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26/11/'07 - Greenback Looks To Rebound After Strong Black Friday
Economic News
USD
High Liquidity is the name of the game after the Thanksgiving holiday, as traders are back in the market after low trading volumes, and high price movement. Last week we saw the EUR/USD continue to break all-time highs only to reverse sharply on Friday, leaving the EUR/USD floating at a distance of 100 pips below those highs. Risk appetite returned to the Asian markets after better-than-expected Black Friday sales suggested that U.S. consumer spending would remain solid towards the end of the year. ShopperTrak RCT Corp, who tracked sales at about 50,000 U.S. retail outlets, reported that combined sales on Friday and Saturday rose 7.2% on a y/y basis, while total sales on Black Friday rose by 8.3% y/y. We need to understand that during this period, for the Europeans, America is one big discount bin, thanks to the current weak dollar that slid this week to another record low against the EUR. As a result, tourists are spending thousands to travel to the United States to snag blockbuster bargains on everything from iPods to designer clothes and handbags. This situation is injecting funds into the US economy with no manipulation activity which gives hope to the falling greenback. The aforementioned foreign economics' sources noted that shopping behavior is one of the majors' remedies of the US economy to fight and deal with the credit crunch which was caused by the subprime mortgages crisis. It still appears that the worst is still ahead of us and the USD may weaken even more, which will make the US exporters delightful and the importers more worried especially if they are paying with a foreign currency.
EUR
The EUR posted new lifetime highs against the USD in holiday thinned trade on Friday, pushing beyond 1.4900 to post an intraday high of 1.4968 as the USD index made a sustained break of 75.00. The Euro reversed in overnight trade however, with investors pushing it back below 1.4900 The EUR did hit record highs against the USD, but was unable to sustain such levels as ECB Governing Council member Ordonez said that he saw a greater-than-expected economic slowdown in the Euro zone and that there was not enough data to dispel uncertainty about the effects of the financial market turmoil. Overall the EUR/USD traded with a low of 1.4775 and a high of 1.4930 before closing the day at 1.4830. ECB President Trichet and various ECB officials are scheduled to speak today and we expect that they will continue to speak about the potential economic slowdown which could threaten the EUR economy and may cause a reduction in the EUR currency against the majors today. Euroland PMIs returned with mixed results for the month of November. The advance PMI results for November showed a partial rebound in manufacturing but a renewed decline in services, which combined to pull the composite PMI down to its lowest in over two years. This is consistent with the less up-beat message from other business surveys, suggesting that Euro strength, high oil prices, a shaky banking sector and concerns about the US economy are all taking their toll on European business confidence.
UK GDP growth was revised down a tick from 0.8% to 0.7%, as we expected, although 0.7% growth is still considered to be above the long term trend growth rate (2.5% yr). Also, the details in the report showed private consumption spending unexpectedly accelerating to 1.0% in Q3, its fastest pace for the year so far. The report does not unequivocally support for the case for a near-term rate cut from the Bank of England. Bank mortgage approvals fell to just 44.1k in October, which according to the British Bankers' Association was the lowest on record. Full industry figures will be published by the BoE next week. Generally, it seems that the major currencies (the EUR especially) versus the USD are still seeking the equilibration point that local economies would be able to deal with. To avoid the recession which is being threatened in those economies according to economic status we can clearly determine that the US economy is gloomier compared to the Euro zone which only strengthens the assumption that we are ahead of another EUR strengthening before the greenback will recover.
JPY
The JPY enjoyed a market holiday on Friday causing thin trading conditions during the Asian session. The JPY initially weakened as risk appetite returned to Asian markets. The USD/JPY was choppy as it found buyers early after Asian equities opened strong. Sellers pushed the JPY crosses lower after reports that China would invest some of its foreign exchange reserves in Japanese stocks. The news that China would invest in Japan has some interesting implications which may be reflected on today's trading session, as a JPY strengthening is more likely to take place. Recently, global equities have been positively correlated to the JPY crosses because of risk reduction. Leveraged portfolios that are both long equities and JPY crosses, must sell if either goes down to generate liquidity. However, if China invests in Japan, this could cause a negative correlation between equities and the JPY crosses as China must buy JPY in order to buy Japanese stocks. Japan's benchmark Nikkei stock index climbed more than 2.0% on the news. A Chinese official told the Nikkei business daily that it would begin investing in Japanese shares 'soon' without giving a firm time frame. The China Business daily reported that China's sovereign wealth fund (CIC) is to join Baosteel, Shougang Group and Angang Group to make a bid for Rio Tinto, adding that the group's offer could be valued at around $200B. Rio Tinto's share price spiked up about 8% on the news, and managed to hang on to gains after thw CIC denied the press speculation. China's Steel Association added that it had not heard of plans to bid for Rio Tinto. Most analysts agree that regulatory issues make a CIC bid for Rio Tinto quite unlikely. We expect to see the JPY strengthen against the majors and maintain its positive momentum against the USD.
