Forex Tips & Daily Analysis

Positive USD positions were supported by a series of events which started after the release of poor Euro-Zone fundamental data. Another help for the greenback was a drop in Oil prices as Hurricane Gustav slowly passed without causing any major damage to energy facilities in the Mexican Gulf.

Economical News

USD

The greenback saw mixed results during yesterday's trading session, and continued it advance against a basket of major currencies. Positive USD positions were supported by a series of events which started after the release of poor Euro-Zone fundamental data. Another help for the greenback was a drop in Oil prices as Hurricane Gustav slowly passed without causing any major damage to energy facilities in the Mexican Gulf.

Yesterday, U.S. Factory Orders showed a better than expected rise of 1.3% in July, sending the EUR/USD pair to its lowest level since January at 1.4485 before tumbling even further to 1.4383. Against the JPY the USD fell 0.5% to 108.12.

The USD has continued to gain support over the last few weeks and continues to benefit from global economic worries. This is due to investors who are looking to avidly push long greenback positions rather than other currencies whose countries were further behind in terms of economic readjustment in the wake of the global credit crisis. Tomorrow the ECB and the BoE will issue separate interest-rate decisions and both are expected to keep rates on hold; This will likely contribute to more USD momentum.

Looking ahead for today, we will see a batch of US data headlined by the very important ADP Non-Farm Employment Change (NFP). Other scheduled events include: Unemployment Claims, ISM Non-Manufacturing PMI, and Crude Oil Inventories. ADP estimates the results of NFP, which measures the estimated change in the number of employed people during the previous month excluding the farming industry and government. ADP's results are expected to be negative at -30K from a previous 9K in the last month and could halt some of the USD's bullish momentum. It is important to note that ADP has been inaccurate for the last several months in their estimation of real NFP figures. The Unemployment Claims report, one of the most influential USD indicators, is forecasted by analysts to show a 3K decrease of jobless Americans from last weeks mark of 425K. ISM is expected to slightly decrease to 49.4 from 49.5 in the last month and will likely latch onto the previous indicators in the direction it provides for the greenback. Crude Oil Inventories is expected to remain positive and could add to the continuous bearish trend of prices. If US economic data can get through the day with no surprises, it is likely to continue to push the dollar up ahead of Friday's big news day.

EUR

Yesterday the EUR underwent bearish trading sessions against most of its major currency rivals. The Euro plummeted to an eight-month low against the dollar after an unexpected 0.4% drop in regional retail sales which placed the European currency at its lowest levels of the year. The economic data released confirms the EUR economy shrank 0.2% in the second quarter and could reflect Q3 as well. This reinforces the possibility that the economy may be heading towards a recession.

There is a growing expectation about the ECB rates decision to be announced today. The ECB has been alarmed about how inflation has gained ground and has announced that they will act by tightening policy if prices remain high. For now rats will remain untouched.

Today, the German Factory Orders are due at 10:00 GMT; they are expected to improve by 0.4% after last month's 2.9% drop. Later we expect the ECB meeting about the rate decision where no changes are predicted to come to the 4.25% rate currently in use. The EUR might finally see some signs of strengthening for the first time since the beginning of the week when ECB President Jean-Claude Trichet is likely to make some pretty hawkish statements. The conference will be open to press questions, which usually leads to heavy market volatility. Traders should follow today's news very closely, as the market is expected to fluctuate excessively during the interest rate statement.

JPY

Yesterday the JPY underwent bullish sessions against most of its major currency rivals. The JPY's most notable surge was against the EUR, as the pair fell by 100 pips testing the level of 156.00.

Yesterday, indicators describing the state of Japan's economy were not made public.

The low yielding currency has remained strong against its foreign counterparts after investors came to the conclusion that the European Central Bank will not increase interest rates anymore. As a result, foreigners buying Japanese goods will look to buy Yen, which in the long term will help strengthen the Japanese currency.

