ForexYard's Commentaries - page 7
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17/09/'07 - Markets Await Tomorrow's Rate Decision.
Economic News
USD
The greenback lost some significant ground against the majors last week and it reached an all time low against the EUR. The negative dollar sentiment was mainly driven by the recent weak jobs and housing figures which gave further indication that the US economy may be heading towards a recession. The Fed's hesitancy to lower the interest rate has put the greenback on a slippery slope and the subprime and credit crisis have cast a shadow over the US economy. The most significant news that is expected from the US Today is the Empire State Business Conditions Index and it measures the general business conditions of manufacturers in the New York State. It is forecasted to release at 18.0, which is well below the previous figure of 25.0. If the figure will be released inline or below expectations, it will reaffirm the fact that the US economy is slowing down. With many investors already believing that the US economy is heading towards a recession it is likely that we may see this figure surprise on the downside. If this occurs then the greenback could experience some sharp bearish movement but it is more likely that it will range trade today as a result of investor caution.
Looking ahead to the rest of the week all the market's attention will mainly focus on Tuesday's interest rate decision and statement by the Fed which is expected to lower the interest rate by 25 basis points coupled with a dovish statement that will follow the interest rate announcement. The Fed Statement will play a key role in determining the markets sentiment with regards to future interest rate expectations, while the rate cut should have an immediate impact on the market and provide the dollar with some respite particularly if the Fed springs a very rare surprise and drops the interest rate by 0.50 %. The other significant US data that investors will watch this week is the consumer inflation, US housing starts and the Philadelphia Fed Index.
EUR
The EUR performed solidly last week all across the board and it surged to a new all time high against the greenback. However the bullish EUR will begin to experience a slowdown in momentum, as due to inflationary pressures and the spreading credit crisis in the Eurozone, the ECB is unlikely to raise the interest rates before the end of the year. Although Trichet and the ECB still seem to have a hawkish stance with regards to its imminent monetary policy, the market sentiment has shifted and it will place the EUR under pressure in the near future particularly if more cracks in the usually resilient European economy begin to appear.
Today the only news to be released, relevant to currency trading, out of the Eurozone will be the Trade Balance which is expected to come in at 4.0 B, well below the previous figure 5.2 B. The expected drop in the European Trade Balance may be partly attributed to the strong EUR and fledgling greenback, as it is making it harder for European exporters to compete in the global markets. However this news will not cause any volatility in the EUR and it should range trade today as investors will exercise caution ahead of Tuesday's US Interest Rate Announcement. In addition the German ZEW report is due to be released on Tuesday and it is also likely to cause volatility in the EUR.
JPY
Early last week the JPY went on a bullish rampage on the back of the sharp rebound of US equity markets but since then it has been on a gradual decline. There were strong indications in the beginning of the week that we could see a sustained carry trade unwind but with the volatility of US stocks it is still too early to predict whether we will see continued risk aversion particularly with the Fed's interest rate decision on the horizon. There was no significant news released from Japan in the Asian trading session today and looking ahead to later in the week, the Bank of Japan will announce its interest rate decision on Wednesday. The current market sentiment is that the Japanese interest rate will remain unchanged at 0.50 %, therefore traders will pay close attention to BoJ Governor Fukui's comments for hints to Japan's future monetary policy. The JPY could rise to new heights if the US Federal Reserve fails to cool the market on Tuesday and risk aversion may stay as a priority among investors.
Technical News
EUR/USD
The pair is trading at an all time high and is now in a tight range. It appears to have some more momentum up as supported by the 4 Hour chart. The RSI and slow stochastic are floating at the 40 level, and are showing more room to run on the hourly level. The daily chart is showing a bearish cross on the slow stochastic which indicates that a correction down is close.
GBP/USD
The cable lost ground last week and is now trading at 2.0060. The hourlies are showing that the bearish momentum is slowing down and the bearish cross on the daily slow stochastic is supporting the bullish notion. The next target price might be around 2.0120.
USD/JPY
The pair is trading at 115.40 which is the 23.6% Fibonacci level of the 124.00/112.60 move. A breach up through that level will validate the move up at least up to the 38.3% level which is 117.00. All oscillators support the bullish notion.
USD/CHF
After several failed attempts to break through the very important support of 1.1800 last week, the pair is showing positive momentum on the daily studies. The slow stochastic and RSI are showing strong positive momentum which indicates that the next target price might be 1.1930.
The Wild Card
Crude Oil
The bottom barrier of the 4 Hour channel has been breached which indicates that a bearish correction move is imminent. The slow stochastic is showing a strong bearish cross which might pull the Oil back to the 77.00 levels again. This is a great opportunity for Forex traders to profit from a strong correction move.
19/09/'07 - US Core CPI ,Housing Starts and Building Permits.
Economic News
USD
Despite yesterday's sharp interest rate cut by the Fed the market anticipated the move. Stocks jumped on the news that the Federal Reserve decided to cut its key interest rate by a 0.5% to 4.75% and the dollar crashed to its historic lowest level against the EUR. The Fed slashed interest rates in order to protect the U.S. economy from sinking into a recession; sparked by the turmoil in the credit and housing markets. During the FOMC meeting, Fed chief Ben Bernanke stressed that the central bank will continue to act as needed to promise price stability and sustainable economic growth.
According to Fed's chief Bernanke's latest move, we can understand that he is more concerned by the sign's of a possible recession which are caused by the tumble in the housing market, jobs market, and the significant reduction in retail sales.
Along with an Interest Rate decision, although somewhat overshadowed by it, other U.S economy news continued to flow yesterday prior to the interest rate news, further exacerbating the currently limping U.S economy. The USD PPI index released at -1.4%, down from last month's figure of 0.6% and well below the forecasted figure of -0.2%. Housing Market Index released inline with expectations at the level of 20, yet down from the previous month's figure of 22. The U.S CPI index is on tap today along with the Housing Starts and Building Permits. All of the latest are expected to come out quite negative.
