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06/06/'07 - Will the ECB hawk spread its wings?
Economic News
USD
Yesterday the USD continued on its bearish path and it extended its losses against the EUR and the sterling. Comments made by the Federal Reserve chairman Ben Bernanke that a slowdown in housing construction will be a drag on economic growth “somewhat longe'' than expected was the main driver of the dollar selling momentum . He added that the housing slump hasn't spilled over into other parts of the economy, and he maintained a forecast for ``moderate'' growth. These comments were seen as slightly dovish by investors as this positive attitude indicated to the market that the Fed will not hike or cut rates in the near future. The other major cause for the slide of the greenback is the speculation that the European Central Bank and the Bank of England will signal higher interest rates at meetings this week, increasing the value of local currencies. Also it was reported yesterday that the ISM Non-Manufacturing index rose to 59.7 from 56.0 in April, beating expectations for a second straight reading of 56.0. This news had a significant impact is it provided more momentum for the dollar to rally and the currency moved to day highs against the sterling and firmed against the EUR, although it remains close to recent lows. Today the dollar movement will pegged to the EUR as all attention shifts to the ECB interest rate statement and the press conference that will follow it. If the ECB maintains its hawkish stance the dollar will be firmly in a bear hug with little hope of an imminent recovery and the bearish trend will continue at least until the end of the week.
EUR
Yesterday it was reported that Euro zone retail sales for April were up 0.2% from March, missing expectations for a 0.9% rise following March's 0.5% gain. This much weaker than expected data nonetheless paves the way for retail sales to be stronger in the second quarter than in the first. Also the May PMI survey of the Euro zone's services sector came in just above expectations at 57.3, while the pricing measure eased to a five-month low of 53.1. Both of these data releases had minimal impact on the bullish surge of the EUR, as the currency is being driven by expectations of a rate hike which will be announced today at 11:45 GMT. However a rate increase to 4.0% is almost definite following a series of strong European economic figures and has already been priced in by the market, so all attention will be focused on the press conference with ECB president Trichet that will follow. Traders will be on the lookout for hints about future policy from president Trichet and many believe that a further rate hike may occur as early as September. The ECB differs from other central banks in its policy making as in addition to inflation and growth they focus on M3-which is the broadest gauge of money supply. In their view, too much money in the system is inflationary and that has been their view since the start of the Euro in 1999. Although inflation is now sitting at 1.9%, one tenth of a percent below the bank's 2.0% target, the rate of growth in M3 is likely to keep Mr. Trichet sounding hawkish, especially given the very optimistic growth outlooks and the risks to inflation that higher energy prices, high resource utilization and a lower unemployment rate now pose.
It is highly unlikely that the ECB will spring a surprise but if they do traders can expect sharp movement in the EUR. The more likely scenario today is a rate hike to 4.0% which will have little impact on the EUR but hawkish comments by Trichet will keep the currency on its bullish path.
JPY
Yesterday the JPY extended its gains against the greenback and the EUR and nearly all of the yen crosses were either down or unchanged. The JPY strength was driven by concerns that the demand for riskier assets may decline with central banks in Europe and Asia likely to raise rates in the coming months. The Dow was also down 80 points yesterday and we can see that the correlation between the yen and the US equity markets remains very high as it is a primary determinant for risk appetite. The JPY rebounded from a record low against the EUR as investors shied away from the so-called carry trades and the currency also rose from 15 year lows against the British pound, the Australian dollar and the New Zealand dollar. Although it seems that investors may be starting to shy away from carry trades we may have not seen the end of them just yet as the BoJ is in no haste to hike Japan's benchmark interest rate, which at 0.5% is the lowest among major economies thus encouraging carry trades. No Japanese market moving data will be released for the rest of the week so JPY movement will pegged to the performance of US and Chinese stock markets.
Technical News
EUR/USD
On the 4 H chart we notice that the bullish trend is running a head. The volatility decreases and the EUR USD is in a consolidation after it has broken the 1.3505 resistance level. The price should continue to move upwards in a range of 1.3510 to 1.3610. As it seems, the bullish pressure will continue to gather momentum on the EUR USD also today.
GBP/USD
On the 4 H chart, a rising wedge (bullish) is forming which may imply a continuation of the bullish carry trade, its recommended to time the entrance to the market with short term charts, 1.9970 seems like a strong entry point. At the moment GPB USD is being traded around 1.9915 to 2.0000 range. The volatility is low, we should expect to see also today a bullish pressure on the GBP. The uptrend should continue on 2.0050 resistance.
USD/JPY
The USD JPY broke 121.40 support. USD JPY is in a downtrend supported by 1H exponential moving averages. The volatility is low. Bollinger bands are tightened. We should expect to see also today a bearish configuration. 1H, 4H Elliott pattern implies that the USD JPY will continue to gather momentum. The target is expected at 120.60
USD/CHF
The USD CHF is in a bearish configuration. The volatility decreases. USD CHF moves without trend and swings around exponential moving averages (EMA 50 and 100). Bollinger bands are tightened. 1H, 4H Elliott pattern implies a continuation of the bearish pressure. The target is expected at 1.2050
The Wild Card
EUR/JPY
On the 4 H chart, the 5 Elliott pattern can be observed and the A,B,C is to be formed, in this case the C wave is expected to make this pair consolidate at 163.60. Forex traders beware: its not a classic pattern and therefore caution is needed on this kind of move.
07/06/'07 - GBP Interest Rate Announcement & US Unemployment Claims
Economic News
USD
The greenback has been pushed off the headlines as most of the significant economic information has been coming in the form of interest rate releases from the rest of the world.
