Forex Tips & Daily Analysis

Economical News

USD

Yesterday the greenback saw mixed results against most of its currency rivals. The USD fell to a two-month low against the EUR after the ADP reported that Non-Farm Employment in the US will fall hard in June. The EUR/USD pair rose just above 60 points yesterday ending the trading day at 1.5859. Versus the JPY the USD fell to 106.05 from 106.68, and after gaining some ground versus the CHF in the early part of the day going as high as 102.30, the greenback ended up losing 100 points closing just above 101.30 .The dollar did pick up points yesterday as the GBP/USD pair fluctuated between 1.9926 and 1.9850 after a scare in the housing sector in the UK when housing shares fell broadly shaking prices and confidence.

The ADP report looks to be the real indicator of what today's movement will likely be, as the numbers show that there was a loss of 79k jobs in June, far more than the expected loss of 20k jobs. Last month's surprise report of 40k jobs created was also revised to show that only 25k new jobs were actually created. Also yesterday, the US Treasury Secretary Henry Paulson in a speech regarding global markets said that the current crisis was caused by bank compensation packages, which rewarded success but didn't punish failure. He pointed out the necessity for the government to let major financial institutions deal with issues on there own, without the immediate intervention of larger governing bodies in order to sustain a free market environment. His comments sparked even more volatility to yesterday's fluid Forex market.

Today is a huge news day for the USD, headlined by Nonfarm Employment Change. The ISM Non-Manufacturing Composite and the Unemployment Rate will also be released today and should impact the USD as well. Nonfarm numbers are currently forecasted to have dropped by an extra 11K from May's mark of -49K. The move will mark the sixth consecutive month that this critical measurement of the US economy has fallen. ISM Non-Manufacturing Composite, which measures the activity level, new orders, employment and supplier deliveries of purchasing managers in the services sector, is being forecasted to see a reduction from 51.7 to 51.1 while the Unemployment rate is forecasted to improve slightly from 5.4% to 5.5%. The main impact should be caused by the Nonfarm Employment Change and ISM Non-Manufacturing Composite results will likely put the USD in a bearish trend as we head into the holiday weekend.

EUR

Yesterday the EUR continued its week long success as it gained against a basket of major currencies. The 15-nation currency rallied to its highest level against the greenback since late April hitting $1.5888 in late New York trading, up from the $1.5793 on Tuesday. Shortly following some poor data from the UK in the early morning session yesterday the Pound hit 23-day lows against the Euro. The bullish Euro trend began in the morning after another strong speech by ECB President Jean-Claude Trichet and continued to gain steam after weak ADP data for the American Economy. The single European currency was also fueled by better than expected Euro Zone producer prices which rose 1.2% compared to April and rose 7.1% annually.

Today, European news will likely be overshadowed by the importance of US data; however Forex traders should keep in mind several events, if mapping the EUR as a trading option. The inflation within the Euro-Zone has reached 4% due to increases inn Oil and food prices, and will likely add to more market speculation surrounding if and when the ECB will raise their interest. Senior ECB officials, including Trichet who remains the most hawkish of them all, have been hinting for some weeks that a rate rise is imminent; he himself warned that inflation could "explode" if the ECB fails to act decisively. All likelihood is that the rate hike will happen today. A rate hike in the EUR, will send the EUR/USD pair even higher, which will in turn send the already record high of $144/per barrel of Crude Oil even higher.

Today, along with the ECB Interest Rates at 11.45GMT, we can expect a press conference at 12.30 GMT where Trichet will discuss the rate decision. Expect the EUR to respond with bullish movement if rates are raised, as we could see the popular EUR/USD pair once again test 1.60.

JPY

The JPY saw mixed results against most of its major currency rivals. Vs. the greenback the Yen had a very volatile session as the pair tested bids around the 106.78 level and capped out at around 106.04. Against the EUR, the JPY was 168.20 down from 168.52 in the day prior.

Overall, the Yen rises broadly amid global stock rout. On Tuesday, the Japanese currency benefited from mounting risk aversion as heightened fears of further losses in the banking sector and global stocks prompted investors to sell dollars.

However the JPY gains versus the dollar were limited as the balance now shifted to the Crude Oil's side. In stead of buying Yen, people now prefer the Crude as their safe heaven. Risk aversion in currency markets was also stoked by a slide in global stocks. The JPY tends to garner support in times of heightened risk aversion as investors reverse trades financed by borrowing the Japanese currency at low interest rates.

Today, there is no economic news expected to be released From Japan, however, we should see an active JPY trading in response to key U.S and Euro-zone data releases. The near term outlook for the JPY remains quite bullish as a U.S economic redemption is unlikely to occur anytime soon. 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

There is a very distinct bullish channel forming on the 4 hour chart, as the pair now floats at the middle of it. The Slow Stochastic on the 4 hour chart indicates that the pair should continue its bullish momentum. The Bollinger Bands on the Dailies also show there is still room for an additional upcoming bullish move.