EUR
Traders drove the EUR to a record high against the USD yesterday after the Fed cut its target rate for overnight loans between banks by 0.5% as rising defaults on subprime mortgages rippled through global credit markets. In total, the European currency has gained 5.5% this year versus the USD as traders bet the Fed would cut rates as the U.S. economy slowed. The EUR traded as high as $1.3987 against the USD although exporters/importers may weigh in on any attempt by the market to surpass the psychologically critical 1.40 level.
Yesterday, there was no significant news released from the EUR zone, apart from the German ZEW Economic Sentiment, which came in weaker than expected at -18.1. However this soft data did not manage to slowdown the European currency from extending its gains across the board after a significant Interest Rate cut by the Fed.
Today is also expected to be devoid of data so we should see the EUR continue range trading on it's heights and will heavily depend on the volatility of the equity markets.
JPY
Yesterday, the Japanese currency dropped against all 16 major currencies after the Fed rate cut fueled a rally in U.S. stocks, spurring investors to buy riskier assets funded by borrowed yen.
The dollar pared some of its early gains against the yen to trade at 115.90 yens per one USD.
Some traders are moving back into risky positions, buying the high-yielder's and selling the yen, so-called carry trade bets, investors buy high-yielding currencies with funds borrowed in Japan, where the benchmark interest rate is 0.5%.
The yen traded as weak as 115.98 per dollar after the Fed interest rate cut, down 3.9% since it appreciated to 111.61 per dollar on Aug. 17, the strongest since June 2006, as investors exited carry trades.
BOJ kept its benchmark rate at 0.5%, the lowest among industrialized nations and we expect the greenback to continue its recovery against the JPY despite the interest rate differential moving towards JPY favorability.
Technical News
EUR/USD
The weekly chart implies on an upcoming reversal as a bullish channel is observed and the price is currently touching the upper barrier. In case of breach through this barrier we may see an aggressive bullish movement. Today, a bullish flag structure is shown on the 15 min. chart which may indicate an upcoming bullish movement which is also supported by the Slow Stochastic (14). Going long seems to be preferable.
GBP/USD
On the 4 hours chart, the slow stochastic is crossing 89 clearly in over bought territory, which implies on an upcoming bearish trend. There is an opposite head & shoulders pattern which is reflected on the 4 hour chart which also indicates on an upcoming bearish trend. Going short seems to be preferable today.
USD/JPY
The 4 hour chart indicates an upcoming bearish trend when a rising wedge is observed and the pair failed to breach the upper barrier. Forex traders need to pay attention for the 115.46 Fibonacci 38.2% levels because in case of a breakout the next barrier is located at 114.72 which is the lower boundary.
USD/CHF
On the 1 hour chart a falling wedge structure is shown which implies on an upcoming bullish trend however , on the 15 min. a descending triangle is establishing which indicates on an upcoming bearish trend especially if the 1.1802 level would be breached. If this level will not be breached, we expect to a bullish trend to take place.
The Wild Card
Crude Oil
Today we may see the Crude Oil weakening as the bullish trend seems to be out of steam. The 4 hour chart is bearish and the Slow Stochastic is crossed on overbought territory (84) and having a negative slope. Going short seems to be preferable today however Forex traders need to pay attention for a possible 80.80 breakout.
20/09/'07 - Historic All Time High For The EUR/USD - 1.4000
Economic News
USD
It was a busy day for currency trading yesterday, as the USD fell to an all-time low against the EUR, however grazed back slightly due to data showing a decline in U.S. consumer prices. The Greenback also fell against the GPB taking it to 2.0173 before declining back to 2.0025.
Yesterday, data coming from the US showed some concerns about the country's economic outlook data such as: CPI, Housing Starts index, and the Building Permits index; the consumer price index surprisingly decreased and pushed lower by 0.1% from the previous month and new home construction strike a 12-year low. The Home Construction Index decreased by 2.6% last month to its lowest in more than 12 years, while building permit activity, a sign of future construction plans, also dropped to a low which has not been seen since mid-1995, Building permits fell 5.9% to an annual rate of 1.307 million.
As it seems at the moment the housing recession may deepen, causing more damage on an already slowing economy, after borrowing costs rose and lenders shut off access to credit, and of course still dealing with the delicate issue of the mortgage defaults which will probably delay the recovery from the worst homebuilding recession in 16 years. The U.S. Federal Reserve announced on Wednesday that it added $9.75 billion of impermanent reserves to the banking system in the course of overnight repurchase agreements and today, the Federal Open Market Committee (FOMC) cut its fed funds target rate by 50 basis points; the first cut in that rate in four years.
EUR
Yesterday's trading day for the 13 nations currency was defined as a quite dramatic day. The EUR climbed up during the early morning hours in Europe to 1.3987 which was a new time high, before it has strengthen back to 1.3956. The EUR is trading at a very important point against the USD. The historic break through the 1.4000 level today might generate some concerns from the ECB, as it rises it can lower exports, mainly to the United States, where the prices for anything from automobiles to steel to consumer goods are more expensive to American buyers, and the ECB would try to avoid this situation. US Federal Reserve Chairman Ben Bernanke and ECB President Jean Claude Trichet are scheduled to speak today regarding those important issues.
The most considerable "ray of light" regarding yesterday's Euro-zone economic data was the German PPI which raised to 0.1%, The rest of the economic data which will be release this week are not very market moving since we only have the Philly Fed survey and leading indicators left on the calendar, and most of the moves will be only technical ones.
