Forex Tips & Daily Analysis

Economical News

USD

It seems as if the US housing troubles have just started. Wall Street extended its slump into yet another week Monday, as investors worried that even a safety net set up for mortgage financiers Fannie Mae and Freddie Mac wont' head off further troubles in the financial markets. Worries over Fannie Mae and Freddie Mac led to a volatile session in which the Dow dipped below the 11,000 mark for the first time in about 2 years.

Investors' latest unease about the banking sector comes in a week when many financial names are to issue quarterly reports - many of which will likely include sizable write-downs of souring mortgage debt. While combining that information with US housing figures due out on Thursday, we may definitely expect the Building Permits and the Housing Starts figures to deteriorate, closing much lower than forecasted.

The Greenback saw mixed results yesterday against its major currency rivals as the absence of any fundamental data left the USD movement in the hands of market speculators. The EUR/USD fell from 1.5961 to 1.5864 during the short period after U.S. Treasury Secretary Henry Paulson announced a rescue plan with tighter mortgage regulations for the failing mortgage lending giants Freddie Mac and Fannie Mae. However, it didn't take long though for the USD to take a hit as US Stock markets sank over the poor economic outlook and the EUR/USD closed the day over 1.59 again.

The approval of new mortgage lending rules by the Fed is focused at forcing lenders to revaluate whether borrowers can repay the loans they take out, while limiting those who can take loans in general. The move comes not long after the Fed was given more power to control the broader spectrum of the US economy. For many analysts the USD recovery will depend on whether the Fed initiatives were enough to calm investors' worries over the poor state of the country's biggest lending firms. Any improvement in their credit spreads and shares may help the dollar regain some strength.

Today should be vital in mapping the short-term movement in the USD as traders should expect a batch of mixed US data. Core Retail Sales and Retails Sales are both expected to see small gains meaning that US investors' confidence is still not all together broken. The expected 1% increase in Core Retail Sales and 0.5% rise in overall Retail Sales will show that despite rising energy prices and a faltering credit and housing sector, tax rebates are being spent. Today's Producer Price Index looks to stay unchanged and could help contribute to any positive movement in the USD. Still though, these events will likely be overshadowed by Fed Chairman, Ben Bernanke speech. The Fed chairman is expected to testify before the Senate Committee on Banking, Housing, and Urban Affairs issues in Washington DC; A hawkish statement and mostly unchanged rhetoric can be expected from Bernanke, however he will likely come under significant scrutiny to discuss the current state of the US economy and whether or not the steps to bail out Freddie and Fannie will really help he US economic outlook and. Expect his remarks to contribute once again to a highly volatile trading day in the Forex market.

EUR

The EUR finished yesterday's trading session with mixed results as it escaped mid-day bearish trends versus the major currencies. Poor economic data coming from the Euro Zone and the emergency plan of the Fed to restore investor confidence, contributed enormously to set the trend direction of the 15 nation currency.

The only economic data for the Euro Zone (EZ) we had yesterday was Industrial Production which fell by 1.9% in May from April in comparison to the 0.6% during the same period last year. The result wasn't surprising as the EZ has shown a decrease in efficiency and production for quite a while. Yesterday's drop, the sharpest in over 20 years, proved that it is still an issue. Since 2007 production of durable and non-durable consumer goods has declined by 5.2% and 3.2% respectively, causing a decrease in Industrial Production numbers. The ECB will continue to play tug o' war with inflationary worries and overall production numbers, as the high value of the currency has begun to affect broader aspects of the EZ economy.

On tap from the Euro Zone today, we will see the publication of German ZEW Economic Sentiment. 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. It's forecasted to dercrease to a mark of -55.5 largely on the back of pessimistic expectations due to the recent rate hike and poor economic data in the recent future from Germany and the rest of the EZ. Also on tap for today is the monthly ZEW Economic Sentiment for the whole of the EZ, also forecasting a heavier pessimist sentiment as the mark is expected to lose over 3 points to -56.0. Though the outlook of the USD is far worse, the EUR could experience some bearishness versus the other currencies today on the back of poor fundamental news. As the EUR/USD approaches record highs, the psychological level of 1.60 combined with positive US data could prevent the pair from hitting news highs.