Technical News
EUR/USD
After touching the unbelievable all time high of 1.4950 on Friday, the pair is calming down a bit, and is correcting to the 1.4800 level. The bearish momentum on the 4 hour chart is expected to continue today, with a high possibility of an additional bullish break this week. The bearish consolidation will accumulate the momentum.
GBP/USD
The cable is in the middle of a corrective move after bottoming out at 2.0350. It is forming a bullish channel on the daily chart. The momentum is moderate, and a breach through the 2.0700 will validate the next move to 2.0800.
USD/JPY
The intensive bearish avalanche continues with full strength, and it appears that nothing is likely to stop it in the short run. The hourlies are fully supportive of the bearish move, and a breach through the 108.20 will unleash an additional drop probably into the 107.50 levels. Going short appears to be quite preferable.
USD/CHF
The pair established a strong support at the 1.0900 level, after failing to break through that level on Friday. There seems to be a local correction, and we might see the 1.1150 level again before the pair will resume the bearish trend. Selling on high key levels might be preferable today.
The Wild Card
Crude Oil
The 98.00 barrier was not breached overnight, and Crude Oil is making another move up. The momentum on the 4 hour chart is high and the daily charts are starting to follow. This could be a great entry point for Forex traders to enter the bullish move on great price.
27/11/'07 - US National Housing Index & Consumer Confidence On Tap
Economic News
USD
U.S. stock prices declined yesterday as investors worried that rising mortgage defaults and credit market losses would have a drag on the economy. Analysts estimate that the biggest slump in real estate since 1991, turmoil in financial markets, and higher energy prices will probably slow the U.S. economy's growth rate to 1.5% during the 4th quarter of this year.
There is still a lot of fear because of the fact that this credit contagion is continuing to widen out, further supporting speculations that more Federal Reserve interest rate cuts are imminent. Futures on the Chicago Board of Trade show traders began speculating that the Fed will lower its target rate on Dec. 11. Traders estimate an 80% chance that rates will be cut to 4.25% at that meeting.
Meanwhile, the USD remained relatively unchanged following an uneventful return from the US Thanksgiving holiday weekend. The lack of economic data gave little directional bias to start the week's currency trading, but a busy US calendar certainly promises a pickup in volatility in the week ahead. Trading in coming days could well be driven by the housing data upon which the whole USD argument rests at the moment. If housing continues to deteriorate, it will put relentless pressure on the Fed to cut rates in December, as the EUR/USD is expected to hit the 1.500 barrier. As for today, traders are expecting the National Home Price Index to be released at 14:00 GMT. The forecast for the index is a slight decrease from -4.4% to -5.0%. Later today, the US Consumer Confidence data due to be released and is also expected to show relatively weak figures.
EUR
Worries about the U.S. economy and expectations for repeated Federal Reserve rate cuts are still preventing the U.S. dollar from accelerating vs. the EUR. Yesterday, in late afternoon New York trading, the EUR was up 0.2% at $1.4858, just within sight of the all-time high of $1.4966 set on Friday. We still suggest that from a fundamental perspective, the EUR/USD exchange rate is likely to breach the key psychological level of 1.50, which may even be this week. This, of cause, will depend on upcoming fundamental data, mainly from the U.S. markets. Once the EUR makes a sustained break through $1.50, the Forex market should be wetting its appetite for trade up to $1.55/EUR. European officials have increasingly expressed concern about the Euro's rapid rise and the potential drag on exporters. ECB Governing Council member Nout Wellink said yesterday that although the Euro's rise against the USD was not of "immediate concern", any further ascent would be "fairly worrying."
Meanwhile, the focus has been on the re-emergence of money market strains, with the ECB announcing measures to mitigate liquidity pressures. Yesterday, the European Central Bank sought to calm stressed money markets by promising banks extra money to help them cope with a possible year-end cash squeeze. There is not much on the Euro-zone calendar today, but Germany has IFO Business Climate Index due for release which is expected to be slightly weaker than its previous number.
JPY
Japanese stocks accelerated their advance yesterday, boosting hopes for new demand for the under performing market. The JPY strengthened against a basket of currencies as investors were prompted to diversify away from risky carry trades. The USD extended losses, falling to a fresh 2 1/2 year low against the JPY on Monday, as U.S. stock prices declined on credit market worries and expectations for repeated Federal Reserve rate cuts.