JPY
JPY Yesterday, The USD strengthened against the JPY rising to 116.09 from 115.74 after the BOJ, as expected, kept its benchmark interest rate stable at 0.5% and kept its estimations of the national economy unchanged. As it seems for the near future, the BOJ will cooperate with US and European central banks by holding its benchmark interest rate, as it would find it hard to raise rates at the time when U.S. central bank is cutting them.
Currently traders treat the USD/JPY as a less attractive alternative for future investments especially after the US Fed interest rate cut, however tending to the GBP or to other commodities currencies (AUS,NZD) as a substitute may also be considered as a riskier move since those pairs are characterized as extremely volatile compared to the USD/JPY.
Technical News
EUR/USD
The pair breached through the 1.4000 level and is now trading at all time high levels near 1.4040. The hourly studies are showing strong bullish momentum after the physiological barrier, and will probably continue to go up intraday. The daily charts are showing a bearish cross forming, which indicates that on the longer run a correction might be in place.
GBP/USD
The cable is trading in a very unstable and choppy manner in the past few days. The daily studies show a slight bullish momentum and the hourlies show mixed signals with a moderate bearish tendency. It would be preferable to stay out of the cable trading until the smoke clears.
USD/JPY
The pair is in the midst of a very accurate upwards channel, and is now testing the bottom barrier. The oscillators show that a negative breach is quite unlikely, and the daily chart is showing bullish momentum. A preferable strategy might be to go long on dips.
USD/CHF
A very strong breach through the 1.1800 has occurred, and the pair is now trading around 1.1770. The breach indicates that the bearish move has been validated and that the next target price is 1.1740. On the daily chart a bullish cross is starting to form which might indicate that a correction up could be imminent if the cross will validate.
The Wild Card
Crude Oil
The upward channel is showing that the move is nowhere near the end, and is showing a very accurate technical behavior. The Oil is floating at the lower barrier of the channel which provides Forex traders with a great opportunity to establish a great entry point and continue the bullish ride.
24/09/'07 - The Greenback Continues to Weaken.
Economic News
USD
The dollar posted its biggest losses through the past week after the Fed dropped its benchmark rate to 4.75%, mainly due to the biggest housing slump which threatens to weaken the U.S economy. The USD fell to a record low against the EUR and tested the lowest levels since 1976 vs. the CAD on speculation that the Federal Reserve will continue to reduce U.S. interest rates. The housing crisis is not over and the Fed is likely to lower interest rates again before the end of the year as the economy comes to a standstill. This week, the USD may extend its losses as reports are expected to show declines in Home Sales, Durable Goods, and Consumer Confidence. The expectations for the Existing Home Sales release currently stand at 5.50M, slightly down from the previous month's figure of 5.75M. On Wednesday, the Durable Goods Orders figure is expected to be released in negative territory at -3.5%, while the core figure is expected to be released at -0.8% which would be a significant drop from last month's figure 3.7%. The consumer data, which includes Consumer Confidence, Personal Spending and Personal Income, is also expected to weaken. On Friday, the Chicago Purchasing Managers' Index will provide traders with a picture of the health of manufacturing in the Midwest and will also be a benchmark for near future trading sentiments.
Although the calendar seems full of major events, it is unlikely that any one event will be aggressive enough to create a shift in market behavior, as the negative momentum on the USD appears to be stronger than ever.
EUR
A surprisingly aggressive Federal Reserve rate cut last Tuesday helped the EUR to reach its all time high against the USD. The European currency has reached the 1.40 level at the end of the last week and is now steadily floating above 1.41. The EUR was also stronger versus the JPY, trading 0.8% higher, testing the 163.00 level. Last week's Euro-zone data showed that the European private sector's growth slowed to a 2 year low in September as major European indicators descended, making any further interest rate hike this year by the ECB unlikely. Signs of instability continued to flow as last week's Service sector PMI in the Euro zone dropped from 58.0 to 54.0, while manufacturing PMI fell from 54.3 to 53.2.
This week is expected to be relatively light on market moving news from the Euro-zone; therefore most price movement on EUR pegged currencies will be derived mainly from the U.S. markets.
JPY
Last week, we saw the Japanese economy slowly sliding into its natural place in the carry trades global system, which is a slow and consistent weakening process. The JPY declined against all the Majors as a decline in borrowing costs and an advance in stocks spurred risk appetite and gave a boost to the carry trade. The Japanese Yen has sold off significantly over the past week dropping 0.7% against the USD and 1.6%, to a 162.64 level, per EUR.
Yesterday, Yasuo Fukuda was elected LDP president in Japan which will formally be introduced as the new PM tomorrow in the Lower House. This was widely expected and there has been no market reaction. The bulk of Japanese data due out this week will be on Thursday, which is when we will see labor market, consumer spending, and inflation data. Most of these numbers are expected to be relatively weak and not likely to help the Japanese Yen.
Technical News
EUR/USD
The strong momentum continues as another all time high of 1.4125 was breached. The pair now consolidates around 1.4110 with a clear intention to continue the uptrend. The hourlies are very bullish, and the dailies are showing the third consecutive bearish cross. Going long might be preferable in the short run.
GBP/USD
The cable is showing a stable up trend that was initiated at 1.9900. The hourlies are showing more room to run and are pointing 2.0350 as the next destination in this specific move. A breach through that level will validate a much stronger move with a potential to reach 2.0450 and above.
USD/JPY
The pair has been trading in a wide range in the past three weeks and showed no distinct direction. The hourlies are showing moderate bearish signals, whereas the dailies are showing a strong bearish move in the making. 114.00 appears to be the next target price.
