Forex Tips & Daily Analysis

Economical News

USD

Yesterday, the Greenback maintained its rally against most of its major currency counterparts following the hawkish comments from the Fed Chairman Bernanke about inflation worries and remarks that short-term interest-rates will likely jump this year. The EUR/USD has depreciated from 1.5650 down to 1.5441. The USD\JPY went up by 0.3% to reach 107.67, reaching a three month record.

The USD's rally continued despite the unfavorable Trade Balance outcome, which showed that the U.S monthly trade deficit has increased by 7.8% to $60.9 Billion in April, making it the largest increase since 2005. The poor figures came mainly as a result of the higher prices of imported oil and other petroleum products.

In his speech, Bernanke said that the worst of the financial crisis has gone and risks of a substantial downturn in the economy are vanishing, meaning that the Fed has halted its aggressive campaign of rate cuts and will soon begin to raise the interest rate in order to combat inflation fears which appear to be more perceptible due to high costs of energy, especially crude oil. Under the base of his comments, many analysts are signaling a sustained recovery of the U.S. currency that will continue over the medium and longer term.

Looking ahead to today we have the stock readings on Crude Oil and the speeches from FOCM members Donald Kohn and Randall Kroszner. Traders should follow their words regarding future policy on interest rates to be adopted by the Fed, as it is expected that the greenback will continue steady gains against its rivals.

EUR

The EUR retreated against the USD yesterday as a result of the comments made by the Fed chairman, while it remained stable against other currencies. With this result, the EUR has lost in the last two sessions 2% of its value. The EUR\USD was traded at 1.5441, down 1.3% in late New York trading time on Monday.

In the meantime, the Euro gained some stability against others currencies with the help of good economy data coming from the Euro-Zone such as the French Industrial Production, which rose by 1.4% showing a recovery from the fall of 1% in March, and the Italian Industrial Production, which rose to 0.7%, and increased by 8% compared to last year.

As for today, there isn't much significant economic news coming from the Euro-Zone. The only influencing data will be the French CPI, which is expected to increase in 0.1% compared with its last reading of 0.3% on inflation rate. Traders should pay attention to it, as inflation has become a recently wild currency trigger, leading to a second degree the economic growth.

JPY

The JPY saw mixed results vs. its rival counterparts in yesterdays trading. Recently, the Japanese currency traded around the 107.00 level against the USD, reaching its lowest stage in 3 months. The significant drop of the Asian currency was provoked by comments from Fed members regarding the American inflation concerns.

Yesterday, Japan continued to post strong data as Q1 final GDP printed at 1%, better than expectations of 0.9%. CGPI came in at 4.7%, also better than the 4% forecasted. We saw the JPY crosses initially trade a bit lower, but come back higher after the initial reaction. These results show that due to an increase in corporate capital spending, the Japanese economy is growing at a faster speed than previously estimated. Japan continues to report higher inflation results which could spur the Bank of Japan to eventually increase rates, however not necessarily in the near future.

Looking forward, we have the Bank of Japan rate meeting later this week. Inflation continues to dominate the minds of central bankers and look for it to continue to be a driving force in currencies. Higher inflation could prompt higher Interest Rates but at the expense of slower economic growth. Balancing these two could prove to be difficult and make markets more volatile.

Today we don't expect any significant economic data coming from the Asian market. Forex traders should keep an eye on the economic events around the world, as today could prove to be another volatile day for the Japanese currency.

Technical Analysis

EUR/USD

After a sharp drop of more than 350 pips since last Friday, the pair is now trading with mixed signals. The Slow Stochastic of the 4 hour chart is showing moderate bullish momentum, and the RSI confirms that the direction is indeed up. The daily chart is also supporting the bullish notion, however the Hourlies does not yet have a distinct direction. Forex traders are advised to wait for a clearer signs on the Hourlies before entering the market.

GBP/USD

After the recent local bearish correction has been halted, the hourlies and the daily chart are currently showing that the pair floats with no distinct direction. The daily chart's RSI is floating near the 50 level and the Slow Stochastic also does not deliver any specific signs. Waiting for a clearer sign before entering the market might be the smart move today.

