Forex Tips & Daily Analysis

Economical News

USD

Yesterday the EUR/USD par experienced a highly volatile trading session and ultimately closed at 1.5466. This closing price represented almost a 90 pip loss for the Dollar versus the Euro. Early morning trading in Asia added another 100 pip to the EUR/USD pair as it raced passed 1.55. In addition the greenback depreciated versus the rest of its major currency rivals yesterday as well. A possible explanation for the dollar's decline can be found in yesterday's issued reports on the economy. The Empire State Business Conditions Index came in much lower than expected. The index which measures the general business conditions of manufacturers in New York State came in at -8.7, nearly 8 points lower than initially forecasted. The NAHB Housing Market Index surprised many investors with a slight drop from the forecasted reading. Economists were surprised because they thought homebuilders had begun to recover from the subprime credit crisis that has ravaged the US economy. Also yesterday Federal Reserve (Fed) Chairman Ben Bernanke spoke in front of the Senate Finance Committee Health Reform Summit, where he addressed the poor state of the US HealthCare system. Surprisingly, Bernanke did not touch upon the state of the US economy or the monetary policy. On a positive note, TIC Net Long-Term Transactions were released at $115.1B. This event which measures the monthly difference in cross-border foreign and domestic purchases of long-term securities, returned much higher than the expected mark of $63.0B.

Today we can expect a batch of significant US calendar news. The most important of which will be the PPI index. The PPI measures the change in the price of finished goods and services sold by producers, and is expected to rise by 1.0% this month on the back of rising energy prices. Also expected to boost the USD is Industrial which is estimated to rise for the month of May. PPI and Industrial Production will likely have to combat negative news from Building Permits, Housing Starts and Core PPI. Housing Starts measures the annualized number of new residential buildings that began construction during the previous month. The index is expected to see a small decline from the already low figures from last month.

It is safe to say that the movement of the USD today will be largely dictated by its own local news. High volatility in and around the release of PPI and Housing Starts (12:30 GMT) should be expected.

EUR

The EUR strengthened against the major currencies during yesterday's trading session. The most notable gain for the EUR was against the as it gained close to 100 pips in the European trading session yesterday. The strengthening of the Euro was validated by stronger than expected fundamental news from the EZ yesterday. Only two Euro-Zone indicators were made public yesterday. Core CPI and CPI which both measure the rate of inflation in the market returned with positive gains from the previous month. The Core CPI came in at 1.7%, which was 0.1% higher than previously published and the CPI came in at 3.7%, which was 0.2% higher than previously published. The revised raise in both indices strengthened the probability of the Euro-Zone Interest Rate hike next month.

On tap from the Euro-Zone today we can expect the German ZEW Economic Sentiment, Italian Trade Balance and Euro zone Trade Balance. The German ZEW Economic Sentiment should have the greatest impact the European currency; however investors are still torn over the validity of forecasted results. The indicator measures institutional investor sentiment and more specifically reflects the difference between the share of investors that are optimistic and the share of investors that are pessimistic. The indicator generally serves as a pre-cursor to Euro-Zone confidence as a whole and could provide substantial liquidity during the early European trading session. As of now it is projected to be released at -42.4, and could change the course of the EUR to a bearish trend. Nonetheless traders should anticipate that news from EZ counterparts, specifically the US and UK will dominate the direction for the Euro today.

JPY

The Yen, during yesterday's trading session, devalued versus most of the major currencies except the USD. This mixed result is a direct continuation from last week's trading. Traders should note that even though the JPY strengthened versus the dollar, it was above the psychological level of 108.

In a slow news day from Japan, yesterday, only one indicator was published. The Tertiary Industry Activity Index was supposed to strengthen the JPY, as it came out higher than previously published, however it didn't manage to push the local currency up. In fact, the effects of outside news dominated the Japanese fundamental reports from yesterday, leading to its overall bearish behavior.

Today will once again be a slow news day for Japan. The only indicator that could shade light on the state of the local economy will be the Monetary Policy Meeting Minutes. The Monetary Policy Meeting Minutes details the record of the Bank of Japan's last Interest Rate meeting that is normally held about a month prior to it. This indicator is important for Forex traders because it gives them insight into the thinking of the Bank of Japan on the direction of their currency and in turn the necessity of any interest rate changes. Today traders will be wise to keep their eyes open for news from outside of Japan and place their transactions accordingly.

Technical Analysis

EUR/USD

After dipping sharply for the last couple of days, this pair manages to recover slightly yesterday. This cross will once again target the 1.5600 as all indications are still bearish today. If this level is breached we may see another sharper move upwards.

GBP/USD

The RSI and Momentum on the daily chart are negatively sloped indicating that this pair still has steam left in its bearish movement. However the 4 hour chart is slightly bullish, so the preferred short term strategy today will be to buy on a dip as the daily movement should still be bearish.

USD/JPY

We are at the beginning of a downward channel on the 4 H chart. Although the 4 H chart RSI and Momentum are still positively sloped, there is a clear bearish cross on the daily chart's Slow Stochastic, meaning that in a long range there might be a trend reversal. Traders should wait for a clearer signal on the hourlies before entering the market.

USD/CHF

The typical range trading on the 4 hour chart continues. Both the 4 hour chart RSI and Slow Stochastic are floating in neutral territory. The daily chart is also supporting the neutral notion with its oscillators still showing no sign of a possible trend change. Forex traders are advised to wait for a clearer signal before entering the market n this pair.