USD/CHF
After four attempts to breach through the 1.1700 the daily slow stochastic and RSI are showing stronger bullish signals. A bullish cross is forming on the 4 hour chart which indicates that a moderate correction move is quite inevitable. Going long with tight stops might be preferable today.
The Wild Card
Crude Oil
The uptrend is showing no sign of a halt as the upwards channel remains stronger than ever. The Oil is floating on the bottom barrier of the channel which provides Forex traders with a good opportunity for a long entry point. Next target price is around 81.90.
26/09/'07 - US Durable Goods
Economic News
USD
The greenback fell to a new all time low of 1.4160 against the EUR on the back of continued aggravation in the US economy. It seems that everybody is selling dollars as the outlook for consumer spending becomes gloomy with each passing day. Consumer confidence dropped to a 2 year low in the month of September when sales of existing homes fell to a 5 year low. The deterioration in the labor markets, tight credit conditions and rising energy prices were the major reason for the last market figures. The drop in confidence and home sales only reinforces the need for the Federal Reserve to continue lowering interest rates. We expect another 0.25% - 0.50% of easing by the end of the fourth Quarter followed by another 50bp before the middle of next year. The next Non-Farm payrolls report is not expected to be "flattering” either. On top of the layoffs that have already been announced in the financial sector, workers at General Motors held their first nationwide strike in 25 years in addition 73,000 workers have been displaced and 30,000 are expected to be fired. If this is not resolved soon, it will have a meaningful impact on non-farm payrolls which will naturally dovetail into further weakness for the US economy which only will weaken the USD even more than it has already. We think that in this case a recession is only a matter of time until we will see it on the statistics figures and the US economy wo't be able to avoid this unpleasant situation. Meanwhile the only piece of good news was the Richmond manufacturing index which jumped from 7 to 14 in the month of September to the highest level since April 2006. The manufacturing sector is expected to be one of the biggest beneficiaries of the dollar weakness which is why today's durable goods may not be as bad as analysts are currently predicting thanks to the weak USD which will make the US exports more attractive then ever.
EUR
Economic data out of Europe continues to get worse and if the EUR does not stop rising, the European Central Bank will be forced to take an action and to intervene in the currency. Investors should not forget that the EUR topped out in late 2004 after Trichet called the moves brutal and he may have to do so again as German business climate fell to a 19 month low in September. This is a result of deteriorating credit conditions, a strengthening currency and tight monetary policy. As an export dependent nation, the Euro-zone has a lot to lose if the EUR continues to rise as exporters are already experiencing the negative effects because their commodities are suddenly too expensive, and buyers all over the world prefer the American merchandise to the European.
The only major benefit of a strengthening currency is lower inflationary pressures. We are already seeing the initial impact with import prices falling for the first time in nearly 2.5 years. Less inflationary pressure means less pressure on the ECB to raise interest rates. If we see a material slowdown in economic data, softer inflation may actually give the central bank the flexibility it needs to begin talking about lowering interest rates. This should still be a few months away, but it is a factor that is certainly worth watching. There is not much on the Euro-zone calendar today, but Switzerland has leading indicators due for release which are expected to be weaker.
JPY
The JPY strengthened against a basket of currencies as investors were prompted to diversify away from risky carry trades. Yesterday we saw the release of Japanese Trade Balance which failed to provide any support for the Japanese Yen. The Traded Balance rose from 671.2 bln to 743.2 bln for the month of August and did not affect the market. Tomorrow will be a significant day for the JPY as Core CPI , Overall Household Spending, Industrial Production and Retail Sales are due to be released and all of them forecasted to be better then last years figures which may strengthen the JPY against the majors .
It seems that the Japanese economy is right back on track and traders need to consider the Japanese market as an attractive alternative to invest their money in.
Technical News
EUR/USD
The pair is starting to show the first bearish signals on the daily charts as a double bearish cross combined with and the RSI breach of over 80 are forming. The hourlies support the bearish notion and a correction to the 1.4060 is quite possible.
GBP/USD
The cable is trading in a wide range lately and is showing no significant clear direction. It is now in the middle of a downtrend initiated at 2.0300. The hourlies are showing bearish momentum, as the dailies support the bearish notion. Next target price might be around 2.0080.
USD/JPY
The pair has been dropping for the past week from 116.30 to 114.00 and is now consolidating around 114.90. The sentiment is mildly bearish as the negative momentum on the 4 hour chart is growing. A violent breach through the 114.00 will validate the bearish move and probably take the pair to 113.50.
USD/CHF
After several attempts to break the 1.1640 the pair is showing local bullish momentum and is now trading around 1.1690. The hourlies are showing a bullish cross on the slow stochastic and the RSI is floating around 50 which indicate that the bullish momentum is slowly growing. Next target price should be around 1.1730.
The Wild Card
Crude Oil
There has been a massive breach through the bottom area of the channel in the 4 Hour chart. Oil is now trading at 79.80 and showing the first strong bearish sentiment in over a month. This could be a great opportunity for Forex traders to go short on a very good entry point that has potential to very profitable in the long run.
01/10/'07 - Greenback Shows First Positive Sentiment, US ISM Manufacturing.
Economic News
USD
The greenback weakened all across the board on Friday and it closed off the week at another all time low against the EUR. The string of weak US economic data released throughout last week support an additional rate cut by the Fed and this is putting the dollar under pressure. On Friday, the Core PCE Price Index, which measures the rate of inflation experienced by consumers when purchasing goods and services, released inline with expectations at 0.1 %. This data provided a strong indication to the market that although the Fed cut the interest rate significantly to 4.75 % there is still room for a further rate cut because the inflationary pressures are not taking effect yet as there was only a slight increase in consumer prices. Therefore the greenback plummeted on the back of this news hitting all time lows against multiple currencies, particularly against the EUR, as the interest rate differential between the US and Europe is expected to continue to tighten while the growth differential is expected to widen to Europe's favor . The current market sentiment is very dollar bearish as the US economy is expected to expand at a much slower rate than previously forecasted and this sluggish growth forecast has prompted market analysts to believe that the Fed will be forced to cut the interest to 4.0 % in 2008 in order to stimulate growth.