Looking ahead to today there is no major news expected to come from Japan apart from the Retail Sales, which are expected to be slightly better then the previous month's figure. The direction of the JPY may also depend on the performance of equity markets and their impact on carry trades. Key U.S. and European data release may cause some movement in the Japanese currency. Holding any existing long positions would be wise, as any fluctuation should be beneficial. The bulk of Japanese data is due out on Thursday, this is when we will see the Manufacturing PMI, Core CPI and the Core Tokyo CPI. Most of these numbers are expected to be relatively strong and likely to help the Japanese Yen.
Technical News
EUR/USD
A 1,2,3 wave structure is being established on the 4 Hour chart which suggests that this pair will test the 1.4900 Fibonacci level. If this level will breach, the next target price is 1.4940, if not this pair is expected to test the 1.4750 resistance level.
GBP/USD
There is a mild bearish channel on the 4 Hour chart that may imply an upcoming bullish trend; however this trend might take place later this week when the first target price is located at 2.0600. In case of a breakout, the next barrier will be located at 2.0720.
USD/JPY
The daily chart is showing a continuing bearish trend and we may see this pair consolidate at 107.20 within the next 2 days. Today, a bearish channel is establishing on the 4 hour chart which indicates the continuation of the current bearish trend and could break the 107.80 level. Going short seems like the preferable strategy.
USD/CHF
The pair established a strong support at the 1.0900 level, after failing to break through that level on Friday. There seems to be a local correction, and we might see the 1.1150 level again before the pair will resume the bearish trend. Selling on high key levels might be preferable today.
The Wild Card
Crude Oil
An upcoming bullish trend is expected as a reversal took place after it failed to break the 96.80 support level. There is a falling wedge structure on the 4 H chart which only strengthens the assumption that a bullish trend will take place. Forex traders have a good entry point to get into the the market and to leverage their profits.
28/11/'07 - Core Durable Goods Orders, Home Sales May Define Greenback Direction
Economic News
USD
The greenback strengthened all across the board yesterday on the back of news that a major Abu Dhabi investment company bought a significant portion of Citigroup. Citigroup, which is a major financial institution in the U.S, was hit very hard by the recent subprime crisis and credit crunch. So this investment by the Abu Dhabi group sent out a strong signal to the market that the financial sector may be at the beginning of a recovery process and therefore this created positive sentiment for the greenback. The major U.S fianacial institutions have been exercising damage control ever since the subprime crisis began and so the fact that investors are showing renewed faith for these institutions is a very positive sign for the U.S financial sector. This news was the main driver of the greenback yesterday and although there was other negative data released it had little impact on the market. The U.S Consumer Confidence released below the expected figure of 91.5 at 87.3, but it nevertheless was unable to offset the positive momentum surrounding the greenback following the Citigroup news.
Looking ahead, today there is a string of significant data releases that investors should watch out for, kicking off with the Durable Goods figures. Both the headline and the core figures are forecasted to release stronger than the previous month and this will be a positive sign for the U.S manufacturing sector. This will be followed by the Existing Home Sales figure which will give the market another indication of whether the rate cut by the Fed is providing the struggling housing sector with some relief. Investors will also focus today on the Fed's Beige Book report for hints with regards to future monetary. If today's news suprises on the upside then the greenback may be able to hold off another downward slide, however it will take a lot to remove the grey cloud surrounding the greenback, so the overall trend is still bearish. Also if the Beige Book highlights a U.S economic slowdown then the greenback will face another steep decline.
EUR
After reaching a succession of record highs against the greenback, the EUR lost a small portion of its gains yesterday. A correction may be favorable to the European economy, as the ECB has made it clear that it views the EUR's sharp gains as undesirable. However in the meantime the bullish EUR has not created any noticeable negative impacts on the EU economy and many analysts believe that as soon as the EUR begins to dampen exports that the ECB will intervene in the currency markets. Also the German economy is one of the key players in the Eurozone and it is heavily reliant on exports but despite the strong EUR, German economic data is still positive. This fact was further reiterated yesterday by the release of the German Ifo Business Expectations and Climate Indexes, which both surprised on the upside. So in the meantime the ECB is sitting tight and observing whether the U.S economy will be able to avoid a recession. Therefore we believe that the ECB will likely keep interest rates unchanged in the near future, even though inflation risks are still on the upside as they would like to avoid strengthening the currency even further.