The only news event to be published today from the Japanese economy will be quarterly Capital Spending, estimated to grow at 1.2%. This is a substantial change from the 3% drop in Q1 spending. As it seems like both the USD and EUR are expecting high volatility today, the JPY could benefit from the overall risk in the market. Traders should keep a close look on the news coming from the US and Euro-Zone as both will be the deciding factors in the Yen's movement for Thursday.

Technical Analysis

EUR/USD

After touching the low of 1.4383 yesterday, the pair now consolidates around 1.45 level again. On the 4 H chart we notice that the bearish trend is running a head. The volatility is very high and the EUR USD is not in a consolidation stage, especially after the pair has broken the 1.4400 support level. The price should continue to move downwards in a range of 1.4500 to 1.4300. As it seems, the bearish pressure will continue to gather momentum on the EUR/USD also today till the weekend

GBP/USD

The cable is in a bearish configuration. The volatility has decreased. The pair moves without trend and swings around exponential moving average (EMA 50 and 100). The Bollinger bands have tightened and the 4H chart's Elliott pattern implies a continuation of the bearish pressure.

USD/JPY

Both the dailies and the hourly sharts indicate that the bearish trend will probably continue which might take this pair to the 107.00 level during the day. Both momentum and RSI are sloping downwards supporting an imminent bearish trend. A short position may keep risk tight at the current levels

USD/CHF

The pair is floating in a relatively wide range for several days now, as can be seen on the 4 Hour chart. No significant break through the 1.1200 range has occurred, and the hourly chart continues to deliver mixed signals. The daily chart is giving a moderately bullish sentiment with a bit more room to run.

Wild Card

Oil

The bearish trend continues with full steam and Oil is now traded at 109 level. The daily chart reveals that there is still more room to run. The 4 Hour RSI is floating at 50 which provides forex traders with a great opportunity to get in the trend at still quite a high bearish momentum.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.4565	1.7830	108.90	1.1130	0.8405	0.8245
	1.4545	1.7810	108.70	1.1110	0.8385	0.8225
	1.4515	1.7780	108.40	1.1090	0.8355	0.8195
Support	1.4455	1.7720	107.80	1.1030	0.8295	0.8135
	1.4425	1.7690	107.50	1.1000	0.8265	0.8105
	1.4405	1.7670	107.30	1.0980	0.8245	0.8085