Looking ahead, there will be some key US economic data releases this week kicking off today with the ISM Manufacturing Index and The ISM Manufacturing Prices. These figures may cause some volatility as the Fed is now keeping a close watch on all the indicators to determine its future monetary policy. However, this weeks' trading may be somewhat range bound as the market will begin to shift its focus to Friday's all- important Non Farm Payrolls report. If the US data releases will continue to disappoint this week, than the greenback will remain under pressure as expecations of another rate cut increase while some positive news will provide the greenback with reprieve as the EUR and GBP should be well past their peak.
EUR
The EUR continued on its record setting trend as it closed on a new all time high against the greenback on Friday. The strong EUR may cause serious repercussions for the European Union as their exporters will find it increasingly difficult to compete against the US and Chinese exporters in the global market. Nevertheless, ECB President Trichet is still maintaining a hawkish stance that the strong EUR will not have any serious negative impact on the European economy. However the ECB may have to change its tune very soon as weaker inflation and consumer confidence reports are indicating that the strong EUR is beginning to take its toll on the European economy. Also due to the spreading global credit crisis, that has left a significant imprint on Europe, the ECB is unlikely to raise its interest rate in the near future as it will not want to rock the boat. So in next weeks', ECB monetary policy meeting, Trichet is expected to have a dovish stance in regards to future policy. The EUR should be nearing the end of its bullish run as the strong currency is causing cracks to appear in the European economy and a rate hike in the near future is highly unlikely, however weak US data is preventing a reversal and driving the European currency to new heights.
JPY
Earlier today in the Asian trading session the Japanese Tankan Large Manufactures Index, which measures the business conditions of large manufacturers, released at 23 beating the expected figure of 21. Although US economic growth is slowing, the Japanese business confidence is holding steady near a two-year high as companies are increasing expenditure plans. The Tankan also indicated that large Japanese companies increased their profit and sales estimates for the current financial year. Nevertheless this was not enough to boost the JPY, and on the contrary, the Japanese currency lost ground particularly against the high yielding currencies as a rally in Asian stocks brought back investors risk appetite thereby spurring on carry trades. Therefore the direction of the JPY over the next week is still likely to remain heavily correlated to the Dow.
Technical News
EUR/USD
The pair closed at another all time high of 1.4280, on Friday and is now consolidating around 1.4250. The hourlies are starting to show bearish signals that might indicate a correction. The dailies are showing multiple bearish crosses and proving that it's only a matter of time before the pair pulls back to the 1.40-1.41 levels.
GBP/USD
There was a violent breach through the 2.0400 level on Friday. The dailies are pointing to a target of 2.0600 and are starting to be a bit bearish. It might be preferable to buy on dips as a correction on the hourly level is quite imminent.
USD/JPY
The pair has been trading a wide range for a while now, and is showing no significant direction on the daily studies. The hourlies are bullish and showing potential momentum which might take the pair back to 116.00 soon. Due to lack of a significant trend, traders should consider the pair for intraday trading, and avoid position trading.
USD/CHF
After hitting rock bottom at 1.1620, the pair is showing a slight pick-up to the 1.1660 level. The dailies are showing a very strong bullish cross, and together with an extremely oversold 4 Hour chart the bullish correction move seems inevitable. 1.1700 appears to be the next target price.
The Wild Card
Crude Oil
The massive uptrend continues as can be clearly seen on the daily chart. The slow stochastic is floating at 60, and a double doji formation indicates a further break is close. The hourlies are showing a bullish cross and together with a bullish RSI value provides a great opportunity for Forex traders to resume the strong uptrend.
03/10/'07 - ADP Nonfarm Employment Change
Economic News
USD
Since the beginning of the week the Greenback has rebounded after a sharp sell-off, which was prompted by an aggressive Federal Reserve interest rate cut last month and expectations of monetary consolidation. The moderate USD appreciation continues today as investors are seeking more clues on the health of the U.S. economy. Yesterday was also characterized by quite subdued trading as many investors sat on the sidelines before the release of the ISM Non-Manufacturing Index later in the session and the most anticipated and important jobs report this Friday. Last month's U.S Pending Home Sales indicator dropped 6.5%, but the U.S equity markets showed little reaction to yesterday's report. The EUR/USD dropped only 0.3% to 1.4173 at 7:30 a.m. in London from 1.4154 in New York yesterday. But that was no surprise at all. With Thursday's ECB and BOE monetary policy meetings as well as Friday's U.S non-farm payrolls report still due to be released, traders are expecting the news to shed more light on the current U.S economic situation. The ADP Nonfarm Employment Change is on tap today along with the ISM Non-Manufacturing Index. The Non-Manufacturing Index is expected to release at 55.0, just 0.8 points weaker then a previous month's figure. On the contrary, the expectations for the ADP Nonfarm Employment Change release are currently standing at 53K, significantly higher than last month's figure of 38K. Along with the economic data and positioning, market participants have also been taking notice ahead of the G7 meeting.
The following two day are expected to be quite volatile and full of sharp price movements. Beyond the expectations for volatility, Friday's NFP will probably be more important than ever, as the greenback future is still very much unclear. A higher than expected release could be a great beginning for a much anticipated positive sentiment that might pull the US economy out of its dark corner.
