Forex Tips & Daily Analysis

Economical News

USD

The Greenback saw substantial growth last week versus a basket of it currency rivals, most notably against the Euro. The USD gained nearly 500 pips versus its cross-Atlantic counterpart, as the oft-traded EUR/USD pair saw its biggest rise in 3 years. Investor confidence in the greenback grew as the week progressed as US officials continually pushed a hawkish stance regarding monetary policy, as well as shooting down talk of the troubles within the US economy. Dollar bullishness escalated on Thursday after Retails Sales saw a larger than expected rise, at 1.2% for the month of May. Momentum carried the dollar into the weekend despite Friday's release of the Preliminary Michigan Statement. The report which measures consumer confidence showed that American consumer confidence dropped to nearly 30 year lows. But with a sharp rise in US inflation, a rise which will likely lead to an interest rate hike, as well as troubling news following the Irish vote of the EU Lisbon Treaty, the USD finished last week on a positive note.

As we look toward this week, investors look primed to continue to see a bullish dollar. The meeting of the G-8 leaders over the weekend, did little to veer the USD off of its latest path, even as foreign exchange was noticeably absent from talks. Much of the speculation surrounding the direction of the USD this week, is whether or not the talk of rising inflation in the US will curb sub-prime credit worries that have haunted the US economy and its trusty dollar. With a relatively light week of US news on tap, it is very possible that the bullish trend, all be it at a slower speed will continue. This week US news will be highlighted by Housing Starts, PPI, Industrial Production, Unemployment Claims and the Philadelphia Fed Manufacturing Index. Results are expected to mixed, and with the addition of key speeches by Federal Reserve officials Ben Bernanke and Donald Kohn, who will both likely defend the new hawkish US monetary stance, it could prove to be another significant week for the Greenback.

Today the US economy will provide some significant market making news as we expect the release of the Empire State Business Conditions Index (12:30 GMT), TIC Net Long-term Transactions (13:00 GMT) and to finish up the day a speech by Fed Chairman Ben Bernanke. Bernanke will address the Senate Finance Committee Health Reform Summit, where he is scheduled to discuss HealthCare reform, however with the current situation of the dollar, expect Bernanke to push the already bullish currency further.

EUR

The Euro had a tough trading session last week, as it lost major ground against the USD, seeing a 500 drop throughout the week. The bearish EUR was left in the dust as Federal Reserve officials heightened talk of inflation intervention, by raising interest rates. Many investors saw the aggressive move by the US as a sign of maturity against what has been an almost stubborn response to inflationary concerns in the Euro-Zone. European Central Bank President Jean-Claude Trichet was long a supporter of a staunch hawkish monetary policy, and such hawkishness has continued despite last weeks hint at a rate hike in the Euro-Zone. The acknowledgement of Trichet to the heightened risk in inflationary pressures in Europe was seen as a precursor to a rate hike, but instead the USD has stolen the limelight yet again as investors begin to retract from the 15-Nation currency.

Last week's European calendar returned with decent results, despite the uncertainty in the regions direction for the future. Still though EUR bearishness continued and escalated after Friday's vote in the EU. The Irish voted No to a referendum, which would bring a formal constitution and structural changes to the EU. Although little would have changed regarding the EUR in the short-term, investors saw the indecision by the EU as a sign that all was not as rosy as it seemed in Europe, which led to even more EUR sell-off.

As we look ahead to this week, we can expect some market moving events from the Euro-Zone. The EX news week will be headlined by CPI, German ZEW Economic Sentiment, German PPI and a speech by ECB President Jean-Claude Trichet. While most of the events are forecasted to return with similar results from the previous month, the EUR backed by Trichets words, will do its best to return some gains in the hope of cooling any investor wariness in the currency.

Today we are expecting the 9:00 GMT release of Core CPI and CPI. The two indices, expected to see a 0.2% and 0.3% rise respectively, will be important in setting a positive tone for the EUR to start the weeks trading. Still investors should keep tuned to Bernanke's speech later on as it could be the defining point of the day.

JPY

The JPY had a mixed week of trading last week highlighted by hitting a 4 year low versus the Greenback. The pair, which ended last week's trading above 108, has continued to make gains as the USD has renewed bullish trading. The JPY was certainly present in last weeks news, as a host of Japanese data was released. Strong Industrial Production numbers helped facilitate some bullish movement against the EUR and GBP, but was soon offset upon the release of poor Consumer Confidence figures. With the rise in oil and food prices, both of which are vital to the Japanese economy, consumer confidence is the lowest it has been in nearly 6 years. Bank of Japan Governor Masaaki Shirakawa warned investors of the growing risk faced in regards to Japanese economic expansion, and the trend looks set to continue this week as well.