USD/JPY

The bullish channel on the daily chart still remains intact, as the pair now floats on the bottom barrier. The momentum is bullish and still quite strong. The hourlies support the bullish notion, and it appears that the pair still has more room to run. Going long is a preferred strategy today.

USD/CHF

The range trading continues without a distinct breaking direction. The daily chart is giving mixed signals and is mostly floating in neutral territory. The hourlies are showing a slight bearish corrective momentum, while moderate bulls still dominate the 4 hour chart. It appears that the possible next move might be a bearish one. In that case traders are advised to swing in after the breach.

Wild Card

Gold

Gold is in the middle of a corrective move that is now showing strong signs of a moderate bullish trend. It appears that it might be able to breach through the 890.00 level which is a key resistance level. The bullish cross on the hourlies is strengthening the notion that forex traders might enjoy a nice entry price for the upcoming bullish move.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5560	1.9630	108.50	1.0520	0.9530	0.8000
	1.5540	1.9610	108.30	1.0500	0.9510	0.7980
	1.5510	1.9580	108.00	1.0470	0.9480	0.7950
Support	1.5430	1.9510	107.30	1.0400	0.9410	0.7880
	1.5400	1.9480	107.00	1.0370	0.9380	0.7850
	1.5380	1.9460	106.80	1.0350	0.9360	0.7830

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-06-11	00:30	AUD	WMI Consumer Sentiment	m/m	2.7%	*
		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.
2008-06-11	06:45	EUR	French CPI	m/m	0.3%	0.4%
		French 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.
2008-06-11	08:30	GBP	Claimant Count Change		7.2K	8.0K
		Claimant Count Change Measures the change in the number of people claiming unemployment related benefits over the previous month. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy.
2008-06-11	08:30	GBP	Average Earnings Index +Bonus	q/q	4.0%	4.1%
		Average Earnings Index +Bonus The Average Earnings Index (AEI) measures the average wage, including bonuses, paid to employees. The indicator reading represents the change in the current quarter when compared to the same quarter in the previous year.
2008-06-11	08:30	GBP	Trade Balance		-7.4B	-7.3B
		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.
2008-06-11	08:30	GBP	Unemployment Rate		5.2%	5.2%
		Unemployment Rate Measures the percentage of the total work force that is unemployed and actively seeking employment. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy. However, unemployment usually draws little attention because traders view it as a lagging indicator.
2008-06-11	12:30	CAD	Industrial Capacity Utilization Rate		81.8%	80.7%
2008-06-11	12:30	CAD	New Housing Price Index	m/m	0.2%	0.2%
		New Housing Price Index The New Housing Price Index (NHPI) measures monthly changes in the selling prices of new residential houses. The NHPI is used as the inflation measure of new home construction.
2008-06-11	14:35	USD	Crude Oil Inventories		-4.8M	0.1M
		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.
2008-06-11	15:30	USD	FOMC Member Kohn Speaks		*	*
		FOMC Member Kohn Speaks FOMC members vote on where to set the nation's key interest rates, and their speeches are often used to drop subtle clues regarding future monetary policy and interest rate shifts
2008-06-11	16:15	USD	FOMC Member Kroszner Speaks		*	*
		FOMC Member Kroszner Speaks FOMC members vote on where to set the nation's key interest rates, and their speeches are often used to drop subtle clues regarding future monetary policy and interest rate shifts.
2008-06-11	18:00	USD	Beige Book		*	*
		Beige Book Provides a look at how regional Federal Reserve branches view the economy in their area. It is produced two weeks before the monetary policy meetings of the Federal Open Market Committee (FOMC), who uses the book's anecdotal evidence to help determine the path for interest rates.
2008-06-11	22:45	NZD	FPI		0.3%	*
		FPI The Food Price Index (FPI) measures the rate of inflation for food and food services. FPI can give traders a peek into the upcoming quarterly CPI release since it is the only component of CPI that is reported on a monthly basis.