EUR
There is a new stage in the EUR - USD complex relationship as Europe urges the U.S to curb greenback depreciation. The European Chief political spokesman added his voice to the list of demanders before the next G7 meeting in Washington, to make a greater effort of stopping the USD collapse. The European Financial leaders are afraid of the impact that high EUR may have on European exports which currently seem to be a vital ingredient in the local Euro economy. The major concern is a future recession in the Euro zone economy, because exporters are pressured to cut their prices on the demand that is coming from overseas consumers that prefer US goods due to the cheep dollar. This is causing the US goods demand to grow at the expense of the European one. We must say that the threat to the Euro zone is derived from future interest rate hike expectations and the ECB is more focused onlocal inflation risks. Today, there is no significant data expected from the Euro zone, when retail sales, German Services PMI are the only releases and both are forecasted to be slightly weaker compared to last month's figure. The bottom line is that an upcoming EUR strengthening is more likely to take place due to the fact that internal economic powers will surely be more significant, than a potential USD application.
JPY
Carry trades are still the name of the game when it comes to Japan and the JPY is going through a neutral period as the price action is quite small in the USD/JPY and the trading range appears to be quite tight. Yesterday, the JPY saw little change against the greenback as it drifted from the 115.30 level to 115.60. It would be quite clear that the calm behavior we have seen from the JPY will not continue, as the packed US calendar will draw the attention of most traders. Today's ADP, the ISM Non Manufacturing, and the Nonfarm Payrolls will no doubt take the USD/JPY out of its latest dead calm.
Technical News
EUR/USD
The pair is consolidating around 1.4150 after the drop from yesterday's 1.4280 and is still seeking direction on the 15 minutes chart. The 4 Hour chart shows that there is still more room for the downtrend and the dailies are sending mixed signals with a slight bearish preference. Testing the 1.4100 level will be a key event for the pair.
GBP/USD
The cable continues to have very choppy trading sessions with no specific clear direction. The volatility range is around 80 pips in width, and the movement is revolved around 2.0400. Both hourlies and dailies are floating on neutral territory, which means that traders must look for the entry point in the 15 minutes chart and try to take short term positions.
USD/JPY
The trading range for the pair is getting tighter every day, and it appears to be looking for the break quite soon. The signals are showing that a break through the 116.00 level will validate the move as bullish, and will probably be strong. A breach through the 115.00 level will still keep the pair in a ranging mode.
USD/CHF
The pair advanced 120 pips in the last 48 hours, and is showing that the momentum is still there although diminishing on the 4 Hour charts. The daily chart is showing that a test of the 1.1800 level appears to be very possible, and a breach will send the pair up further to 1.1830, which is a key resistance and a 23.6% Fibonacci level of the 1.2460/1.1630 move.
The Wild Card
Crude Oil
The breach through the bottom barrier of the channel has created a bearish momentum that seems to have a lot of steam in it. The 1 Hour chart is showing strong consolidation in the 80.20 level, which mean that the further break down could be close. This could be a great opportunity for Forex traders to get into the downtrend on a very good entry point, as it not completed yet.
08/10/'07 - The Greenback Sailing Quiet Waters, Columbus Day Halts US Markets
Economic News
USD
Last week's much anticipated U.S Jobs Report didn't bring much relief for the greenback. The USD rose sharply on last Friday, after the Nonfarm Payrolls data showed September U.S. jobs growth of 110K. However, the initially strong rally of better-than-forecasted NFP figures turned into a similarly sharp sell-off for the USD. Since then, the greenback has stabilized and has been trading around the 1.41 level against the EUR. Last Friday's Average Hourly Earnings index released at 0.4% beating expectations of 0.3%. In fact, the latest string of the better-then-expected U.S data is reducing the probability of further possible Federal Reserve interest rate cuts. Now speculators forecast that the Fed will only cut rates by 25 basis points throughout December.
Also on Friday, the Canadian Unemployment Rate released at the lowest rate in 33 years. The Canadian Employment Change index released at 51.1K beating expectations of 16.5K. As a result, the USD has tumbled to a record low against the CAD, falling 1.5% to the 0.9816 level, the biggest drop in 3 years.
Today the U.S financial markets will be closed due to Columbus Day. Low liquidity is expected during the New York session and the USD should continue to range trade at its low levels. During the rest of the week, there is no real market moving news expected from the U.S markets except on Friday, where the US Retail Sales along with the Consumer's Sentiment are due to be released. Looking forward this month, the focus in the market has shifted to an upcoming meeting of finance ministers and central bankers from the Group of Seven rich nations and a Fed policy meeting at the end of the month. As a whole no ground breaking movements are expected to happen this week.
EUR
Last Friday's relatively strong U.S Nonfarm Payrolls data sent the EUR substantively lower against the USD, hitting fresh multi-week low of $1.4032. It didn't take much time for the pair to snap back to earlier levels, indicating the resilience of the EUR as it remained robust throughout the most important news releases of the month. Today, due to the fact the US and Japanese markets are closed, most of the movement will probably emanate from the small amount of news that is expected from Europe. The European morning will start with ECB President Trichet's speech at the breakfast meeting organized by the European Policy Centre, in Brussels. Trichet will mostly discuss future considerations of an interest rate adjustment.
The following releases are expected to come out of the UK today, kicking off with the UK PPI Output and Input figures. The PPI Input is expected to be released at 1.4% which is much higher than last month's -0.5%. The UK PPI Output is also expected to come a bit higher than last month on 0.2% and a previous figure of 0.1%. The second release will be the UK Industrial Production which is expected to rise from a negative territory of -0.1% to positive levels of 0.3%. Other than that it appears that today will be relatively quiet and the entire trading day is expected to be characterized by low liquidity all across the board.