The Australian Interest Rate was left unchanged at 6.25% on Tuesday night, followed by the European rate Hike to 4.00%. The New Zealand Interest rate was also hiked by a 0.25% to 8.0% which is an unbelievable 9 year high. The EUR/USD was not heavily influenced by the Rate hike, in contrary to the AUD and Kiwi which continued the ongoing appreciation we have been seeing for many months now. As for domestic news from the US we saw the release of the Unit Labor Costs yesterday which exceeded expectations and came out at 1.8% with a 1.3% consensus. Today the US calendar is once again relatively light with the exception of Unemployment Claims which is expected to grow by 5K to 315K. US Retail Sales release is expected tomorrow and should seal this economic week with relatively no price movement coming from the United States. It looks as if the greenback's fate is at the hands of other markets, at least until the end of this week.
EUR
The ECB hiked the Interest rate yesterday by 0.25% to 4.00%. The rate hike was widely expected and the market reacted with a slight EUR depreciation that is still trading near 1.3500. The near future of the EUR and the ECB is vague as monetary policy keeps the EUR and the GBP in a very tight range with no sharp price movement.
As for today the Bank of England is expected to release the Interest Rate decision, and although it is widely expected to remain unchanged, the BOE might surprise and hike it by 0.25%. If a hike will indeed occur, we might see the GBP/USD testing the 2.0000 levels and even 2.0050. As a whole it looks like the USD is not going to make a significant move this week and will allow the European currencies to continue the strengthening move, at least on a local scale.
JPY
The JPY is the showing the first sign of strength in a long time, probably due to profit taking of the carry trades. The USD/JPY has made a 120 pip correction yesterday as it dropped from 122.00 to 120.80 very much like the EUR/JPY's move to 163.10 from a 164.40 peak yesterday. It looks that the profit taking correction is just temporary, and the JPY will continue its ongoing weakening course we have been seeing for several months now. The Core Machinery Orders is expected to be released tonight and jump from negative ground of -4.5% into positive 4.5% which might give the JPY its final push before going back the carry trades course.
Technical News
EUR/USD
On the 4H chart, a bullish pennant is establishing and implies a possible breakout of the 1.3523 support level which tested yet hasn't been breach in last 4 days In the upcoming days this breakout is more than a reasonable assumption. The preferable strategy may be going long in any value below 1.3500.
GBP/USD
Daily chart note of an upcoming reversal when RSI 66 with negative divergence and Slow Stochastic crossing at 84 are suggesting taking this forex pair to consolidate at 1.9850.
USD/JPY
The weekly chart is bearish and suggesting a reconsolidation at 120.00 in the upcoming weeks. Hourlies are bullish and still have a lot of steam keeping this positive momentum, it looks like this pair will touch the 121.05 and then try his third try at 3 days to breach the 121.30 level.
Preferable strategy is going long on dips 121.05 and to take profit on tops 121.30.
USD/CHF
A falling wedge is observed on the 4 H chart which signals an upcoming bullish trend that may breach the 1.2200 later today. We are to opine that the 1.2168 level would be an attractive entry point for going long.
The Wild Card
USD/CAD
An amazing bearish channel is shown on this forex pair daily chart, this channel which was established in the last 3 months is waiting to be breached , however we need to find the right signal which will "inform" us of on the upcoming reversal.
Economic News
USD
It has been a very impressive move for the greenback on Friday as it appreciated about 0.5% against the EUR and across most of the board. It started early in the trading session and culminated at the release of the US Trade Balance which narrowed down to -58.5B, a much better figure than the expected 63.5B. The move on Friday caused traders to understand that this might be the first signal to a wider move and the notion on the market is slowly turning into a USD bullish one. Whether this is just local profit liquidation or in fact the beginning of the change, will probably be resolved in the following two weeks. The expectations for an interest rate change have been lowered by the Federal Reserve officials, and we will probably not see any cuts or hikes for the remainder of 2007. As for this week, it is not expected to be heavy with news from the US but there are several key points; the US Retail Sales on Wednesday, the PPI on Thursday, and the Consumer Sentiment and industrial Production on Friday. Most of the figures are expected to help the Greenback on its bullish move.
EUR
Last week ended with some mixed figures coming from the European market causing the EUR and the GBP to depreciate against the USD during the Friday trading session. The French Trade Balance went further down to -2.8B together with the German Trade Balance which also went down but remained in positive grounds of 15.0B. The positive data release came from the UK as the Industrial Production came out higher then the expected 0.2% on 0.3%, which made the GBP depreciation against the USD softer. As for today the most significant news event will come from the UK with the PPI Input expected to be released at 0.6%, and the PPI Output at 0.4%. The important events that are expected to come this week are the UK CPI, the UK Retail Sales, and the Swiss Interest Rate Release.
JPY
It has been a relatively quiet trading session in Asia after the release of the JPY Gross Domestic Product revision, which caused no price shaking. The economy expanded by a revised 0.8% in Q1 from the previous quarter, growing at a faster rate than the preliminary estimate of 0.6%, as the corporate sector continued to spend on new plants and other assets to meet demand abroad for Japanese-made goods. “Toda's revised GDP data confirmed that Japan's economic recovery remains intact,” said Masayuki Gotoh, senior economist at the Cabinet Office. Although the picture looks pink for the JPY, it appears that most of the trading bias will come from US and EUR derived events, as most focus this week will be concentrated on the USD movement
Technical News
EUR/USD
The pair is breaking through major key levels as the 1.3400 barrier was broken; we see that a 1.3350 breach has already been made. The daily charts are bearish and the hourlies are unwinding to support the bearish notion. 1.3300 is the next target price.
GBP/USD
There is a very strong support level forming at 1.9620, as the pair was shy of a breach at the early stages of the trading session. If a breach will be made we will probably see the April 1st low of 1.9550.
USD/JPY
The pair is showing moderate sign of a local correction, as we might see it touch the 121.00 levels again before the next move up will occur. The dailies are very bullish, and the hourlies delicate bearish cross indicating that buying on dips might be preferable today.
