03	04:30	AUD	RBA Rate Statement		*	*
		RBA Rate Statement The Central Bank Governing Council releases an Interest Rate Statement each month. The statement contains the latest decision regarding changes to the countries short term interest rate ("minimum bid rate"). A rising trend has a positive effect on the nation's currency. Short term interest rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. What makes interest rates so important is that high rates attract foreigners looking for the best "risk-free" return on their money, which significantly increases demand for 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 in an attempt to bring prices down. This is what makes inflation-predicting indicators so important. Traders know that rising prices will lead the central bank to raise interest rates, which ultimately leads to a more valuable currency.
2008-06-03	04:30	AUD	Cash Rate		7.25%	7.25%
		Cash Rate Measures interest rate for overnight money market deposits. 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.
2008-06-03	05:45	CHF	CPI	m/m	0.8%	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.
2008-06-03	08:30	GBP	Construction PMI		46.1	45.7
		Construction PMI The Chartered Institute of Purchasing and Supply (CIPS) Construction Purchasing Manager's Index (PMI) measures the activity level of purchasing managers in the construction 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.
2008-06-03	09:00	EUR	PPI	m/m	0.7%	0.8%
		PPI The Producer Price Index (PPI) 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.
2008-06-03	09:00	EUR	Revised GDP	q/q	0.7%	0.7%
		Revised GDP Measures the change in the value of all goods and services produced by the economy.The 'Previous' listed is the 'Actual' from the Flash release and therefore the 'History' data will appear unconnected. There are three versions of GDP released about 15 apart - Flash, Revised, and Final. The Flash release is the earliest and thus tends to have the most impact. The Final is not included for lack of significance
2008-06-03	13:00	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.
2008-06-03	13:00	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.
2008-06-03	13:00	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.
2008-06-03	14:00	USD	Factory Orders	m/m	1.3%	0.0%
		Factory Orders Measures the value of new purchase orders placed with domestic manufacturers for durable and non-durable goods. Factory Orders tend to have a low impact because it reports much of the same information contained in the Durable Goods Orders report released over a week earlier.
2008-06-03	14:00	USD	Fed Publishes TAF Summary		*	*
		Fed Publishes TAF Summary On April 21, 2008, the Federal Reserve offered $50 billion in 28-day credit through its Term Auction Facility (TAF). A summary of the auction results are expected to be published.
2008-06-03	23:01	GBP	Consumer Confidence Index		70	68
		Consumer Confidence Index The Nationwide Consumer Confidence Index (NCCI) 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.
2008-06-03	23:30	AUD	Services PMI		47.3	*
		Services PMI The Services Purchasing Manager's Index (PMI) measures the activity level of purchasing managers in the services 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.
2008-06-03	23:50	JPY	Capital Spending	q/q	-7.7%	-9.6%
		Capital Spending Measures the total amount of new capital expenditures by private businesses. A rising trend has a positive effect on the nation's currency because high levels of business investment are a sign of a strong economy.