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-09-04	00:00	GBP	MPC Rate Statement		*	*
		MPC Rate Statement Usual Effect More hawkish than expected = Good for currency; Frequency Monthly; FF Notes This is a "Tentative" event because the statement is not issued if the rate doesn't change (except under extreme conditions). If the statement is not issued this event will be removed from the calendar immediately following the release. If issued, the Tentative mark will be removed; Acronyms Bank of England (BOE), Monetary Policy Committee (MPC); Why Traders Care It's one of primary methods the MPC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates, commentary about the economic conditions that influenced their vote, and most importantly, clues on the outcome of future votes;
2008-09-04	01:30	AUD	Trade Balance		0.4B	0.1B
		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.
2008-09-04	08:00	GBP	Halifax House Price Index	m/m	-1.7%	-1.8%
		Halifax House Price Index Measures the monthly change in the average sale price of homes finances by the Halifax Bank of Scotland (HBOS). Halifax is the UK's largest mortgage lender uses internal mortgage lending figures to produce the index.
2008-09-04	10:00	EUR	German Factory Orders	m/m	-2.9%	0.4%
		German Factory Orders Measures the value of new purchase orders placed with domestic manufacturers for durable and non-durable goods.
2008-09-04	11:00	GBP	Official Bank Rate		5.00%	5.00%
		Official Bank Rate Measures Interest rate at which banks lend balances held at the BOE to other banks; Usual Effect Actual > Forecast = Good for currency; Frequency Monthly; FF Notes When there is a change in rates the MPC will also issue a statement. Rate shifts are usually priced in the market and thus overshadowed by the MPC statement which is focused on the future; Acronyms Bank of England (BOE), Monetary Policy Committee (MPC); Also Called Interest Rates, BOE 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 9 members of the MPC vote on where to set the rate. The individual votes are published 2 weeks later in the MPC Meeting Minutes;
2008-09-04	11:45	EUR	Minimum Bid Rate		4.25%	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;
2008-09-04	12:15	USD	ADP Nonfarm Employment Change		9K	-30K
		ADP Nonfarm Employment Change Measures the number of new jobs created in the previous month, excluding the farming industry. ADP, a leading provider of employment solutions for businesses, releases this indicator two days before the highly anticipated official Nonfarm Employment Change. ADP claims that this indicator has predictive value in regard to official statistics, but it hasn't yet gained acclaim from traders due to it's short history.
2008-09-04	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;
2008-09-04	12:30	USD	Unemployment Claims		425K	422K
		Unemployment Claims Measures The number of individuals who filed for unemployment insurance for the first time during the past week; Usual Effect Actual < Forecast = Good for currency; Frequency Released weekly, 5 days after the week ends; FF Notes This is the nation's earliest economic data. The market impact fluctuates from week to week - there tends to be more focus on the release when traders need to diagnose recent developments, or when the reading is at extremes; Why Traders Care 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; Also Called Jobless Claims, Initial Claims;
2008-09-04	12:30	USD	Revised Nonfarm Productivity	q/q	2.2%	3.3%
		Revised Nonfarm Productivity Annualized change in labor efficiency when producing goods and services, excluding the farming industry
2008-09-04	12:30	USD	Revised Unit Labor Costs	q/q	1.3%	0.1%
		Revised Unit Labor Costs Annualized change in the price businesses pay for labor, excluding the farming industry
2008-09-04	14:00	USD	ISM Non-Manufacturing PMI		49.5	49.4
		ISM Non-Manufacturing PMI Measures Level of a diffusion index based on surveyed purchasing managers, excluding the manufacturing industry; Usual Effect Actual > Forecast = Good for currency; Frequency Released monthly, on the third business day after the month ends; Next Release Oct 3, 2008 FF Notes Source changed series calculation formula as of Feb 2008. Above 50.0 indicates industry expansion, below indicates contraction; Why Traders Care It's a leading indicator of economic health - businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy; Derived Via Survey of about 400 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories; Also Called Non-Manufacturing ISM Report On Business; Acronyms The Institute for Supply Management (ISM), Purchasing Managers' Index (PMI);
2008-09-04	14:35	USD	Natural Gas Storage		102B	88B
		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;
2008-09-04	15:00	USD	Crude Oil Inventories		-0.1M	-0.1
		Crude Oil Inventories Measures Change in the number of barrels of crude oil held in inventory by commercial firms during the past week; Usual Effect No clear effect, there are both inflationary and growth implications; Frequency Released weekly, 4 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; 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; Also Called Crude Stocks, Crude Levels; Acronyms Energy Information Administration (EIA);
2008-09-04	17:40	USD	FOMC Member Fisher Speaks		-	-
		FOMC Member Fisher Speaks Due to deliver a speech titled "Monetary Policy in a Technology Driven World" at the Progress and Freedom Foundation 2008 Summit, in Aspen. Audience questions expected;
2008-09-04	23:30	AUD	AIG Construction Index		41.6	-
		AIG Construction Index Measures Level of a diffusion index based on surveyed construction companies; Usual Effect Actual > Forecast = Good for currency; Frequency Released monthly, on the fifth business day after the month ends; Next Release Oct 6, 2008 FF Notes Above 50.0 indicates industry expansion, below indicates contraction; Derived Via Survey of about 200 construction companies which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories; Also Called Performance of Construction Index; Acronyms Australian Industry Group (AIG);
2008-09-04	23:50	JPY	Capital Spending	q/q	-4.9%	1.2%
		Capital Spending Measures the total amount of new capital expenditures by private businesses. A rising trend has a positive effect on the nation's currency because high levels of business investment are a sign of a strong economy.