USD/CHF
A massive 200 pip move on Friday caused the pair to close the week at 1.2350. The daily charts are bullish with plenty of room to run, together with the hourlies which are unwinding from overbought levels to support the bullish notion.
The Wild Card
CAD/CHF
The pair is touching record levels of 1.1650 as there is a very clear bearish pattern forming on the 4 Hour chart allowing forex traders to jump into what looks like a very interesting downward move. If the dailies will approve we might see a reverse move that provides a great entry point for a short position.
12/06/'07 - Dollar on the War Path!
Economic News
USD
The dollar strengthened at the end of last week on news of rising bond yields, which lessened the chances of a Fed rate cut which may be the trigger for the correction after last week's aggressive strengthening of the greenback.
Lower interest rates, used to jump-start the economy, can undermine a currency direction by making investments denominated in its currency less attractive. A significant narrowing of the U.S. trade deficit in April further boosted the dollar last week. Traders are scrutinizing economic data closely for pointers to the Fed's future course, and inflation figures due Thursday and Friday could help move the dollar. Today, the Labor Department releases its producer price index and on Friday the consumer price index is due to be out. The dollar was little changed against Japan's currency, edging up to 121.77 yen from 121.74 yen after slipping to as low as 121.50 yen during Monday's session.
Generally speaking, the dollar should remain strong for the coming two weeks as there is still quite a bit of steam left.
EUR
The Italian Industrial Production numbers for April followed the lead of Germany, collapsing by -0.8% MoM and +0.8% YoY however with not significant impact on the market. After looking as if there had been a degree of moderation in U.K. house prices the DCLG reported they had seen a rise of 11.3% YoY in May, up from 10.9% in April. This is above forecasts of 11.0% and keeps the upward pressure intact. However, unless there is any upturn in inflation figures interest rates will probably remain stable for the present.
Indeed, the prospect of higher inflation is still a threat with the PPI figures for May showing a +1.2% MoM and +1.2% YoY gain. The monthly number was forecast to only rise by around +0.6% though the annualized figure was reported only just above the 1.0% forecast. These numbers will be enough to prick up the ears of the BOE who will not want a repeat of March's requirement to send a letter to the Treasury to explain why the CPI was above 3.0%.So far their forecasts appear to be on track, but this time their nerves may be strained if there are more figures pointing to renewed upward pressure.
Finally, on a very quite day, Trichet presented testimony to the European parliament and provided the normal, oft repeated comments of a strong economy, accommodative policy and favorable financing conditions. The target is for stable growth without inflation but highlighted the continued upside risks to inflation. On questioning he stated very clearly that he has never used the word 'pause' when relating to rate hikes. This, it would appear, is a clear sign of continued rate hikes which will maintain the EUR currency's strength over time. Later on we will see the U.K. CPI & PPI along with the Euro-zone Industrial Production for April. I can't see this generating too strong a move and more likely we shall see the pullback from Friday's Dollar rally deepen a little further. However, this should allow better buying levels for the EUR.
JPY
The wholesale goods price index jumped 2.2% in May from a year earlier, rising for the 28th consecutive month, the Bank of Japan said.
The year-on-year gain was more than the market's consensus forecast for a rise of 2.1%. Month-on-month, the index was up 0.5%. In April, the index increased by a revised 2.3% from the year before and was up a revised 0.9% from the previous month. The export price index in May, in contract currency terms, rose 1.4% year-on-year following a revised gain of 2.2% in April. Month-on-month, the export price index edged up 0.4% after rising a revised 0.4% in the previous month.
The import price index, in contract currency terms, jumped 5.0% last month from a year earlier, against a 6.3% increase in April. Month-on-month, the import price index increased 2.4%, following a revised rise of 2.3% in the previous month.
All those figures generally imply JPY recovery, however this recovery is a minor one and with no major move, little should be expected.
Asia sees the Japanese Domestic Corporate Goods Price Index which the BOJ is praying will show stronger price indications which will help lift prices. However, the Yen has remained pretty much range bound for some while and it's difficult to see there being any move beyond 100 points from current levels in the near term.
Technical News
EUR/USD
On the 4 H chart we notice that the bearish trend is running a head. The volatility has decreased and the EUR/USD is consolidating after it broke the 1.3420 support level. The price should continue to move downwards in a range of 1.3315 to 1.3450. As it seems, the bearish pressure will continue to gather momentum on the EUR/USD also today.
GBP/USD
On the 4 H chart, a declining wedge (bullish) is forming which may imply a continuation of the bearishness. It is recommended to time the entrance to the market with short term charts, 1.9680 seems like a strong entry point. At the moment GPB USD is being traded around 1.9660 to 1.9750 range. The volatility is low and we should expect to see today more bearish pressure on the GBP. The downtrend should continue on to the 1.9610 resistance.
USD/JPY
Since the USD/JPY broke the 121.65 support level, this pair is trading around the same level. The pair is in a downtrend supported by 1H exponential moving averages. The volatility is low. Bollinger bands have tightened. We should not expect to see any dramatic moves on the USD JPY, and the pair should continue to consolidate also today. 1H, 4H Elliott pattern implies a continuation of the USD JPY to gather momentum. The target is expected at 121.10
USD/CHF
The USD CHF is in a bullish configuration. The volatility decreased and the pair is in a consolidation pattern since broking the 1.2386 resistance level. USD/CHF swings around exponential moving averages (EMA 50 and 100). Bollinger bands have tightened. 1H, 4H Elliott pattern implies a continuation of the bullish pressure. The target is expected at 1.2410
The Wild Card
EUR/GBP
On the 4 H chart we notice that the bearish trend is running a head. Foreign currency traders take note: the volatility decreased and the EUR/GPB is in a consolidation pattern since it has broken the 0.6780 support level. The price should continue to move downwards in a range of 0.6750 to 0.6800. As it seems, the bearish pressure will continue to gather momentum today.