The only news to be released from the Eurozone today will be the German Consumer Confidence, which will give us another indication of how the German economy is fairing despite the strong EUR and we are also expecting the release of the M3 Money Supply. These figures should not have any impact on the market and the EUR movement today is likely to be dollar centric. Although the EUR slipped yesterday, investors are still favoring the European currency, so it will head back up after the correction loses steam.
JPY
The JPY fell noticeably against the greenback yesterday on the back of the Citigroup news. However since then the JPY has managed to rebound on speculation that later on today the Beige Book will highlight a U.S economic slowdown. The JPY has been on a very strong bullish path pretty much ever since the credit crisis spread globally, as investors avoided the so-called carry trade strategy and became more-and-more risk averse. However the bullish JPY trend may reverse as soon as the risk appetite in the market returns as the BoJ is unlikely to raise the interest rate in the near future as a result of deflation concerns. Also the correlation between the DJIA and the JPY is still very visible as carry trades resumed on the back of yesterday's sharp rally but there is still a strong possibility of renewed losses. The JPY is unlikely to be affected by this week's Japanese economic data but rather its direction will more likely depend on the state of the risk sentiment in the market.
Technical News
EUR/USD
The pair still floats within the range of 1.4800.4900 while the current move is up. The momentum is still bullish as clearly displayed by the Daily chart. The hourlies are showing RSI at the 50 level which indicates that we might see another upwards move quite shortly.
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 downwards channel, and is now testing the top barrier. The oscillators show that a positive breach is quite unlikely, and the daily chart is showing bearish momentum. Going short still might be a preferable strategy.
USD/CHF
On the 15 Min chart we see an ascending triangle which indicates on an upcoming positive breakout which will strengthen the greenback. On the 4 Hour chart the Slow Stochastic is on its way to the overbought territory and an upcoming reversal is expected. Going short from 1.1120 seems preferable today.
The Wild Card
Crude Oil
On the daily chart we can see the Slow Stochastic having a negative slope and still having place headed to oversold territory, however the 4 Hour chart indicates on an upcoming reversal when Slow stochastic was crossed at 6 which is clearly oversold as RSI and momentum having positive slope which support the upcoming bullish trend. Today, Forex forex traders may seek for enticing entry point for long position which seems to be preferable.
29/11/'07 - Will GDP Data Trigger Another Bearish Greenback Wave?
Economic News
USD
As the month of November comes to end, talks of the Federal Reserve cutting interest rates have done nothing but gain steam. The rumors have has so much weight that the Dow Jones and most other Wall Street outlets saw gains yesterday just from the notion that such cuts might eventually come. Yesterday the Fed's second in command, Vice Chairman Donald Kohn noted that ''flexible and pragmatic policy making'' was key in turning around the US economy and that the Fed would "act as needed" in cutting interest rates, if such measures were needed.
The release of the Beige Book yesterday further solidified the expectations of Government intervention in the economic "crisis" taking place now. The Beige Book identified that there was in fact growth in US districts, however tedious it might have been. The report touched on how US consumers have reacted to economic uncertainty with "relatively soft retail spending" in the beginning of holiday shopping. The Beige Book goes on to note how the ongoing credit crisis has created "barriers for some buyers" in the real estate market as available homes are on the rise. Manufacturing and products and services from food and energy inputs rose significantly according to the Fed report.
The events from yesterday have continued to contribute to the glairing uncertainty in the US, even so much as to produce completely different opinions from members of the same governing body. Kohn's remarks yesterday contradicted those of member from his own board. Such indecisiveness within the Fed could be disastrous as most of the positive movement that the greenback is seeing, is coming from expectations of Federal intervention. As we look ahead to today, the US news schedule is once again full of significant information. Annual GDP and GDP deflators, along with unemployment claims will precede the 15:00 GMT release of the New Home Sales report. Rounding out the day we will here words from Fed Governor Mishkin, who many hope will reiterate Donald Kohn's call for swift and necessary intervention.
With a full calendar aside from US events, it will be intriguing to see what trends the greenback develops over the course of the day.
EUR
The EUR continues to impress, even on days where it sees sharp drops against its major counterparts. Yesterday, while falling to 1.4712 against the greenback, the 13 nation currency bounced back to once again flirt with 1.50 levels.
The Euro zone economy has encountered a bit more stress in these times, as prices for goods and services have skyrocketed compared to the dollar and now European businesses are beginning to feel the effects. With immensely clean track records and better value due to the currency crisis, US companies are simply becoming more affordable. Today should prove to be a significant one, as amidst the very tight economic calendar, EU news will have a very large role in that it will be missing from the equation. Outside of the release of German unemployment rate and several related topics concerning the UK, the news will be dominated by US, UK and Japanese news.
