Forex Tips & Daily Analysis

Economical News

USD

The USD completed yesterday's trading session with mixed results versus the major currencies. The news of the first half of the day surrounded the oft traded EUR/USD pair which hit record highs and peaked at 1.6035 before correcting back to just a bit less than 1.60. The USD slowly strengthened throughout the day, right up until the 14:00 GMT testimony of Fed Chairman Ben Bernanke. Bernanke along with Treasury Secretary Henry Paulson testified before the Senate Committee on Banking, Housing, and Urban Affairs and spurred market volatility almost instantaneously. Bernanke warned that high energy prices have helped limit the spending power of U.S. consumers. He reiterated that the high crude oil prices will likely add stress to the economy throughout the rest of the fiscal year. This led to the biggest drop in Light Sweet Crude prices since the George Bush Sr. presidency, nearly 17 years ago, as the highly traded commodity surfaced at just over $138/barrel. The USD began to strengthen shortly after and closed the trading day at 1.5910, more than 100 pips off of earlier highs in day.

Yesterday was also a big news day for the US as many conflicting indicators came to light. Retail Sales and Core Retail Sales grew a 0.1% and 0.8% respectively, far off expectations. The PPI index went up to 1.8% as Core PPI saw the second month of similar growth at 0.2%. Empire State Manufacturing Index rose to -4.9 from a previous reading of -8.7, Business Inventories came in with a change of 0.3%, and the IBD/TIPP Economic Optimism remained the same at 37.4. The aforementioned data did surprisingly little to move USD trends as most of the attention was put on Bernanke and Crude Oil prices.

Today will be another big news day for the greenback. Core CPI is forecasted to rise by 0.2% similar to last month and CPI should rise to 0.7%. The TIC Net Long-Term Transactions is set to decline to 70B and Industrial Production is expected to stay unchanged. The two big volatility events will likely come from the release of Crude Oil Inventories, which is expected to rise and yet another day of testimony from Bernanke and friends before the Senate Banking committee. Reading the indicators today does not give us a clear picture of future market movement for the USD.

EUR

The EUR lost ground versus its major rivals, including the strange day versus the dollar. The EUR reached a new high against the USD when in peaked at 1.6035 in the early European trading session. However the pair ultimately closed at 1.5910 in response to poor Euro-Zone data and market speculation. Pessimism is on the rise throughout the European economic-zone which might be the reason for the EUR's trend yesterday. Yesterday was a slow news day for Europe as two indicators were released. The German ZEW Economic Sentiment deteriorated to -63.9, and EU ZEW Economic Sentiment declined to -63.7.

Today a number of indicators will be published from the EZ. German Final CPI is forecasted to come out at 0.3% and French CPI should decline from 0.5% to 0.4%. The important event of the day for Europe will be CPI figures which are forecasted to provide yet another 4% gain this month, this could help recover some ground lost by the EUR over the last few days. With the CPI numbers expected to rise both in France and in Germany as well as the whole of the EZ, it is likely we will see some EUR bullishness.

YEN

The Yen strengthened versus the major currencies yesterday. The biggest gain for the JPY came against the EUR as it gained 179 points yesterday; one day after the EUR/JPY pair hit all time highs. A good reason for this appreciation can be found in the fundamental news from the Asian giant. Yesterday was an important news day for the Japanese economy as crucial indicators were released. Overnight Call Rate as forecasted and previously decided upon was set again at 0.5% and Tertiary Industry Activity Index came in lower then projected at -0.2%. Also, the BOJ Monthly Report stated: "Japan's economic growth is slowing, mainly due to the effects of high energy and materials prices". However the Bank of Japan Governor Masaaki Shirakawa declared the Japanese economy is not slipping into stagflation, even though he stressed the need to closely watch developments in the prices of energy and raw materials given the increasing uncertainties surrounding the economy. This statement was a pleasant surprise for investors. Thus investors seemed to reward Japan with a strengthening Yen.

Today unlike yesterday Japan will be absent from the economic calendar. Thus investors should pay close intention to the JPY's counterparts before placing their transactions. Mapping the movement of the Stock markets worldwide could also provide much needed clues as to the direction of the heavily traded currency

Technical Analysis

EUR/USD

After the pair crossed the 1.6000 level yesterday, there has been a sharp drop in EUR/USD price. The hourly chart is showing a distinct bearish channel, as the pair now floats in the middle of it. The momentum is strong and the next target price might be 1.5800. The 4 hour and the daily charts are showing fresh bearish momentum and all oscillators are showing that there is still much more room to run. Going short might be a good choice today.