13/06/'07 - Will The USD Bullish Move Continue?
Economic News
USD
Yesterday the greenback continued its bullish rampage in anticipation of key economic data releases. The US currency has been buoyed by stronger-than-anticipated US economic news, which also prompted a slump in US Treasuries as the prospects of an interest rate cut diminished. The Fed has left interest rates unchanged at 5.25% for almost a year but has recently voiced concerns over inflation and this is making traders nervous ahead of today's Beige Book economic report and Friday's CPI figure. The US treasury currency report will be released today and it will be of particular interest to traders which countries the report will accuse of currency manipulation. US lawmakers are due to unveil a bipartisan bill which will address the problem of undervalued currencies that harm US trade and economic interests. The main question on investors' minds is whether China will be labeled in the treasury report as a currency manipulator. China has been accused in the past of undervaluing its Yuan currency thus making its exports cheaper and this is causing the US-China trade deficit to balloon as US exporters are struggling to compete against the Chinese on the global market. If the proposed currency legislation will look to directly effect currency markets by supporting intervention then the USD may come under widespread selling pressure.
The other significant news to be released today is the US retail sales. Last month the retail sales figures were very disappointing with the headline figure slumping into negative territory at -0.2%. This news prompted fears of a recession thus shoving the greenback on a bearish slide and it lost around a 100 pips against the EUR. These weak numbers can be partially attributed to the unseasonably cold weather that occurred in April and the early Easter holiday in March which took a large portion of retail sales. However today's figure will paint a completely different picture as headline retail sales is expected to bounce out of negative territory to 0.6% and the core figure is forecasted at 0.7%. Last weeks' better than expected figures of US consumer confidence and personnel spending measures also provide a strong indication that retail sales could spring a positive surprise on the market with an unexpectedly strong figure. Today the Dollar will continue on its bullish surge as the treasury report is unlikely to hold it down and strong retail sales will only add to the greenbacks momentum.
EUR
Yesterday, the EUR continued to fall deeper into the bears cave particularly against the greenback as five year high US bond yields have lured investors away from the EUR. This negative momentum was further exacerbated by the weaker than expected German wholesale price index and Euro-Zone industrial production data which were released yesterday. German wholesale prices for the month of May fell by more than expected to 0.3% m/m, and to 2.4% y/y from 0.8% and 2.9% respectively. Also Euro-Zone industrial production declined more than expected in April to -0.8% m/m, below estimates of 0.2%. The year-on-year industrial production figure was expected to rise but it declined to 2.8% from 3.7% a month earlier. However even though industrial production did not reach expectations there was still an upward revision to April's figures. Also with recent manufacturing data such as the manufacturing purchasing managers' survey for May indicating that this sector is still relatively robust, it is highly unlikely that the ECB's view of tightening its monetary policy will be influenced by yesterdays disappointing industrial production figures. Investors are convinced that there will be further rate hike to 4.25% in September following last week's hawkish comments by ECB president Trichet. Yesterday he reiterated those comments by telling the European Parliament's economic and monetary affairs committee that the bank's interest rate policy remains accommodative and financing conditions are favorable. He also stated that the ECB will do whatever is necessary at any given time to control the inflation risks that they see. The German DIHK research institute reiterated that they expect the ECB to continue raising rates but they do not see the need for the ECB to increase rates beyond 4.25%.
The EUR has been on a downhill slide since last week's interest rate statement and this is mainly due to the dollar strength but we are beginning so see some weak spots in the European economy. Without any significant news expected from the Eurozone today the EUR negative momentum is set to continue, especially on the brink of today's expected strong US data releases, however the ECB's hawkish attitude with regards to interest rates should limit the EUR losses.
JPY
Yesterday the JPY was supported by worries about a decline in investor risk appetite. The EUR fell against the yen as the jump in bond yields pushed U.S. shares lower and prompted some investors to cut risky positions. The EUR stood yesterday at 161.78 against the yen, hovering around a one-month low and the USD also fell slightly against the Japanese currency from around 121.70 to 121.62. Yesterday the GCPI, which measures the rate of inflation experienced by corporations when purchasing goods, released at a beating expectations figure of 2.2% but this was still lower than last months figure of 2.3% indicating that Japan may not be ready for a rate hike just yet, so Japan's central bank will probably keep interest rates unchanged as it awaits more evidence on the economy's strength after consumer prices fell for a third month. Nevertheless the Japanese Finance Minister Omi reiterated yesterday that interest rates will have to rise in the long term. Also earlier today the JPY current account surplus released at 2.3T beating the forecasted figure of 2.0T as a result of last months downhill slide of the Yen boosting exports to Europe and Asia, thus countering slower growth in shipments to the US. Today the JPY should continue to gain on speculations that a slump in global stock markets will cause investors to sell higher yielding assets they bought with money borrowed in Japan. The slump in stock prices, caused by concern over higher yields, is triggering risk reduction and the unwinding of yen carry trades is likely to continue while stocks are sluggish. However traders should be aware that any gains in the yen could be tempered by flows from Japanese investment trusts targeting overseas assets.
Technical News
EUR/USD
The pair is floating at levels we have not seen in more than three months and is consolidating at 1.3310. The daily charts are bearish and the hourlies are slowly unwinding from oversold levels. Indicators are showing that there might be a correction up, before the move down resumes.
GBP/USD
The current uptrend seems to be continuing, as the daily slow stochastic firms the notion that the local move will continue in the short run. The hourlies produce mixed signals and show no distinct bias. It looks as if the preferable strategy would be to wait for a clear sign to confirm the daily bullish trend.