JPY
Last week, the JPY was the only major currency to decline against the USD almost on a daily basis. On Friday the USD rose 0.3%, to a fresh record high of 116.85 vs. the JPY, making it the biggest weekly loss against the USD in more than a year. The Japanese currency has also fallen for the 4th straight week vs. the EUR, losing 0.9% to 165.40. Since the end of the previous week, the JPY continued to lose ground as investors increased Carry Trades under the notion that Asian equities will follow U.S. stocks higher. Currently the JPY is trading around the 117.00 level against the USD and 165.50 against the EUR. Today will be quite a thin forex trading session for the JPY as there is no news expected from Japanese markets. Later this week, the JPY Interest Rate Announcement will be closely watched, although no change in rate is expected. Therefore, most price movement on the JPY pegged currencies will be derived mainly from European and American markets.
Technical News
EUR/USD
The pair is in stable consolidation around 1.4120 and as the Bollinger bands are getting tighter the next move is getting closer. There is a bearish cross forming on the 4 Hour chart, indicating that the next break will probably be bearish. The daily charts are quite neutral, as traders should look for entry point on the hourly level.
GBP/USD
The cable is in the midst of a moderate uptrend which seems to be in a halt. The hourly charts are giving no distinct signals, and the dailies are floating on neutral ground. It would be preferable to stay out for the moment and wait for a clear signal on the 4 Hour chart be fore placing an order.
USD/JPY
There is a solid channel forming on the 4 Hour chart as the pair now floats on the bottom barrier. The slow stochastic and RSI are showing that the bullish momentum is still strong, and that the next target price might be 117.80.
USD/CHF
The pair is still in the middle of the correction move initiated in 1.1620 and it appears to continue with full steam. The daily slow stochastic is signaling that there is still more room to run. The hourlies are supporting the bullish notion as the RSI is floating around the 50 area, which means that the trend is nowhere near over. The next target price might be 1.1840.
The Wild Card
Crude Oil
There has been a bearish breach through the bottom barrier of the upwards channel. The breach indicates that the correction move will be equal to the channel's width. The oil has completed the correction move, and the daily study show that the main uptrend will probably resume shortly. This is a great opportunity for Forex traders to jump back onto the uptrend at a relatively low price.
09/10/'07 - Greenback Gains in Strength Once More
Economic News
USD
A delayed reaction to Friday's non-farm payrolls report as well as the market's expectation for today's FOMC minutes, has taken the US dollar higher against every major currency today. Today's FOMC minutes will conclude the September 18th monetary policy meeting, where the U.S central bank lowered both the Fed funds and discount rate by 0.5% each. The credit market has relatively stabilized since the rate cut and there have been no new outbursts in the financial sector. After the last appreciation of the USD, the FED is not likely to cut rates again. We need to remember that weak USD fuels growth in the U.S economy. In fact, recent economic data including non-farm payrolls could give the Fed the luxury of waiting until December before lowering interest rates again. Towards the end of the week, our focus will turn to trade, inflation and consumer spending. The weakness of the US dollar should help to narrow the trade deficit while boosting inflation. Consumer spending is the biggest potential market mover this week (it is not due out until Friday). The strength of payrolls in September and the upward revision to retail sales in August suggest that retail sales could be stronger than the market is currently expecting. Overall, it seems to be shaping up to be a dollar positive week.
EUR
The Euro is slipping back towards 1.40 on the back of a smaller than expected rise in German factory orders as well as mixed commentary from ECB and IMF officials. Despite the German Economics Minister's comment that he is not losing sleep over the current level of the EUR this morning, recent economic data indicates that as much as some officials may try to deny it, the strength of the currency is indeed having an impact on the economy. French calls for central bank intervention to cut the costs borne by European exports failed to sway Germany's finance minister, Peer Steinbrück, who insisted publicly Monday that he loved "a strong euro." But before a meeting of finance ministers from the 13 countries that use the EUR, Pedro Solbes of Spain underlined concerns about recent volatility that are shared across much of southern Europe. After saying that exchange rates should reflect economic fundamentals, he insisted that efforts to correct the EUR/USD relationship should "not only be made by the Europeans, but by all the parties concerned," according to news agencies. Buffeted by the impact of the subprime mortgage crisis in the United States and facing a projected economic slowdown, concern is growing that Europe is paying the price for problems created elsewhere especially in the U.S. EU ministers are expected to agree today to move ahead next year with a study that could lead to requirements for more disclosure of debt-default risks, as well as revisions on how assets valued. The proposed changes were suggested at an informal meeting of finance ministers in Porto, Portugal, last month following the losses in the U.S. subprime mortgage market. Nevertheless, pressure is growing and the employers' federation BusinessEurope last week complained about the effect on exporters of the euro's high rate against the yen. It added that by crossing $1.40, the euro exchange rate had reached a "pain threshold" for European companies which are seeking a way to minimize their losses . Even in Germany, where a strong currency is seen as a sign of political and economic success, the economics minister, Michael Glos, expressed a sharply different view to that of Steinbrück. "The weaker USD is making us very worried," he said Monday after a speech before the International Iron & Steel Institute in Berlin, "especially if it grows weaker still."
JPY
The Japanese market was closed for a public holiday in Japan yesterday, so there was no economic data released. Today we have the Eco Watchers index but it is not expected to be market mover. The big event this week is the BoE interest rate decision, yet even that may not cause any significant movements in the JPY since there is only a 3 percent change for a quarter point rate hike. Should the stock market resume its rise, we could see fresh gains in carry trades. The dollar could extend its gains against the JPY given the bullishness of last week's non-farm payrolls release when carry trades seemed like an attractive long term investment.
Technical News
EUR/USD
On the 4 Hour chart we notice that the bearish trend is running ahead. The volatility increased and the EUR/USD is in a consolidation after it has broken the 1.4100 resistance level. The price should continue to move downwards in a range of 1.4050 to 1.4000. As it seems, the bearish pressure will continue to gather momentum as well today.