Wild Card

Wild - Crude Oil

The Oil continues its extremely volatile session as it might be in the center of forex trader's focus today. Yesterday's inability to breach the 140.00 level, together with additional bearish indications by various oscillators is strengthening the notion that a correction move is quite imminent. Going short with tight stops and limits might contain high profit potential.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5594	1.9780	108.52	1.0485	0.9507	0.8001
	1.5565	1.9743	108.24	1.0458	0.9481	0.7963
	1.5537	1.9708	107.95	1.0432	0.9454	0.7927
Support	1.5487	1.9628	107.36	1.0371	0.9393	0.7846
	1.5458	1.9591	107.11	1.0342	0.9365	0.7809
	1.5431	1.9552	106.83	1.0314	0.9337	0.7772

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-06-17	07:15	CHF	Industrial Production	q/q	6.8%	-5.1%
		Industrial Production Measures the total value of output produced by factories, mines, and utilities. A rising trend has a positive effect on the nation's currency because high levels of production are a sign of a strong economy. Industrial Production reacts quickly to the ups and downs of the business cycle and can be a leading indicator of manufacturing employment, average earnings, and personal income. Traders pay special attention to Industrial Production because it's one of the few growth indicators that is produced directly by the Federal Reserve.
2008-06-17	08:00	EUR	Italian Trade Balance		-0.5B	-1.0B
		Italian 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.
2008-06-17	08:30	GBP	CPI	y/y	3.0%	3.2%
		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.
2008-06-17	08:30	GBP	Core CPI	y/y	1.4%	1.5%
		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%.
2008-06-17	08:30	GBP	RPI	y/y	4.2%	-
		RPI The Retail Price Index (RPI) measures the rate of inflation experienced by consumers when purchasing goods and services. RPI differs from CPI in that it only measures goods and services bought for the purpose of consumption by the vast majority of households.
2008-06-17	09:00	EUR	German ZEW Economic Sentiment		-41.4	-
		German ZEW Economic Sentiment Zentrum für Europäische Wirtschaftsforschung (ZEW) Economic Sentiment measures institutional investor sentiment. The monthly indicator reflects the difference between the share of investors that are optimistic and the share of investors that are pessimistic. For example, if 30% of participants expect the economic situation to improve within the next six months, 30% expect no change and 40% expect the economic situation to deteriorate, the ZEW Indicator of Economic Sentiment would take a value of -10. Thus, a positive number means that the share of optimists outweighs the share of pessimists.
2008-06-17	09:00	EUR	ZEW Economic Sentiment		-43.6	-
		ZEW Economic Sentiment Zentrum für Europäische Wirtschaftsforschung (ZEW) Economic Sentiment measures institutional investor sentiment. The monthly indicator reflects the difference between the share of investors that are optimistic and the share of investors that are pessimistic. For example, if 30% of participants expect the economic situation to improve within the next six months, 30% expect no change and 40% expect the economic situation to deteriorate, the ZEW Indicator of Economic Sentiment would take a value of -10. Thus, a positive number means that the share of optimists outweighs the share of pessimists.
2008-06-17	09:00	EUR	Trade Balance		-2.4B	-
		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.
2008-06-17	12:30	CAD	Foreign Securities Purchases		5.3B	-
		Foreign Securities Purchases Measures the monthly value of domestic securities, debt, and assets purchased by foreigners. 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.
2008-06-17	12:30	USD	Housing Starts		1.03M	-
		Housing Starts Measures the annualized number of new residential buildings that began construction during the previous month. A rising trend has a positive effect on the nation's currency because the housing market is a leading gauge for the overall economy. A high level of housing activity signals that the construction industry is healthy and that consumers have the capital to make large investments. More importantly, new housing activity creates an economic ripple effect as home owners buy goods such as appliances and furniture for their homes, and builders buy raw materials and hire more workers to meet demand.
2008-06-17	12:30	USD	PPI	m/m	0.2%	-
		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.
2008-06-17	12:30	USD	Building Permits		0.98M	-
		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.
2008-06-17	12:30	USD	Core PPI	m/m	0.4%	-
		Core PPI Derivative of the Producer Price Index (PPI) that excludes the Food and Energy items. Although Food and Energy can be very volatile from month to month, they play an important role in pass-through inflation. Therefore Core PPI usually has less impact than the overall PPI.
2008-06-17	12:30	USD	Current Account		-173B	-
		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.
2008-06-17	13:15	USD	Capacity Utilization Rate		79.7%	-
		Capacity Utilization Rate Measures the percentage of available resources being utilized by factories, mines and utilities. A rising trend has a positive effect on the nation's currency because companies tend to raise their prices when nearing maximum capacity. This price increase (i.e., inflation) will eventually trickle down to the consumer, so capacity levels can act as a leading indicator of CPI and other consumer inflation gauges. Traders pay special attention to the Capacity Utilization Rate because it's one of the only inflation indicators that is produced directly by the Federal Reserve.
2008-06-17	13:15	USD	Industrial Production	m/m	-0.7%	-
		Industrial Production Measures the total value of output produced by factories, mines, and utilities. A rising trend has a positive effect on the nation's currency because high levels of production are a sign of a strong economy. Industrial Production reacts quickly to the ups and downs of the business cycle and can be a leading indicator of manufacturing employment, average earnings, and personal income. Traders pay special attention to Industrial Production because it's one of the few growth indicators that is produced directly by the Federal Reserve.
2008-06-17	23:50	JPY	Monetary Policy Meeting Minutes		-	-
		Monetary Policy Meeting Minutes The Bank of Japan (BOJ) Monetary Policy Meeting Minutes are a detailed record of the bank's interest rate meeting held about one month earlier.