Forex Tips & Daily Analysis

Economical News

USD

The USD saw bullish momentum against its major currency rivals yesterday. The greenback saw positive trends throughout the trading day as the Chicago PMI rose and beat forecasts and even more importantly, the Crude Oil lost some grounds and was traded at around $140 a barrel. The USD was on a bearish trend last week and traders were looking for some positive news to help the USD rally back. After trading at above 1.58 versus the EUR, the USD regained some grounds and the cross was traded at the mid 1.57 zone.

Yesterday's bullish trading by the USD was sparked by the economic release of the Chicago PMI. This indicator showed that business activity in the US midwest increased unexpectedly in June and is a sign of future economic growth. In an interview yesterday, U.S. Treasury Secretary Henry Paulson said that a strong dollar is in the U.S. interest and added that he believes "the long-term economic fundamentals of the United States are solid". Last but not least, the USD gained further momentum with the decline of the Crude Oil price to around $140 a barrel after reaching a record high during the beginning of the trading day yesterday.

Looking ahead to today, there are a few economic releases expected. The most important economic data from the U.S. will be the ISM Manufacturing Index, which is expected to be lower than the previous value and might be a negative sign for the American growth. Simultaneously, there will also be releases of the ISM Manufacturing Prices and Construction Spending, which are both expected to stay around the same rates as their previous measuring. With lots of attention to the housing market, it might be interesting to see the Domestic Vehicle Sales, which is most Americans' second biggest purchase and is expected to fall compared to its previous measuring. Overall, it seems like today will not be a good trading day for the USD and traders might see bearish trends for the greenback.

EUR

Yesterday was an intersting trading day for the EUR as positive economic figures were released, but the EUR saw bearish trends against its currency counterparts. The releases of the CPI Flash Estimate and Italian Prelim CPI both beat forecasts with positive figures, however the EUR was hurt but some hawkish speeches by EU members. The EUR/USD cross fall during the day and was traded around the mid 1.57 range during the end of the day. The EUR was hurt dramatically by European Union Commissioner for Economic and Monetary Affairs' Joaquin Almunia note in which he said that the EUR's hovering near $1.58, is overvalued.

June's inflation rate marks the highest level since Eurostat started collecting data in 1997. It is also well above the European Central Bank's target of around 2% and the ECB has hinted that it will raise interest rates Thursday to fight inflation.

There will be a batch of economic data releases today, with two releases surrounding the German economy. As the biggest economy in the Euro-Zone, the two releases from Germany, German Retail Sales should rise and the German Unemployment Change is expected to be negative, both positive signs for the EUR. The Manufacturing PMI and Unemployment Rate are both forecasted to stay the same as their previous readings. It seems like today will be a bullish trading day for the EUR and traders might expect the EUR to regain grounds against the USD.

JPY

The JPY saw mixed results against its currency rivals yesterday. The Yen's momentum was determined mostly by its pairs' trading trends. Although some positive economic data was released in late trading hours, the Yen didn't gain impactful momentum for it and continued to see mixed trading. The trading day started with negative Housing Starts that were lower than forecasted. Later, the better than expected Tankan Large Manufacturers Index and Tankan Large Non-Manufacturers Index were announced. The Tankan is released four times per year and is one of the nation's most respected gauges of economic health because manufacturers play a vital role in the large export industry and the services sector gives a better indication of conditions in the domestic economy; however the JPY couldn't get too much momentum from these releases as the worse than expected Average Cash Earnings was soon to follow.

Looking ahead to today, the only economic release from Japan will be the yearly Monetary Base which is expected to rise from a previous negative rate and become neutral. It seems like the JPY will once again be affected by its counterparts' trading trends and traders should pay attention to economic data from the U.S. and Euro in order to determine the Yen's trends today.

Technical Analysis

EUR/USD

The pair is trading in a range for the past three days after the previous sharp bullish correction and is now consolidating around 1.5750. The daily chart is showing the first buds of bearish momentum whereas the 4 hour chart is still bullish. Selling on highs might be preferable today.

GBP/USD

The ongoing tight range continues without a break of any significant importance. The daily chart is maintaining a slightly bearish indication yet with no distinct conclusion. The Bollinger Bands on the hourlies are tightening which indicates that the break might be imminent. Traders are advised to hold for the break and then swing into it.

USD/JPY

The hourlies are showing that the pair still does not have a distinct direction, as the chart appears to be quite horizontal for the past 2 days. Indicators on the 4 hour and the daily charts are giving mixed signals although there is still a lot of positive momentum. Traders should wait for a clear signal on the hourly level before entering the market today.