GBP/USD

After a violent breach through the 2.0100 resistance level yesterday, the pair appears to have established a starting point for a relatively strong downtrend. The hourly and the 4 hour chart show 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/JPY

According to the hourlies the pair is still in a bearish configuration. However, a recent bullish cross on the Slow Stochastic of the 4 hour chart implies that the reversal of the current bearish trend is possible. The 4 hour chart's Relative Strength Index (RSI) swings low further supporting the possibility of the reversal. Traders should wait for a stronger signal before jumping into the bullish trend.

USD/CHF

The pair is showing consistent bearish momentum for a while now and today is no difference. Although the signal is not strong the pair might have a local target at 1.000, which might make it feasible for forex traders to go short with tight stops.

Wild Card

Gold

After peaking at the record 988 price level yesterday, this commodity seems to consolidate around the 975 level again. However, the upcoming cross on the daily Slow Stochastic is showing that the bearish trend will probably resume quite shortly. This could be a great opportunity for forex traders to take a position before the technical signal is fully unraveled.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.5980	2.0080	105.40	100.90	0.9946	0.8020
	1.5960	2.0060	105.20	100.70	0.9926	0.8000
	1.5930	2.0030	104.90	100.40	0.9896	0.7970
Support	1.5870	1.9970	104.30	100.80	0.9736	0.7910
	1.5840	1.9940	104.00	100.50	0.9706	0.7880
	1.5820	1.9920	103.80	100.30	0.9686	0.7860

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-07-16	00:00	AUD	RBA Governor Stevens Speaks		*	*
		RBA Governor Stevens Speaks Reserve Bank of Australia (RBA) Governor Glenn Stevens will deliver a speech titled "Asia, Australia and Financial Markets" at the Asia Society AustralAsia Centre CEO Asia Update luncheon, in Sydney. As head of the central bank's governing body, which is responsible for setting the nation's short term interest rate, his speeches can sometimes cause market volatility as traders react to clues regarding future monetary policy.
2008-07-16	00:30	AUD	Leading Index	m/m	0.4%	*
		Leading Index Measures overall economic health by combining ten leading indicators including average weekly hours, new orders, consumer expectations, housing permits, stock prices, and interest rate spreads. The index is published monthly by The Conference Board, a leading private US research group, but traders tend to pay little attention because the components that make up the index are reported at an earlier date.
2008-07-16	06:00	EUR	German Final CPI	m/m	0.3%	0.3%
		German Final CPI Measures the change in the price of goods and services purchased by consumers.
2008-07-16	06:45	EUR	French CPI	m/m	0.5%	0.4%
		French 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.
2008-07-16	07:15	CHF	Retail Sales	y/y	-9.4%	3.8%
		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.
2008-07-16	08:30	GBP	Claimant Count Change		9.0K	10.0K
		Claimant Count Change Measures the change in the number of people claiming unemployment related benefits over the previous month. 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.
2008-07-16	08:30	GBP	Average Earnings Index +Bonus	y/y	3.8%	3.7%
		Average Earnings Index +Bonus The Average Earnings Index (AEI) measures the average wage, including bonuses, paid to employees. The indicator reading represents the change in the current quarter when compared to the same quarter in the previous year.
2008-07-16	08:30	GBP	Unemployment Rate		5.3%	5.3%
		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.
2008-07-16	09:00	EUR	CPI	y/y	4.0%	4.0%
		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.
2008-07-16	09:00	EUR	Core CPI	y/y	1.7%	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%.
2008-07-16	12:30	CAD	Manufacturing Shipments m/m		2.0%	0.4%
		Manufacturing Shipments m/m Measure the total value of shipments made by manufacturers.
2008-07-16	12:30	USD	Core CPI	m/m	0.2%	0.2%
		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%.
2008-07-16	12:30	USD	CPI	m/m	0.6%	0.7%
		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.
2008-07-16	13:00	USD	TIC Net Long-Term Transactions		115.1B	70.0B
		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.
2008-07-16	13:15	USD	Capacity Utilization Rate		79.4%	79.3%
		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.
2008-07-16	13:15	USD	Industrial Production	m/m	-0.2%	-0.1%
		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.
2008-07-16	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.
2008-07-16	14:35	USD	Crude Oil Inventories		-5.9M	-1.2M
		Crude Oil Inventories The Energy Information Administration's (EIA) Crude Oil Inventories measures the weekly increase in barrels of commercial crude oil held in inventory by US firms. The level of inventories influences the price of petroleum products, which can have an impact on inflation and other economic forces.
2008-07-16	14:45	GBP	MPC Member Dale Speaks		*	*
		MPC Member Dale Speaks The BOE MPC Member and Chief Economist Spencer Dale is due to testify on the MPC appointment. 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.
2008-07-16	17:00	USD	NAHB Housing Market Index		18	18
		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.
2008-07-16	18:00	USD	FOMC Meeting Minutes		*	*
		FOMC Meeting Minutes The Federal Open Market Committee (FOMC) 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 FOMC's stance on monetary policy, so traders carefully comb them for clues regarding future interest rate shifts.