USD/JPY
The upwards channel pattern is very clear on the daily chart, as the slow stochastic is starting to form a bearish cross. The hourlies are still neutral with a clear direction forward overbought territory. This indicates that although the trend in the long run is up, we might see a local correction in the short run.
USD/CHF
The pair is in the midst of a very strong bullish trend with very strong daily studies. The hourlies indicate that there is still plenty more steam to take the pair to a possible 1.2500 high. Traders must pay attention for a possible overbought sentiment that might push the pair to a local correction move before the bullishness continues.
The Wild Card
CAD/CHF
There is a very distinct upwards channel forming on the 4 Hour chart, as the pair now floats on its bottom border. The slow stochastic is bullish which allows forex traders to jump in at a very good entry point for a long position and resume the channel movement. The move up is expected to be along the width of the channel, which is about 120 pips.
14/06/'07 - The Swiss Interest Rate and US PPI.
Economic News
USD
Yesterday, the most important news coming out of the US was retail sales with the headline figure releasing at 1.4% and the core figure at 1.3%, beating expectations of 0.6% and 0.7% respectively. Investors viewed this positive news as a signal of an increase in US economic growth and the greenback rallied to a 4-1/2-year high against the low yielding yen, touching the 122.48 level against the Japanese currency. The EUR and the sterling both fell 0.1% on the day against the dollar. The greenback also rose to a four-month high of 1.2469 Swiss francs, up for its fifth consecutive session before surrendering some gains to trade at 1.2449 francs. However, the dollar's gains were limited by a drop in 10-year US treasury yields which fell from five year highs even though many investors are certain that the US is unlikely to cut rates in the future. Also yesterday, the much anticipated Treasury Currency Report stopped short of labeling China as a currency manipulator which could have triggered sanctions under US law. These sanctions could have put some selling pressure on the greenback.
Today all attention will be focused on the Producer Price Index (PPI) which is expected to come in at 0.6%, which is slightly lower than last month's figure of 0.7%. The dollar seems to have lost a little bit of steam as its recent gains have left little room for further strengthening, as was reiterated yesterday by the minor impact of surprisingly strong retail sales. So today, the USD should continue to range trade at current levels and may even retreat slightly, however if the PPI figure springs a major surprise on the upside then we may see the dollar extend its recent gains against the majors.
EUR
Yesterday, most of the focus was on the UK markets as the Average Earnings Index was released at a lower than expected 4.0% which pushed the GBP down a bit and together with strong US Retail sales, also pushed the EUR a bit south. The EUR showed some strength yesterday as it bounced back from the drop back to 1.3311 levels, showing that the next move down might not be imminent.
Today, the European calendar will begin with the Quarterly Swiss National Bank (SNB) Governing Board meeting which sets the nation's short term interest rate (i.e., "three-month libor"). Shortly after the meeting they release a statement that contains the decided rate, a brief commentary of the economic conditions that effected their decision, and most importantly, clues regarding the outcome of future meetings. The interest rate is widely expected to be hiked by 0.25% to 2.5%. Later on we have the UK Retail Sales which is expected to come out of the negative territory of -0.1% and jump 0.3% which might boost the GBP up a little. The Euro-Zone Consumer Price Index (CPI) is also expected to be released with wide expectations of a slightly lower figure of 0.4% and a previous 0.6% release. It looks as if the big price movement potential will come from the GBP and the CHF today, probably more than the EUR.
JPY
It looks as if nothing can really stop the massive JPY selling due to carry trades. It was thought by many analysts that this week might be softer after the positive Japanese Current Account release which came out higher than expected at 2.3 Trillion, but traders are ignoring the economic sentiment. The picture looks pretty clear for the remaining of this trading week as BOJ Governor Fukui will be speaking tonight at a press conference in Tokyo following the Monetary Policy Committee (MPC) interest rate announcement. The Japanese Interest Rate are most probably going to be left unchanged at 0.5% which means that besides the obvious volatility at Governors Fukui's speech we should be seeing the normal JPY movement, and the continuation of carry trades that might take the USD/JPY to break the 123.00 levels.
Technical News
EUR/USD
After touching the 1.3270 low yesterday, and bouncing back to the 1.3310 level the pair sends out mixed signals. The daily studies show moderate bullishness. The hourlies are floating at neutral territory, which means that a preferable strategy for the short run might be to wait for the hourlies for a specific signal.
GBP/USD
A sharp drop brought the pair to test 1.9675 and then bounce back to a consolidation around the 1.9710 levels. There isn't a strong hourly bias, yet the dailies are pushing the pair down to the 1.9640 levels.
USD/JPY
The pair is going up with no intention to stop in the short run. The trend is very strong and is supported by bullish daily studies and alternating hourlies which set the pace of the trend. It looks as if the next barrier is 123.30, which is most likely to be touched today.
USD/CHF
The pair is in the midst of a very strong uptrend which started at the 1.2150 level. There is a bearish cross starting to form on the daily chart, indicating that the trend's momentum is slowly diminishing and we might see a strong resistance forming at the 1.2500 level. If this barrier is breached the trend will regain new momentum and run forward.
The Wild Card
GBP/JPY
The pair is floating on record levels for the past 4 days, and there is a distinct bearish pattern forming on the slow stochastic of the 4 Hour chart. It looks as if the momentum is running out, and the next resistance level will not be breached, which means the pair is about to make a correction move down. This provides forex traders with the opportunity of a great entry point for a short position.
18/06/'07 - US Calender Almost Empty This Week.