JPY

During yesterday's trading session, the Yen saw volatile movement versus most of the major currencies, while most of the day was spent making gains. Like the EUR, the JPY fell against the USD following the announcement from the US regarding the Fed's emergency credit plan. Still though, concern in Japan regarding the economy and currency is high as growth continues to deteriorate alongside consumer confidence. As we look ahead to today's BoJ press conference we can expect to hear some worrisome tones. The BoJ kept a hold on the interest rate at 0.50% early this morning, and as we await the monthly report it is likely to present a downgraded outlook for the economy. Sponsored primarily by surging crude oil prices and the crisis in the credits markets, the JPY is treading on very thin ice. The recent economic data from Japan suggests that the Japanese economy is entering a recession, however the BoJ does not have much it can do to pull the Asian giant out of it at this point.

Today, a batch of data is expected from the Japanese economy; as stated earlier the overnight call rate remained unchanged at 0.5%, as we await the BoJ monthly report and BoJ press conference. Traders should follow today's news with extra caution, as the news should generate higher volatility than usual for the JPY. Most importantly, JPY traders should keep their eyes glued to any changes in the Dow Jones as the index has been the primary catalyst in regards to JPY movement.

Technical Analysis

EUR/USD

The pair is in the middle of a very strong uptrend, and is testing fresh highs on a daily basis. The very important key resistant level of 1.5930 has been breached and the pair is likely to continue is bullish trend. Next target price might be around 1.6000.

GBP/USD

There is a very accurate bullish channel forming on the 4 hour chart, as the cable now floats in the upper barrier of it. The Slow Stochastic on the 4 hour chart shows that there is still more room to run and that going long is probably the best choice today.

USD/JPY

The 4 hour chart is showing that the pair is still floating within its bearish channel. However, the RSI on the hourlies has crossed the 30 line, indicating that the market is oversold. The Slow Stochastic is also showing a fresh bullish cross, suggesting that a bullish trend is imminent. Going long with tight stops appears to be preferable.

USD/CHF

The 4 hour chart shows that the bearish channel still remains intact, as the pair is now floating in the middle of it. Both the RSI and the Slow Stochastic on the 4 hour chart are pointing towards bearish grounds, and no correction appears to be in sight. Going short seems to be a good strategy today.

Wild Card

NZD/USD

The daily chart shows that the pair is in the middle of a sharp bullish corrective move, as all oscillators are pointing up, indicating a very strong bullish momentum. This is a great opportunity for forex traders to join in a very strong trend that still has a lot of steam in it.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.6020	2.0070	106.77	102.30	0.9830	0.8060
	1.6000	2.0050	106.52	102.10	0.9810	0.8037
	1.5970	2.0020	106.20	101.80	0.9780	0.8007
Support	1.5900	1.9950	105.49	101.50	0.9750	0.7977
	1.5870	1.9920	105.20	101.20	0.9720	0.7957
	1.5850	1.9900	105.00	101.00	0.9700	0.7935

