Forex Tips & Daily Analysis

Economical News

USD

The US saw volatile trends yesterday in the market. The EUR\USD cross kept a steady rate throughout most of the day, trading around 1.5440. The USD showed strong bullish momentum against the GBP, and saw volatile behavior vs. the JPY.

A batch of data was released yesterday for the USD. First was the ADP Nonfarm Employment Change report, which showed that the US economy added 40K private sector jobs in May, well above the expected loss of 30K jobs. Later on, the Nonfarm Productivity report showed that productivity rose at an annual rate of 2.6% in the first quarter of the year, faster than previously estimated. Meanwhile, wage pressures have moderated from the final quarter of the last year with unit labor costs rising at an annual rate of 2.2%, as opposed to the previous 4.7%. Such news is welcomed by the Fed, as they ease worries regarding increasing inflation. Later, the Institute of Supply Management Non-Manufacturing Business Index fell slightly in May from 52.0 to 51.7 however, the key component of that index, business activity, rose to 53.6 from the 50.9 in April. At 06:45 GMT Fed Chairman Bernanke delivered a speech, admitting that the possibility of rising inflation expectations is a significant concern for the Fed, yet he stated that the US economy is very flexible and very efficient and therefore such outcome is not likely.

Today, the Unemployment Claims report will be published, and is forecasted by analysts to increase to 374K in May, up from April 372K total. Such an increase should have a negative effect over the USD. At 16:00 GMT Philadelphia Fed President Plosser will deliver a speech called the importance of financial econometrics for financial innovation and financial stability. Traders are advised to follow his speech carefully, as clues regarding future monetary policy are expected

EUR

Yesterday the EUR saw mix results against its major currency counterparts. It saw volatile behavior against the USD and the JPY, and it rose vs. the GBP.

The European Central Bank (ECB) President Trichet gave a speech yesterday, stating that the central bank is doing its best to be forward looking on the impact of the continuing crisis in financial markets. He further said that the euro system has provided notable stability during the turbulence and has effectively supported the implementation of the monetary policy. Later on, the Services Purchasing Manager's Index, that measures the activity level of purchasing managers in the manufacturing sector, showed similar figures to last month's 50.6 reading. European Retail Sales fell by 0.6% in April from March, and went down 2.9% from last year.

Today, the German Factory Orders are due at 10:00 GMT, and are expected to rise by 0.4% from last month. Later, the Minimum Bid Rate will be published, and the ECB is expected to keep its interest rate at 4.00%, unchanged since June 2007. Followed by the interest rate decision release will be the ECB Press Conference that will be help by the ECB President Trichet and his Vice President Papademos. The conference will be open to press questions, which usually leads to heavy market volatility.

Traders should follow today's news very closely, as the market is expected to fluctuate excessively during the interest rate statement

JPY

Yesterday, the JPY saw mixed results against most of its major currency rivals. The JPY underwent volatile developments versus the USD, the EUR, the GBP and the CHF. The JPY fell against the USD to 105.54 from 105.28 boosted by fears of more possible credit related looses and expectations about the Federal Reserve may raise its key interest rates by the end of the year to prevent a worrying rising inflation.

The only data coming from Japan yesterday was the Japanese Imported Auto Sales, which fell down by 20% from the previous year, as sales of imported vehicles by foreign car makers totaled 13,953 in May, down from 17,497 vehicles in the same month last year.

Today, the JPY is absent from the economic calendar, and the USD should be the main catalyst for JPY progressions. Therefore, traders are advised to follow U.S data and Euro Zone news with extra precaution today as they will mark future's JPY behavior.

Technical Analysis

EUR/USD

The pair is in the middle of a very sharp bearish trend and is now floating around 1.5450. The 4 hour Slow Stochastic is a triple top formation with negative slope which indicates a continuation of the bearish move. Next target price might be around 1.5350, and it appears that going short might be a good choice today

GBP/USD

The very distinct bearish channel continues as the cable still heads down with the channel. All oscillators are showing that the bearish will continue and that the cable will probably test the bottom barrier quite soon. With a target price of 1.9350 it appears that the preferable strategy might be to go short today

USD/JPY

The pair is floating at the key level of 105.50 which is the very strong resistance level on the daily chart. If a breach will occur than it appears that a much stronger bullish move will be unleashed with a target potential of 107.20. Going long with tight stops might be a great strategy today before the key breach.

USD/CHF

Range trading continues, as the pair still floats aimlessly on the daily chart. The oscillators are still floating in neutral territory with no distinct direction signal. There seems to be moderate bullish momentum on the hourlies yet forex traders are advised to wait for a clearer signal before entering the market on this one.