Economic News
USD
The Greenback lost some ground on Friday after a series of good news events that were overshadowed by several moderately disappointing figures. The news rally started with the Empire State Business Conditions Index which measures the general business conditions of manufacturers in New York State. The index is derived from a survey that asks respondents to rate the level of general business activity as “decrease”, “increase”, or “no change”. The index was released at a much higher than expected rate of 25.8 with a consensus of 11.1 and a previous release of 8.0. The US Current Account was also released very strong at and the deficit was reduced from -203B to -193B. Finishing up the positive USD sentiment was the TIC Net Long-Term Transactions which measures the monthly difference in cross-border foreign and domestic purchases of long-term securities, and was released at a higher than expected 84.1B with expectations at 71.8B. The most influential news release on Friday was no doubt the US CPI. Although the figure was released at a higher than expected 0.7% the entire USD movement was overshadowed by the Core CPI figure which dropped to 0.1% and dragged the Greenback back down after a relatively long recuperation process, which caused the EUR/USD to close at 1.3380 on Friday. As for this week, it is probably going to be an insignificant period with almost no news coming from the US this week except the US Housing Starts and Building Permits, which will probably not create the next USD move, causing the USD to range
EUR
There have been several important news events last week which demonstrated the Euro-Zone's robustness. The UK Retail Sales went up to 0.4% after coming out of negative territory of -0.1%. The Swiss Interest Rate was hiked to 2.5% and caused almost no price movement as the movement was already priced in after it was hiked as expected. The Euro-Zone Trade Balance came out a bit weaker than expected at 3.5B after a wide expectation of 4.0B and a previous number of 5.4B. As for today, there is no news coming from Europe except the speech by Trichet which is expected in the evening. The following week will also be very light on news with the exception of the UK MPC Meeting Minutes which is due on Wednesday, and together with an almost empty US calendar, we should be sailing on quiet water throughout this week.
JPY
The Bank of Japan kept the interest rate unchanged at 0.5% on Friday, which was widely expected, and pushed the JPY to fresh record lows of 123.50 against the USD. In the monthly report, economic assessment remains unchanged with moderate expansion expected. BOJ's Fukui said that CPI will likely continue to trend up with long-term interest rates moving higher. Governor Fukui also stated in the post meeting press conference that Bank of Japan needs to be "more confident about the outlook for the economy and prices" before increasing benchmark borrowing costs from the lowest rate among major economies. Also, the board members are "in absolute agreement that there are still many factors that need to be examined closely." Traders are now more confident in regards to carry trades which will probably continue with full strength in the next month.
Technical News
EUR/USD
The pair now floats at 1.3390 which is the 50% retracement level of the 1.3520/1.3260 move, marking a strong resistance. If a massive break will occur beyond the 1.3400 level, we might see a further move up. The hourlies are overbought, and a correction move down is imminent.
GBP/USD
The hourlies seem to be strong enough to push the pair further up, although the bearish dailies might be a concern. There is a bearish cross forming on the daily charts, and there is a bullish momentum on the 4 Hour chart. The general bias is up, with a target of 1.9830.
USD/JPY
Trading at record levels, the pair is not showing any signs of a small correction move. The dailies are very bullish, and the hourlies are rotating between bullish and neutral. It looks as if the pair is proudly heading 124.00, with a steady pace.
USD/CHF
The pair has started a correction, after the uptrend that took it from 1.2150 to 1.2450. The dailies are bearish and so are the hourlies which indicate that the momentum down is slowly increasing.
The Wild Card
GBP/JPY
The pair is in the midst of a very impressive uptrend and shows no signs of an ease. The massive JPY selling and the extremely bullish hourlies provide Forex traders with the opportunity to jump into a very good trend, and take about 60 pips as the target price floats around 245.20.
19/06/07 - Will key housing data cap recent USD losses?
Economic News
USD
Yesterday the greenback continued to extend its losses against the EUR and the sterling as the USD has been under pressure since Friday's release of weaker-than-expected US core CPI data, which caused market players to scale down their expectations for US interest rates. The negative impact of the weak inflation figures was further exacerbated by the release of weaker than expected industrial production. The EUR traded around the 1.34 level against the USD and failed to gain further ground after touching 1.3417 as traders are still hesitant to drop the dollar lower after its recent bullish surge where it reached the 1.3265 level. The only news coming out of the US yesterday was the US housing market index from the National Association of Home Builders which fell in June for the fourth straight month to the lowest point since 1991. It seems that housing developers are being pressured by the existing tighter lending conditions for borrowers trying to obtain mortgage loans. So the only way developers can respond is by cutting prices and offering incentives to buyers so that they can cope with the ever-increasing supply of unsold homes. In a week light on US news the lower-than-expected housing market index seems to be one of the main factors that were responsible for yesterday's continued dollar slide and this is rather disappointing for the USD as a positive figure would have surely capped the dollar losses.
Today all focus will shift to the release of US Building Permits and Housing Starts figures for the month of May. Since this week is relatively void of significant news events, the release of these figures is expected create some market movement. The Building Permits figure is a leading indicator for the housing sector as it measures the number of new intended constructions and it should once again provide a glimpse into whether US housing weakness is subsiding as the economy shows signs of recovery. The market is expecting a figure of 1.47M which is an improvement on last months figure of 1.46M but nevertheless this is still a slowdown relative to recent months. On the other hand Housing Starts is expected to be released significantly weaker at 1.48M from last months figure of 1.53M. The Building Permits and Housing Starts figures are released simultaneously but traditionally Housing Starts is the more pivotal of the two and if it surprises on the upside with a release above 1.6M then the greenback should pullback some of its recent losses. However soft housing data could do further damage to the dollar over the short term, but with a lack of major data releases this week the tone is likely to one of a drift lower rather than a major decline in the currency.
EUR
There was no significant news coming out of the Eurozone yesterday but the EUR continued its bullish surge against the greenback and the JPY following hawkish comments by various European Central Bank members as they reportedly continued to warn on inflation risks and reiterated that monetary policy remains on the accommodative side. The EUR should continue rising against the USD on speculation that the ECB will raise borrowing costs to tame inflation. Investors are bullish on the EUR as they strongly believe that the ECB is heading for higher rates, possibly 4.5 by the end of the year, while in contrast Japan is keeping rates very low and the US is holding rates unchanged.