GBP/USD

The 4 hour chart is showing that the cable is trading within a tight range and is now heading towards the bottom section of it. All oscillators are floating on neutral territory without a distinct price direction. Traders should wait for a clearer signal on the hourlies before entering the market on the pair.

USD/JPY

On the hourlies, the pair has made its bearish breach, and appears to have established a starting point for a relatively strong downtrend. The daily chart shows as well that a bearish formation is intact. A negative slope on the Slow Stochastic validates that notion. Going short seems to be a good choice.

USD/CHF

Since the beginning of today's trading session the pair went down a slippery slope, depreciating from 1.0165, down to 1.0131. The hourlies show that the pair has finished its bullish correction and is ready to continue its bearish trend. The Slow Stochastic on the 4 hour chart also supports that notion, indicating that bearish momentum hasn't reached its limit yet.

Wild Card

Crude Oil

The ongoing bullish bonanza continues with no indication of a halt, as the Crude prices have breached the $144 a barrel yesterday. The Slow Stochastic on the daily chart indicates there is still plenty of room for further bullish movement. forex traders may use the strong bullish momentum and swing into the most lucrative trend currently in the Forex market.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5986	1.9981	106.75	1.0203	0.9700	0.8033
	1.5925	1.9960	106.50	1.0180	0.9674	0.8016
	1.5899	1.9937	106.24	1.0158	0.9650	0.7992
Support	1.5854	1.9885	105.73	1.0119	0.9605	0.7955
	1.5821	1.9860	105.49	1.0100	0.9580	0.7930
	1.5795	1.9834	105.20	1.0083	0.9553	0.7902

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-07-03	01:30	AUD	Trade Balance		0.1B	-1.0B
		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.
2008-07-03	03:00	NZD	ANZ Commodity Price Index		0.9%	*
		ANZ Commodity Price Index Measures the rate of inflation (i.e., the rate of price changes) for the nation's seventeen main commodity exports. ANZ, one of New Zealand's leading banking and financial services firms, releases this indicator monthly.
2008-07-03	05:45	CHF	CPI	m/m	0.8%	0.4%
		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.
2008-07-03	08:00	EUR	Services PMI (p)		49.5	49.5
		Services PMI (p) The Services 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.
2008-07-03	08:30	GBP	Services PMI		49.8	49.5
		Services PMI The Services Purchasing Manager's Index (PMI) measures the activity level of purchasing managers in the services 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.
2008-07-03	08:30	GBP	Credit Conditions Survey		*	*
		Credit Conditions Survey The Bank of England (BOE) Credit Conditions Survey provides detailed data on secured and unsecured lending to households, small businesses, non-financial corporations, and non-bank financial firms. The produce the survey, both bank and non-bank lenders are asked about the past three months and the coming three months.
2008-07-03	09:00	EUR	Retail Sales	m/m	-0.7%	0.4%
		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.
2008-07-03	09:00	CHF	SNB Monetary Policy Report		*	*
		SNB Monetary Policy Report The Swiss National Bank (SNB) Monetary Policy Report provides a detailed review of the bank's policies and strategies, plus a look at the current economic climate and its implications for inflation. It's published around 2 weeks after the quarterly Monetary Policy Assessment.
2008-07-03	11:45	EUR	Minimum Bid Rate		4.00%	4.25%
		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;
2008-07-03	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;
2008-07-03	12:30	USD	Nonfarm Employment Change		-49K	-60K
		Nonfarm Employment Change Measures the number of new jobs created in the previous month, excluding the farming industry. A rising trend has a positive effect on the nation's currency. The number of new jobs being created is one of the most important indicators of the economy's health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.
2008-07-03	12:30	USD	Unemployment Rate		5.5%	5.4%
		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.
2008-07-03	12:30	USD	Average Hourly Earnings	m/m	0.3%	0.3%
		Average Hourly Earnings Measures the rate of inflation found in the wages paid to nonfarm jobholders. A rising trend has a positive effect on the nation's currency. When businesses pay more for labor, they are likely to pass the higher costs to the consumer, so traders view wage inflation as a leading indicator of consumer inflation.
2008-07-03	12:30	USD	Unemployment Claims		384K	384K
		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.
2008-07-03	14:00	USD	ISM Non-Manufacturing Composite		51.7	51.1
		ISM Non-Manufacturing Composite The Institute of Supply Management (ISM) Non-Manufacturing Composite measures activity level, new orders, empoyement and supplier deliveries of purchasing managers in the services 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.
2008-07-03	14:35	USD	Natural Gas Storage		90B	89B
		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;