USD/CHF

We are at the beginning of an upward channel on the 4 H chart. RSI and momentum are positively sloped indicating further potential bullish movement. However the Slow Stochastic is crossing at the 70 mark indicating that this pair may have slightly slipped into overbought territory. Target price today will be the 1.0220 level.

Wild Card

GBP/JPY

The pair has been moving within an accurate bearish channel with very strong momentum for 4 days now. The RSI flows high indicating that there is still a lot room for the bearish move. The hourlies also support that notion, however according to it; the uptrend is much more restrained Forex traders have a good opportunity to take advantage of an ongoing downtrend with high profit potential.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5830	2.0080	106.95	1.0320	0.9640	0.7960
	1.5800	2.0050	106.65	1.0290	0.9610	0.7930
	1.5780	2.0020	106.35	1.0260	0.9580	0.7900
Support	1.5700	1.9940	105.60	1.0180	0.9500	0.7840
	1.5670	1.9900	105.30	1.0150	0.9470	0.7810
	1.5640	1.9870	105.00	1.0120	0.9430	0.7780

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-07-01	00:00	USD	Domestic Vehicle Sales		10.5M	10.2M
		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.
2008-07-01		CAD	Holiday: Canada Day		*	*
		Holiday: Canada Day Canadian banks will be closed in observance of Canada Day.
2008-07-01	01:30	JPY	Average Cash Earnings	y/y	0.8%	0.7%
		Average Cash Earnings Measures the monthly change in the wages paid to jobholders.
2008-07-01	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.
2008-07-01	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.
2008-07-01	06:00	EUR	German Retail Sales	m/m	-0.6%	0.8%
		German 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.
2008-07-01	06:00	GBP	Nationwide House Prices		-2.5%	-1.1%
		Nationwide House Prices Measures the monthly change in the average price for a house in the UK. It serves as a leading inflation indicator for the housing market.
2008-07-01	06:30	AUD	Index of Commodity Prices	y/y	28.6%	*
		Index of Commodity Prices Measures the rate of inflation for commodities such as wheat, wool, rice, sugar, aluminum, copper, and gold. A rising trend has a positive effect on the nation's currency. Commodities account for more than half the nation's export earnings, and exports make up roughly 20% of total domestic income, so inflation of commodity prices is a positive sign for the nation's exporters and the Trade Balance. THe index is priced in SDR terms.
2008-07-01	07:30	CHF	SVME PMI		55.7	55.1
		SVME PMI The Schweizerischer Verband für Materialwirtschaft und Einkauf (SVME) Purchasing Manager's Index (PMI) measures the activity level of purchasing managers, 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.
2008-07-01	07:55	USD	German Unemployment Change		4K	-15K
		German Unemployment Change Measures the change in the number of unemployed people actively seeking employment during the previous month. Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor conditions.
2008-07-01	08:00	EUR	Manufacturing PMI (r)		49.1	49.1
		Manufacturing PMI (r) The Manufacturing Purchasing Manager's Index (PMI) measures the activity level of purchasing managers in the manufacturing 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.
2008-07-01	08:30	GBP	Manufacturing PMI		50.0	49.8
		Manufacturing PMI The Manufacturing Purchasing Manager's Index (PMI) measures the activity level of purchasing managers in the manufacturing 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.
2008-07-01	09:00	EUR	Unemployment Rate		7.1%	7.1%
		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.
2008-07-01	14:00	USD	ISM Manufacturing Index		49.6	48.6
		ISM Manufacturing Index The Institute of Supply Management (ISM) Manufacturing Index measures the activity level of purchasing managers in the manufacturing 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.
2008-07-01	14:00	USD	ISM Manufacturing Prices		87.0	87.1
		ISM Manufacturing Prices The Institute of Supply Management (ISM) Manufacturing Prices measures the monthly inflation experienced by manufacturing organizations when purchasing materials and services. The ISM surveys 400 firms to produce this index
2008-07-01	14:00	USD	Construction Spending	m/m	-0.4%	-0.5%
		Construction Spending Measures the monthly change in value of new construction projects
2008-07-01	23:50	JPY	Monetary Base		-0.9%	0.0%
		Monetary Base Measures the annual change in Japan's outstanding currency in circulation, including banknotes, coins, and current account balances. It uncovers the level of additional currency being supplied by the Bank of Japan. An increasing monetary base generally results in higher inflation.