The most significant European news being released today is the German ZEW Economic Sentiment which measures institutional investor sentiment. The market is expecting a figure of 29.0, which is a decent improvement to last month's figure of 24.0. Today if the ZEW releases positively as expected coupled with soft US housing data then we may see the EUR charge to the 1.3460 level against the greenback. It may also rise to 166.30 versus the Yen as there is no sign of carry trades unwinding in the near future.
JPY
The JPY was the weakest performer yesterday as it hit fresh 4 -1/2 year lows against the greenback touching the 123.66 mark. It also slid to a new record low 165.69 versus the EUR and weakened significantly against the sterling. The Japanese currency came under renewed pressure on Friday after a dovish speech from Bank of Japan Governor Toshihiko Fukui suggested interest rates will not rise again any time soon, while gains on equity markets overnight caused the yen to add to its losses. Also the fact that US core inflation released weaker at a time when all other data is suggesting that the US economy is recovering should rally equities and commodities which will in turn spur on carry trades.
There was no significant economic news coming out of Japan yesterday and today is also void of data so we should see the JPY continue on its bearish path, with most yen crosses expected to rise as the carry trade unwind is nowhere to been seen and to the contrary all signs are for carry trades increases, at least in the near future.
Technical News
EUR/USD
On the 4 H chart we notice that the bullish trend is running ahead. The volatility is increasing, especially after the pair has broken the 1.3405 support level. The price should continue to move upwards in a range of 1.3400 to 1.3515. As it stands, the bullish pressure will continue to gather momentum on the EUR USD today as well.
GBP/USD
On the 4 H chart, a rising wedge (bullish) is forming which may imply a continuation of the bullish momentum, it's recommended to time the entrance into market with short term charts, 1.9860 seems like a strong entry point. At the moment GPB USD is being traded around 1.9820 to 1.9950 range. The volatility is high and we should expect to see today bullish pressure on the GBP. The uptrend should continue to the 1.9885 resistance level.
USD/JPY
The USD JPY broke the 123.69 support level. USD JPY is in an uptrend supported by 1H exponential moving averages. The volatility is low. Bollinger bands are tightened. We should expect to also see today a continuation of the bullish configuration. 1H, 4H Elliott pattern imply that the USD JPY will continue to gather momentum. The target is expected at 124.00
USD/CHF
The USD CHF is in a bearish configuration. The volatility is decreasing. USD CHF moves without trend and swings around exponential moving averages (EMA 50 and 100). Bollinger bands are tightened. 1H, 4H Elliott pattern imply a continuation of the bearish pressure. The target is expected at 1.2340
The Wild Card
EUR/GBP
On the 4 H chart, a rising wedge (bullish) is forming which may imply a continuation of the bullish momentum, 0.6795 seems like a strong entry point. At the moment EUR GBP is being traded around 0.6740 to 0.6840 range. The volatility is high and we should also expect to see today bullish pressure on the EUR GBP. This forex uptrend should continue to the 0.6770 resistance level.
20/06/'07 - UK MPC Meeting Minutes On Tap.
Economic News
USD
The US dollar softened throughout the New York session as mixed reports from the housing sector reaffirmed much of the negative sentiment on everything from construction to sub-prime loans. The actual effect on the mortgage market will be felt soon, after the Housing starts was released in line with expectations by 2.1% to 1474K from an upwardly revised 1506K, signaling that homebuilders are not initiating projects as quickly as in previous months. However, building permits jumped a greater-than-expected 3.0% to 1501K from an upwardly revised 1457K. As a leading indicator for starts, the data points to a pick up in construction during the summer. Given a lack of solid demand for properties, these building plans will only contribute further to softness sector-wide as inventories will only rise further, and prices will have to be cut in order to liquidate. Meanwhile the breakdown of data is worthless: Improvements were contained to multi-family units - which tend to be rented out - while declines were seen across the board for single-family units - which are typically mortgaged. Although the multi-family index tends to be highly volatile, this will be a factor worth watching as potential homeowners seem to be shifting towards more affordable rentals and away from expensive loans as mortgage rates rise. It looks as if the USD is going to maintain its weakening trend, at least until next week which will contain a bit more value with regards to news events.
EUR
The EUR dropped back below 1.3400 during European trading after the ZEW survey reflected surprisingly gloomy economic outlooks among investors. Both the German and Euro-zone ZEW figures unexpectedly fell back to 20.3 and 19.0, respectively, as the European Central Bank's overtly hawkish stance has started to take its toll on optimism. Nevertheless, the EUR made a comeback over the course of the US session as the readings still hold at encouraging levels and German sentiment regarding current conditions actually reached another record high of 88.7. Overall, the status of Euro-zone expansion appears to be keeping pace, as the labor market remains tight, exports continue to thrive, and consumption grows. However, these factors combined with inflation holding at 1.9%, just below the ECB's ceiling of 2.0%, may not be enough to initiate policy action within the next few months. Given the fairly aggressive series of rate hikes that the ECB has enacted over the past year, the end of the tightening cycle may be closer than we think, especially if price pressures ease in line with the central bank's outlook.
The Bank of England left interest rates on hold at 5.50% at the June MPC meeting. No statement was released at the time and the minutes from that meeting will, therefore, have an important impact on interest rate expectations and Sterling. The consensus is that there was a 7-2 vote increase for steady rates at the meeting with two members, probably Sentance and Besley, calling for an immediate increase to 5.75%.
There is little doubt that the inflation concerns continued at the meeting and that the bank will have retained a tightening policy bias, especially as Bank Governor King took a firm stance in a recent speech. There is also no doubt that there was a wide range of views on the inflation outlook. It is assumed however, that the net risks suggesting, Sterling should have a weaker bias following the minutes. The strong level of carry trade activity will, however, fuel additional short-term Sterling volatility.