GBP/USD
On the 4 Hour chart, a bullish rising wedge is forming which may imply a continuation of an additional bullish move. It's recommended to time the entrance to the market with short term charts. 2.0300 seem like a strong entry point. At the moment GBP/USD is traded around the 2.0330 /2.0340 range. The volatility is quite low and we should expect the bullish pressure to continue. 2.0400 is now a strong resistance
USD/JPY
The USD/JPY broke the 117.60 resistance and the downtrend is supported by 1 Hour exponential moving averages. The volatility is low and the Bollinger bands are tightened. We should expect to see the bearish configuration continue. The 4 Hour Elliott pattern implies that the USD/JPY will continue to gather momentum. The target price might be 118.00
USD/CHF
Bollinger bands are widened on the daily chart suggesting increased volatility. The daily chart is bearish while the hourlies are bullish. So the preferred strategy may be to go short on 4 hour highs.
The Wild Card
Crude Oil
The daily and the hourly charts both indicate a strong bearish trend. The slow stochastic is crossing with a positive slope. However the momentum and RSI are both indicating under bought levels, so we may see a reversal in the near future. For today the crude oil should continue on its steady slide down. Therefore, Forex traders may find a short position on crude oil very attractive today since there will be a clear opportunity for profit taking.
10/10/'07 - Is the greenback rally over already?
Economic News
USD
Yesterday there was not any significant US economic data released apart from the FOMC Meeting Minutes and on the back of this announcement the USD remained relatively firm against most of the major currencies but weakened slightly against the EUR. The FOMC Meeting Minutes did not expose much about what the Fed is planning in the mid-term regarding its policy; however it pointed out that it would cut both the discount and Fed Funds rate to prevent some of the unpleasant effects on the economy that might take place. The Fed rate cut is now expected to be at least 0.5 % and if it is put into effect it could once again shake the greenback. As it stands the U.S. subprime housing crisis is absolutely not over yet and it will not come to an end until 2009 with a total of 150 billion dollars. Although the significant weakness in the emerging markets is due to that crisis the overall global growth remains strong and stable. While the US economy still suffers from the last housing problem, credit difficulty and subprime mortgage complexity, the up coming positive effect is that the U.S. trade deficit is getting smaller as stronger overseas development and a weaker dollar makes U.S. exports more competitive on the global market. Despite that the US dollar might resume its downtrend against the 13 nation currency, due to the fact that the European economy is currently viewed as more diversified and less exposed to the crisis. Towards the end of the month the Fed will make its key interest rate decision which will be closely followed by traders as a further monetary easing will place the greenback under pressure.
EUR
Yesterday, during a conference meeting the President of the European Central Bank, Trichet, implied that the next main issue which will be discussed at the G7 meeting is that of the exchange rates. As it stands at the moment this main issue will mainly concern the Yuan, US dollar and Japanese Yen. Trichet did not suggest that the EUR was one of the problems and this view continues to be supported by German officials.
The most up-to-date observations came from the part of Germany's Finance Minister who unambiguously pointed out that he is in favor of keeping a strong EUR. The impact of the currency's rise persists to be more noticeable in German data than French data, even though the French have been more attentive than the Germans in regards to the current level of the EUR. During the same month, the French deficit actually improved. EUR bears should not expect to get any support from the ECB in the short term.
JPY
Tomorrow at 15:30 GMT the policy board of the Bank of Japan will declare its assessment at the ending of the two-day meeting regarding the issue of Japans key Interest Rate. As it stands, the Governor of the Bank of Japan, Toshihiko Fukui, will most likely avoid raising the interest rate and will leave it on hold at 0.5 percent because deflation remains a constant battle for the Japanese economy. The BoJ's last rate increase occurred in February and as a result of the U.S. housing problem and its negative effect on economic growth the BOJ would like to avoid a situation in which it will raise rates while other central banks are cutting them or keeping them on hold. The market is currently very volatile and it calls for apprehensive monitoring, so the BOJ has to raise its interest rate slowly but surely to avoid incompetent future investment and sustain growth over the long term. However the major global central banks expect the BOJ to possibly look to raise its key interest rates by December, which will provide the fledgling JPY with some support. In the last week the JPY has been on steady downtrend and this is likely to continue today as there are no significant news releases to provide the JPY with some reprieve.
Technical News
EUR/USD
On the 4 Hour chart we see that the bearish trend is still running ahead. There is more volatility on the EUR/USD and there is a consolidation after the pair has broken the 1.4100 resistance level. The price might continue to move downwards a little bit and do a correction in a range of 1.4050 to 1.4000. As it seems, the bearish pressure will continue to gather momentum as well today.
GBP/USD
The GBP/USD broke the 2.0400 resistance level and uptrend is supported by the positive momentum in the 4 Hour chart. The volatility in the GBP/USD is low and the Bollinger bands are tightened. We should expect to see a bullish trend today.
USD/JPY
We can notice negative momentum on the 4 Hour chart, and it seems the pair might continue with the bearish trend. There is a resistance entry level at 117.50, and in case the pair breaks this level it is a very strong buy signal.
USD/CHF
There is high volatility in the USD/CHF, and we can see it by the wide Bollinger bands in the 4 Hour chart. We also see that this Stochastic Slow is crossing deep in oversold territory indicating a strong possibility of a reversal.
The Wild Card
Gold
Gold broke the 740.20 support level, and it is in an uptrend supported by the 1H exponential moving averages. The volatility is high, and the Bollinger bands are wide. Today, we expect to see a bullish configuration. The target is 741.55. This provides Forex traders with a great opportunity to go long on a very healthy uptrend.