On tap from the Asian powerhouse this week, we can expect Monetary Policy Meeting Minutes and the All Industries Activity Index, as a Thursday speech by BOJ Governor Shirakawa. While the first two events are likely to provide little volatility, expect Shirakawa's speech at the annual meeting of the National Association of Shinkin Banks, to provide substantial liquidity to the market. For today we await the 23:50 release of Tertiary Industry Activity Index, which measures the change in spending for service within an economy. Expectations call for a 0.2% rise in the index which could help JPY trading during the Asian trading session. Still, the JPY will be vulnerable to the movement of outside currencies and the news brought with them as wee expect the dollar to dictate most of the trading behaviors today

Technical Analysis

EUR/USD

The hourlies show quite a wide range-trading with no specific direction; however the Bollinger Bands are tightening indicating upcoming increased volatility. The 4 hour chart is showing a very strong downtrend with increasing momentum. The Slow Stochastic of the 4 hour chart indicates an upcoming test of the 1.5300 level. If that level is breached, swinging in the trend would be the best strategy.

GBP/USD

After bottoming at 1.9404 the Cable is continuing the corrective move at full momentum and is now floating around 1.9520. All oscillators show that the correction move still holds some fuel in it, and if the 1.9600 level will be breached, a new uptrend will be validated and might push the cable above the 1.9700 level once again.

USD/JPY

This pair is in the midst of a narrowing upward channel and this pair is now heading towards the top of it. The hourlies are giving mixed signals with its RSI floating in neutral territory. However, the Slow Stochastic of the 4 hour chart is showing quite strong bullish momentum, and the RSI confirms that the direction is indeed up.

All indications are that there is room for further upward movement and the preferred strategy today will be to go long on dips.

USD/CHF

The bullish move the pair is going through appears to have diminishing momentum, and lacks the ability to make a significant breach beyond the 1.0550 level. The daily chart show mixed signals, and the hourlies are indicating a mild bullish direction. Waiting for a clearer signal on that pair appears to be a good decision today.

Wild Card

Gold

This commodity has been on a sharp sinking over the last week and this bearish trend is likely to stick around in the near future. All charts are still giving a mild bearish signal, however there may be short term corrections during this downtrend. Therefore forex traders can maximize profits by selling on a highs and taking advantage of a bearish trend.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5460	1.9600	109.30	1.0590	0.9470	0.7960
	1.5440	1.9580	109.10	1.0570	0.9450	0.7940
	1.5410	1.9550	108.80	1.0540	0.9420	0.7910
Support	1.5340	1.9480	108.10	1.0470	0.9350	0.7840
	1.5310	1.9450	107.80	1.0440	0.9320	0.7810
	1.5290	1.9430	107.60	1.0420	0.9300	0.7790

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-06-16	07:15	CHF	Retail Sales	y/y	9.7%	4.1%
		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.
2008-06-16	09:00	EUR	Core CPI	y/y	1.6%	1.8%
		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%.
2008-06-16	09:00	EUR	CPI	y/y	3.3%	3.6%
		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.
2008-06-16	12:30	USD	Empire State Business Conditions		-3.2	-1.5
		Empire State Business Conditions Measures the general business conditions of manufacturers in New York State. The index is derived from a survey that asks respondents to rate the level of general business activity as 'decrease', 'increase', or 'no change'. A rising trend has a positive effect on the nation's currency because good manufacturing conditions are a sign of a strong economy. Although this survey is limited to manufacturers in New York only, traders pay close attention because the New York Federal Reserve releases it weeks before other major reports on manufacturing (e.g., Industrial Production, ISM Manufacturing Index).
2008-06-16	12:30	CAD	New Motor Vehicle Sales	m/m	-0.5%	0.0%
		New Motor Vehicle Sales 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.
2008-06-16	13:00	USD	TIC Net Long-Term Transactions		80.4B	63.0B
		TIC Net Long-Term Transactions Treasury International Capital (TIC) Net Long-Term Transactions measures the monthly difference in cross-border foreign and domestic purchases of long-term securities (i.e., bonds with an original maturity longer than one year). For example, if foreigners purchased $100 billion in US securities, and the US purchased $30 billion in foreign securities, the net reading would be $70 billion. A rising trend has a positive effect on the nation's currency because foreigners must first convert their domestic currency before they can purchase the nation's assets. This can dramatically elevate currency demand. Traders watch this indicator closely as it provides several insights into international currency flows.
2008-06-16	14:00	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.
2008-06-16	17:00	USD	NAHB Housing Market Index		19	19
		NAHB Housing Market Index The National Association of Home Builders (NAHB) Housing Market Index (HMI) combines several factors including present sales of new homes, sales of new homes expected in the next six months, and traffic of prospective buyers in new homes. The NAHB produces the index through a survey in which respondents are asked to rate the general economy and housing market conditions.
2008-06-16	23:50	JPY	Tertiary Industry Activity Index	m/m	0.3%	0.5%
		Tertiary Industry Activity Index Measures the change in spending for services. A rising trend has a positive effect on the nation's currency because about half of the nation's workers are employed in the service industry. Strong spending in the services sector not only signals higher employment rates, but can also be a sign of strong consumer spending in the future.