JPY
TOKYO (XFN-ASIA) - The business sentiment diffusion index for leading companies fell to minus 0.9 for the April-June quarter from a reading of plus 6.2 in the January-March period, according to the results of a quarterly survey conducted by the Ministry of Finance and the Cabinet Office. The index is computed by subtracting the percentage of large companies reporting deteriorating business conditions from the percentage of companies reporting an improvement. A positive figure indicates the majority of large companies see an improvement. The finance ministry gave the following breakdown of the business sentiment diffusion indices for April-June, compared with the figures for January-March: Total - minus 0.9 vs. plus 6.2.
Generally this kind of figure might bring a negative behavior of traders relating the JPY when it's only strengthening the conjecture of the disbelief in the JPY those days and even may cause another ran away of the JPY buyers to seek for other attractive alternatives .
Technical News
EUR/USD
The pair now consolidates around 1.3428 which is the 50% Fibonacci of the 1.3540/1.3260 move. The daily charts are defiantly bullish as the hourlies support. A preferable strategy might be buying on a dip around 1.3405.
GBP/USD
The daily charts are pointing higher as the hourlies are dwelling in neutral levels. Traders should look for the 1.9900 break which will signal that the pair is seeking the 2.0000 levels again. Is a break does not occur, than a consolidation around 1.9800 is expected.
USD/JPY
After peaking at the 123.70 level, the pair now rests back on the 123.30 area with a distinct intention to travel north again. The dailies are very bullish as the hourlies rotate in and out of bullishness. The next target price is 124.00.
USD/CHF
The pair is losing ground after the impressive uptrend from 1.2150, and it looks like the downtrend is becoming more solid in the past few days. The dailies are bearish and the hourlies are mostly neutral. The bias seems to be slightly bearish with a daily target of 1.2350.
The Wild Card
NZD/JPY
With strong JPY selling in place and a stronger then ever bullish notion, there is a great opportunity for Forex traders to jump into an impressive uptrend. The pair now trades at 93.58 and it still has plenty of room to run.
24/06/'07 - US Existing Home Sales.
Economic News
USD
Last week with little in the way of news releases, the greenback weakened a bit against most currencies apart from the JPY. It looks as if the carry trades are stronger than the general market trend. Towards the end of last week, we saw a glimpse of positive news for the USD as the Leading Index came stronger than expected and the Philadelphia Fed Manufacturing Survey tripled expectations. The good news didn't do much, and the negative trend continued.
Today's most important release will be coming from the very important housing market - Existing Home Sales. The Existing Home Sales measures the annualized number of existing residential buildings that were sold during the previous month. A rising trend has a positive effect on the nation's currency because large purchases tend to be made by consumers that are optimistic and confident in their financial position. The sale of a home also triggers commissions for real estate agents, and often home owners will purchase goods such as appliances and furniture shortly after purchasing a home. This report is closely scrutinized as it's the month's first demand-side housing indicator to be released. This month, the forecast for the release is 5.96M with a previous figure of 5.99M last month. The spring is a strong season for Home Sales and May is usually one of the most active months. Because the data on new building permits and housing starts has been weak, it's likely to see weakness in existing home sales as well. There is a Surplus of inventory that is likely to be sold at lower prices. This week will be quite rich with US news events such as the Consumer Confidence, Durable Goods, GDP, the Chicago PMI, and the Fed's Interest Rate Statement.
EUR
Although most of the news that came from Europe last week was weaker than expected, that didn't stop the EUR to rally up all throughout the week, strongly pointing to the 1.3500 again. The most impressive move was made by the EUR/JPY which continues to be traded at record levels, and shows intense bullish momentum. With practically no news expected to come from Europe this week, it is quite clear that most of the price action will be coming from the US market, and its very rich upcoming economic calendar. With regards to the EUR/USD, the most important event would be the FOMC Rate decision which is widely expected to remain unchanged at 5.25%, and might help push the pair further up with the lack of positive USD releases to block the expected appreciation.
JPY
Despite the few small positive signals that the JPY might be experiencing, it is still quite clear that its performance is still very poor, and it is overcoming all the negative US news releases and still weakening against the USD. Although it appears that economic new events that come from Japan seem to have no influence on the ongoing bearish trend of the currency, it would probably not be true this week. There are several releases expected to come from Japan this week such as the Trade Balance, Large Manufacturing Conditions, and the BOJ meeting minutes, and together with the packed US week, might caused some price shifting out of the range we have grown accustomed to.
Technical News
EUR/USD
The pair has made a significant move from 1.3260 to the 1.3450 levels and according to the daily charts is heading strongly to 1.3500. If a break will occur beyond that level, we might see a violent move following. If a break will not happen, the pair will probably range trade between 1.3350/1.3450.
GBP/USD
The cable is trading at critical levels near 1.9990, and is slowly pointing to the very important resistance of 2.0000. This very important level, if broken; will probably take the pair back to the 2.0100 levels back again and even further.
USD/JPY
After a short consolidation period, the pair seems to be reestablishing the bullish move, as clearly derived from the daily charts. The current move is heading to the 124.40 levels, and a preferable strategy would be to wait for the hourlies to unwind before entering the market at a better point.
USD/CHF
The pair has been consolidating at 1.2300 after a sharp bearish move from the 1.2450. There is a bullish cross forming on the hourly charts, indicating that there might be a correction move before the daily bearish trend resumes.
The Wild Card
USD/CAD
The pair seems to be establishing a bullish trend after a very long and sharp downtrend that took it to record lows. This turning point provides forex traders with an opportunity to enter the market at a very good point for a long position as it is traded at a very low price, and the direction seems to be up.