Wild Card

Crude Oil

The bearish corrective move continues at full steam and shows no signs of a halt. The daily Slow Stochastic is in a very bearish formation. forex Traders have a great opportunity of entering the market at the peak of the bearish momentum and enjoying what seems to be a very strong bearish trend.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5494	1.9626	106.37	1.0503	0.9638	0.8019
	1.5465	1.9587	106.09	1.0495	0.9610	0.7985
	1.5437	1.9553	105.82	1.0467	0.9582	0.7948
Support	1.5382	1.9487	105.21	1.0411	0.9525	0.7871
	1.5355	1.9451	104.93	1.0385	0.9496	0.7835
	1.5327	1.9413	104.64	1.0359	0.9469	0.7798

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-06-05	00:00	GBP	MPC Rate Statement		-	-
		MPC Rate Statement Usual Effect More hawkish than expected = Good for currency; Frequency Monthly; FF Notes This is a "Tentative" event because the statement is not issued if the rate doesn't change (except under extreme conditions). If the statement is not issued this event will be removed from the calendar immediately following the release. If issued, the Tentative mark will be removed; Acronyms Bank of England (BOE), Monetary Policy Committee (MPC); Why Traders Care It's one of primary methods the MPC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates, commentary about the economic conditions that influenced their vote, and most importantly, clues on the outcome of future votes;
2008-06-05	01:30	AUD	Trade Balance		-2.7B	-1.7B
		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.
2008-06-05	10:00	EUR	German Factory Orders	m/m	-0.6%	-
		German Factory Orders Measures the value of new purchase orders placed with domestic manufacturers for durable and non-durable goods.
2008-06-05	11:00	GBP	Official Bank Rate		5.00%	-
		Official Bank Rate Measures Interest rate at which banks lend balances held at the BOE to other banks; Usual Effect Actual > Forecast = Good for currency; Frequency Monthly; FF Notes When there is a change in rates the MPC will also issue a statement. Rate shifts are usually priced in the market and thus overshadowed by the MPC statement which is focused on the future; Acronyms Bank of England (BOE), Monetary Policy Committee (MPC); Also Called Interest Rates, BOE Rate; Why Traders Care 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; Derived Via The 9 members of the MPC vote on where to set the rate. The individual votes are published 2 weeks later in the MPC Meeting Minutes;
2008-06-05	11:45	EUR	Minimum Bid Rate		4.00%	-
		Minimum Bid Rate Measures The interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system; Usual Effect Actual > Forecast = Good for currency; Frequency Monthly; FF Notes The rate shift is usually priced in the market and thus overshadowed by the ECB press conference held 45 minutes later. Acronyms European Central Bank (ECB); Also Called Refi Rate; Why Traders Care 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; Derived Via The 6 members of the ECB and the 15 governors of the Euro area central banks vote on where to set the rate. The split of votes is not publicly revealed;
2008-06-05	12:30	CAD	Building Permits	m/m	-4.5%	-
		Building Permits 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.
2008-06-05	12:30	EUR	ECB Press Conference		-	-
		ECB Press Conference Speaker ECB President Jean-Claude Trichet and Vice President Lucas Papademos; Usual Effect More hawkish than expected = Good for currency; Frequency Monthly, about 45 minutes after the rate release; FF Notes There are two parts to the press conference: first Trichet reads a prepared statement (a text version is made public at the start), then the conference is open to press questions. Since the questions are not known beforehand they can make for some unscripted moments that lead to heavy market volatility; Why Traders Care It's the primary method the ECB uses to communicate with investors. It covers in detail the factors that affected the most recent interest rate decision, the overall economic outlook, inflation, and most importantly, clues regarding future monetary policy;
2008-06-05	12:30	USD	Unemployment Claims		-	-
		Unemployment Claims Measures the number of individuals who filed for unemployment insurance for the first time during the past week. A falling trend has a positive effect on the nation's currency because working people tend to spend more money, and consumer spending makes up a large portion of GDP. This weekly indicator produces very timely data, but traders generally view unemployment as a lagging indicator that gives little indication of the economy’s future performance.
2008-06-05	14:00	CAD	Ivey PMI		57.6	-
		Ivey PMI The Ivey Purchasing Manager's Index (PMI) measures the activity level of purchasing managers from all sectors of the economy, 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.
2008-06-05	14:30	USD	Natural Gas Storage		-	-
		Natural Gas Storage Measures Change in the number of cubic feet of natural gas held in underground storage during the past week; Usual Effect No clear effect, there are both inflationary and growth implications; Frequency Released weekly, 5 days after the week ends; FF Notes While this is a US indicator, it most affects the loonie due to Canada's massive oil sands; Acronyms Energy Information Administration (EIA); Also Called Nat Gas Stocks, Nat Gas Inventories; Why Traders Care It influences the price of petroleum products which affects inflation, but also impacts growth as many industries rely on oil to produce goods;
2008-06-05	23:30	AUD	Construction PMI		42.6	-
		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.