Forex Tips & Daily Analysis

Lately the dollar is gaining a bullish momentum overseas as investors are buying more of the safest U.S. assets as the global economy enters a recession. Overseas investors bought a net $27.2 billion of U.S. assets in September, compared with net purchases of $14 billion in August, according to economists' survey. The greenback also rose before the Treasury releases data that will probably show increased investment in the nation's securities. The Treasury will release the report at 9 a.m. today in Washington D.C.

Economical News

USD

Following a day of trading that was uninspired by the weekend's G20 meeting, the Dollar was relatively unmoved against the EUR, though traded in a wide range throughout the day. The Dollar lost ground vs. the JPY, despite the fact that Japanese economy posted recessionary economic data. During late U.S. sessions yesterday, the EUR/USD traded at 1.2622 and USD/JPY at 97.36.

The economic data released from the U.S. yesterday provided mixed results. The Empire State Manufacturing Index showed continuing signs of deteriorating commercial markets, posting a record low, while the Industrial Production report from the Federal Reserve showed improvements from the previous 2 months for the U.S. economy.

Risk aversion has also been influencing the markets, more so with the USD/JPY. As the Japanese economy posted GDP numbers that put its economy into a recession, investors have been moving into the JPY and USD to reduce the amount of risk and leverage that they carry in their trading portfolios. Poor performing global equity markets have also increased risk aversion in the market.

Traders today should be aware of the two events that could possibly move the Dollar. The Purchasing Price Index is set to be released today, forecasting a drop in prices by 1.9%. Also, Fed Chairman Ben Bernanke will be testifying before Congress on the progress and the recent changes to the U.S. financial system bailout. Traders can always look to the ForexYard Calendar for up to date economic indicators and breaking market events.

Future prospects for the Dollar may be trending up. If the markets continue to see the massive deleveraging that has been occurring over the past month, we may see the EUR/USD make further moves lower, possibly trading at a level of $1.2300.

EUR

After a week of heavy losses, the GBP took gains against the EUR and the USD. The 6 year low that the GBP saw last week is beginning to erode. The Pound was pushed down by the market with the expectations of future Interest Rate Cuts by the Bank of England. Yesterday the EUR/GBP closed down at 0.8529 while the GBP/USD closed up at $1.4980.

Traders may not take this as a sign of a sharp rebound form the Pound's recent lows. Comments made by the former Chancellor of the Exchequer discussed the positive aspects and benefits that a weak Pound could have on the British economy. He added that the benefits during negative economic growth could ease the national recovery, and also that a prolonged depreciation of the Pound could turn into a run on the currency. Overall, the GBP/USD has dropped 24% this year. The Pound has been sent lower on U.K. recessionary fears and an increase in the government budget deficit.

Concerns remain that the U.K. government may attempt to boost the economy through an economic stimulus plan. Many economists feel the stimulus measures may not have the desired affect and would saddle the government with unnecessary debt and an increased yearly budget deficit.

The UK economy and government is facing a massive challenge ahead. With this frame, there may be room for more depreciation of the Pound. The BoE may choose to cut Interest Rates further or undertake a large government spending program to spur economic growth. Future fundamental data should be closely followed. Any one of these changes, if positive, could send the GBP/USD to the $1.45 level.

JPY

The first modern economy has officially entered into a recession. Late Sunday the Japanese economy posted Q3 GDP results as forecasted of -0.1%. Despite the official recessionary trend, he JPY strengthened against the Dollar, closing the day at 97.33.

This could be taken as a positive sign of the market's reaction to the contracting Japanese economy. The Japanese economy may appear relatively strong compared to its counterparts. The Organization for Economic Cooperation (OEC) has forecasted Japanese GDP to fall 0.1% in 2009. OEC forecasted the U.S. economy to post a decline of 0.9% and the Euro-Zone to fall 0.5%.

Technical Analysis

EUR/USD

According to the daily chart, this pair has been going through choppy sessions with mixed trends for the past several trading days. The trendless wide range the pair has been going through continues with no hint of a distinct direction. After range trading for most of the day yesterday, the pair now seems to be consolidating around the 1.2600 level and the volatility is beginning to decrease. Traders should wait for a clear signal on the hourly level before entering the market today.

GBP/USD

Since the beginning of yesterday's trading session the Cable recouped losses, appreciating from 1.4681, up to 1.5083. The hourly chart's Slow Stochastic is positively sloped indicating that the bullish correction may continue at the near-term time frame. Daily chart's oscillators also support this notion. Placing long positions might be a right choice for today.

USD/JPY

The daily chart is showing that the pair still does not have a distinct direction, as the chart appears to be quite horizontal for the past 10 days. The 4 hour chart is showing that this pair is trading within a tight channel as well and is now heading towards the bottom section of it. All oscillators are floating in a 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/CHF

After bottoming at 1.1891 yesterday, this pair now consolidates a bit higher at around the 1.2000 level. All oscillators show that the bullish momentum will probably continue. The Slow Stochastic of the 4 hour chart is showing no crosses in the horizon, and the bullish momentum there appears to be intact as well. On the daily chart, this pair is still trending upwards and there are no imminent indications of a reversal. Therefore traders can maximize profits by entering steady long positions.

Wild Card

Silver

There has been a sharp breach through the flat channel on an hourly chart which suggests that this commodity is now in the middle of its bearish corrective journey. All oscillators on the 4 hour chart are bearish as well, and forex traders have a good opportunity of taking advantage of this sharp technical event. Going short appears to be the right direction today.