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-07-15	00:00	JPY	Overnight Call Rate		0.50%	0.50%
		Overnight Call Rate Measures Interest rate at which the BOJ rediscounts bills or extends loans to financial institutions; Usual Effect Actual > Forecast = Good for currency; Frequency Variable, about 14 times per year; FF Notes The rate shift is often priced in the market so it tends to be overshadowed by the BOJ Press Conference held a few hours later; Acronyms Bank of Japan (BOJ); Also Called Interest Rates; 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 9 members of the BOJ Monetary Policy Committee come to a consensus on where to set the rate;
2008-07-15	00:00	JPY	BOJ Press Conference		*	*
		BOJ Press Conference Speaker BOJ Governor; Usual Effect More hawkish than expected = Good for currency; Frequency Variable, about 14 times per year; Acronyms Bank of Japan (BOJ); Also Called Interest Rate Statement; Why Traders Care It's one of the primary methods the BOJ uses to communicate with investors regarding monetary policy. It covers the factors that affected the most recent interest rate decision, the overall economic outlook, inflation, and clues regarding future monetary policy;
2008-07-15	01:30	AUD	RBA Meeting Minutes		*	*
		RBA Meeting Minutes The Reserve Bank of Australia (RBA) Meeting Minutes are a detailed record of the committee's interest rate meeting held about two weeks earlier. The minutes provide detailed insights regarding the RBA's stance on monetary policy, so traders carefully comb them for clues regarding future interest rate shifts.
2008-07-15	06:00	JPY	BOJ Monthly Report		*	*
		BOJ Monthly Report The Bank of Japan (BOJ) Monthly Report provides a summary of the current economic climate from the Bank's viewpoint, including growth, inflation, exports, and interest rates. The report is based on data available at the time of the last Monetary Policy Meeting.
2008-07-15	08:30	GBP	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.
2008-07-15	08:30	GBP	Core CPI	y/y	1.5%	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%.
2008-07-15	08:30	GBP	RPI	y/y	4.3%	4.3%
		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.
2008-07-15	08:30	GBP	MPC Member Sentance Speaks		*	*
		MPC Member Sentance Speaks BOE MPC members vote on where to set the nation's key interest rates and their public engagements are often used to drop subtle clues regarding future monetary policy.
2008-07-15	09:00	EUR	German ZEW Economic Sentiment		-52.4	-55.5
		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.
2008-07-15	09:00	EUR	ZEW Economic Sentiment		-52.7	-56.0
		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.
2008-07-15	12:30	CAD	New Motor Vehicle Sales m/m		-2.6%	0.0%
		New Motor Vehicle Sales m/m 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.
2008-07-15	12:30	USD	Core Retail Sales	m/m	1.2%	0.9%
		Core Retail Sales Derivative of Retail Sales that excludes the Automobile Sales component. Automobile Sales make up roughly 25% of Retail Sales, but they can be very volatile from month to month and can distort the picture. Retail Sales with the exclusion of this volatile component is thought to be a better indicator of the underlying trend in consumer spending.
2008-07-15	12:30	USD	PPI	m/m	1.4%	1.3%
		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.
2008-07-15	12:30	USD	Retail Sales	m/m	1.0%	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.
2008-07-15	12:30	USD	Core PPI	m/m	0.2%	0.3%
		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.
2008-07-15	12:30	USD	Empire State Manufacturing Index		-8.7	-7.7
		Empire State Manufacturing Index Measures the level of a diffusion index based on surveyed manufacturers in New York state. It's a leading indicator of economic health - businesses react quickly to economic conditions, and their sentiment is an early signal of future economic activity such as spending, hiring, and investment.
2008-07-15	13:00	CAD	BOC Rate Statement		*	*
		BOC Rate Statement It's the primary tool the Bank of Canada uses to communicate with investors about monetary policy. It contains the outcome of their decision on interest rates and commentary about the economic conditions that influenced their decision. Most importantly, it projects the economic outlook and offers clues on the outcome of future rate decisions.
2008-07-15	13:00	CAD	Overnight Rate		3.00%	3.00%
		Overnight Rate Measures the interest rate at which major financial institutions borrow and lend overnight funds among themselves. 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.
2008-07-15	14:00	USD	Fed Chairman Bernanke Testifies		*	*
		Fed Chairman Bernanke Testifies The testimony usually comes in two parts: first he reads a prepared statement (a text version is made available on the Fed's website at the start), then the committee will hold a question and answer session. Since the questions are not known beforehand they can make for some unscripted moments that lead to heavy market volatility. As head of the central bank, which controls short term interest rates, he has more influence over the nation's currency value than any other person. Traders scrutinize his public engagements as they are often used to drop subtle clues regarding future monetary policy.
2008-07-15	14:00	USD	Business Inventories	m/m	0.5%	0.5%
		Business Inventories Measures the value of goods held by manufacturers, wholesalers, and retailers. A falling trend has a positive effect on the nation's currency because retailers order more goods when they have depleted inventories. This creates more business for the wholesales, who in turn increase their orders to manufacturers.
2008-07-15	14:00	USD	IBD/TIPP Economic Optimism		37.4	36.8
		IBD/TIPP Economic Optimism The Investor's Business Daily (IBD) TechnoMetrica Institute of Policy and Politics (TIPP) Economic Optimism Index measures the mood of consumers in regard to economic conditions. The reading is derived from a monthly survey where 900 nationwide adults evaluate their "six-month economic outlook," "personal financial outlook," and their "confidence in federal economic policies." Index readings above 50 indicate optimism; below 50 indicates pessimism. When consumers are optimistic they tend to purchase more goods and services, which stimulates the economy.
2008-07-15	15:30	USD	Treasury Secretary Paulson Speaks		*	*
		Treasury Secretary Paulson Speaks US Treasury Secretary Henry Paulson will hold a press conference with French Finance Minister Christine Lagarde, in Paris.
2008-07-15	23:50	JPY	Tertiary Industry Activity Index	m/m	1.8%	0.0%
		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.