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.2698	1.5073	97.30	1.2066	0.6499	0.8472
	1.2675	1.5041	97.08	1.2045	0.6483	0.8454
	1.2646	1.5020	96.84	1.2030	0.6468	0.8420
Support	1.2603	1.4959	96.22	1.2003	0.6402	0.8368
	1.2584	1.4934	96.06	1.1984	0.6387	0.8337
	1.2550	1.4915	95.85	1.1960	0.6347	0.8312

Indicators

Date	Time GMT	$€£¥	Event	Period	Prev.	Forecast	Imp
2008-11-18	00:30	AUD	Monetary Policy Meeting Minutes		*	*
		Monetary Policy Meeting Minutes The Bank of Japan (BOJ) Monetary Policy Meeting Minutes are a detailed record of the bank's interest rate meeting held about one month earlier.
2008-11-18	01:30	USD	Treasury Sec Paulson Speaks		*	*
		Treasury Sec Paulson Speaks Speaker US Treasury Secretary Henry Paulson; Due to testify on recent actions regarding Fannie Mae and Freddie Mac, investment banks, and other financial institutions before the Senate Committee on Banking, Housing and Urban Affairs, in Washington DC. It's the Treasury Secretary's job to communicate the government's economic policies, and his speeches are often used to signal policy shifts to the public and foreign governments.
2008-11-18	08:15	CHF	Retail Sales	y/y	0.0%	0.0%
		Retail Sales Measures Change in the total value of inflation adjusted sales at the retail level; It's the primary gauge of consumer spending, which accounts for a majority of overall economic activity
2008-11-18	09:00	EUR	Italian Trade Balance		-2.15B	-2.50B
		Italian 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.
2008-11-18	09:30	GBP	CPI	y/y	5.2%	4.8%
		CPI Measures Change in the price of goods and services purchased by consumers; Usual Effect Actual > Forecast = Good for currency; Frequency Released monthly, about 15 days after the month ends; FF Notes The 'Previous' listed is the 'Actual' from the CPI Flash Estimate and therefore the 'History' data will appear unconnected. This is considered the Eurozone's most important inflation data because it's used as the central bank's inflation target, but it tends to have a relatively mild impact as the CPI Flash Estimate and German Prelim CPI are released about 15 days earlier; Why Traders Care Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate; Acronyms Consumer Price Index (CPI);
2008-11-18	09:30	GBP	Core CPI	y/y	2.2%	2.2%
		Core CPI Measures Change in the price of goods and services purchased by consumers, excluding food, energy, alcohol, and tobacco; The Core data has a mild impact relative to other countries because overall CPI is the central bank's mandated inflation target;
2008-11-18	09:30	GBP	RPI	y/y	5.0%	4.6%
		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.
2008-11-18	13:30	USD	PPI	m/m	-0.4%	-1.9%
		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.
2008-11-18	13:30	USD	Core PPI	m/m	0.4%	0.1%
		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.
2008-11-18	14:00	USD	TIC Long-Term Purchases		14.0B	18.0B
		TIC Long-Term Purchases Difference in value between long-term foreign securities purchased and domestic long-term securities purchased by foreigners. This data represents the balance of domestic and foreign investment - for example, if foreigners purchased $100 billion in US stocks and bonds, and the US purchased $30 billion in foreign stocks and bonds, the net value would be $70 billion. The market impact tends to be significant but varies from month to month.
2008-11-18	15:30	GBP	MPC Member Besley Speaks		*	*
		MPC Member Besley Speaks Bank of England (BOE) Monetary Policy Committee (MPC) Member Tim Besley will speak at the Canada-UK Chamber of Commerce Armourers' Hall, in London. MPC members are responsible for setting the nation's short term interest rate, and traders scrutinize their speeches because they are known to drop clues regarding future monetary policy.
2008-11-18	18:00	USD	NAHB Housing Market Index		14	14
		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.
2008-11-18	21:45	NZD	PPI Input	q/q	5.6%	3.0%
		PPI Input The Producer Price Index (PPI) Input 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.
2008-11-18	21:45	NZD	PPI Output	q/q	3.5%	2.0%
		PPI Output The Producer Price Index (PPI) Output measures the rate of inflation (i.e., the rate of price changes) experienced by manufacturers when selling goods and services. Manufacturers are unlikely to pass Output inflation to the consumer, so it has much less market impact than its PPI Input counterpart.
2008-11-18	23:30	AUD	MI Leading Index	m/m	-0.1%	-
		MI Leading Index Measures Change in the level of a composite index based on 8 economic indicators; Usual Effect Actual > Forecast = Good for currency; Frequency Released monthly, about 50 days after the month ends; Next Release Oct 23, 2008 FF Notes This index is designed to predict the direction of the economy, but it tends to have a muted impact because most of the indicators used in the calculation are released previously. Full reports are only available to Melbourne Institute subscribers; Derived Via Combined reading of 8 economic indicators related to consumer confidence, housing, stock prices, money supply, and interest rate spreads; Also Called Westpac/MI Indexes of Economic Activity; Acronyms Melbourne Institute (MI);
2008-11-18	23:50	JPY	All Industries Activity		-1.8%	-0.1%
		All Industries Activity Measure the change in the total value of goods and services purchased by businesses