It is safe to assume that even amongst losses in the EUR against it counterparts, the EUR will continue to make gains as was proven yesterday.
JPY
The JPY traded yesterday, at its lowest rates in a week, mostly due to the rise in the US stock market. Investors, brimming with positivity from early Dow Jones gains, began borrowing the Japanese currency to secure high-yielding assets. Carry Trades were the name of the game, as the Aussie dollar and other "carry trade friendly" currencies flourished. In what has been described by some as "turbulent" markets, the JPY has been the focal point of much investor speculation. With its dependence toward foreign news being the main accelerator of movement within the currency, the JPY has found itself in the midst of major currency action.
Today's calendar began last night for Japan, as the release of Industrial production numbers came back higher than initially expected. With Manufacturing PMI, Core CPI numbers and Core Tokyo CPI numbers today could prove to be an important one for the land of the rising sun. It will be interesting to observe the status of the JPY before it gets to the 23:30 release of most of our news. It seems that the negative greenback sentiment may be on the brink of reversing, so this may finally halt the bullish JPY momentum.
Technical News
EUR/USD
The pair is still floating in the range of 1.4800.4900 while the current move is up. On the 4 hour chart, the Slow stochastic and RSI have a positive slope suggesting that the uptrend has much room left to go. The upcoming bullish trend is expected to test the 1.4900 level, and in case of a breach we expect this pair to test the 1.4950 resistance level. It appears that going long might be preferable today.
GBP/USD
The pair is floating in a relatively wide range for several days with a slight bullish tendency, as can be seen on the 4 Hour chart. No significant break through the 2.0400/2.0900 range has occurred, and the hourlies continue to deliver mixed signals. The daily chart is giving a moderately bullish sentiment with a bit more room to run. The 2.0800 is a key level, that if breach will validate the next bullish move.
USD/JPY
The downtrend the pair is going through seems to be very strong and the daily chart validates that there is still room to run. The daily chart is confirming that the momentum down is still quite strong and that 109.00 is a valid next target. On the hourlies studies we see that there is a local correction that might end at the 110.70 peak. Selling on highs might be preferable today.
USD/CHF
The volatility has decreased and the USD\CHF is in a bearish configuration on the daily studies. After a touch at the 1.0900 zone, the pair corrected to the 1.1135 level. The bullish momentum is fading away, and looks like a matter of short time before the bearish trend will resume.
The Wild Card
Crude Oil
The strong bullish channel has been breached through the bottom barrier which started a strong bearish correction into the 92.00 zone. Oscillators show that the bearish momentum created by that breach is diminishing. This creates a great long entry point for Forex traders, as the journey to the $100 will probably be back on track soon.
03/12/'07 - Reversal on the way?!
Economic News
USD
As we enter the month of December, it is safe to be said that the erratic month of November could get a run for its money. December is usually laced with all kinds of unique and volatile economic news, which drives global economies mad. The closing out of Q4, massive retailer expectations for holiday shopping, the ever so unpredictable US consumer base and to top it all off in 2007, the expected interest rate cuts by the Federal Reserve.
As the month of November closed on Friday, the greenback saw recognizable gains against its major currency counterparts as the Dow Jones shot up nearly 60 points at week end. Figures released from several US consumer reports last week showed that consumer and construction spending actually slowed during October, which would normally lead to somewhat of a letdown in dollar strength. The greenback now faces all new adversity as the December 11th date, expected by most to be the time of further slicing of interest rates looms heavily over the global market. Towards the end of last week Federal Reserve Chairman Ben Bernanke, came under some scrutiny regarding the differing opinions of his own Board of Governors regarding Government intervention in the latest round of uncertainty in the US economy. The discussion now has become not only if interest rates should be cut, but by how much. While most believe we will see another quarter point drop (much like that last month) there is now serious speculation of a half point drop. It will be a very strenuous waiting period for investors as they prepare for years end.
The world economic news calendar is jam packed this week, with important data from nearly every region and currency home. In the US, news regarding Consumer Sentiment, Average Hourly Earnings and a basket of Nonfarm data, as well as Unemployment figures are to be released. This will be preceded by today's release of the ISM Manufacturing Index and Price figures, coupled with remarks about sub prime mortgages from Boston's Fed President Eric Rosengren. It will be the first speech by an FOMC member in December, thus setting the tone for any new monetary policy on tap.
EUR
November certainly ended on different terms than the rest of the month for the Euro. After seeing strong rallies throughout last month, the 13 nation currency found itself reeling against the dollar on Friday. European economists received quite a wakeup call, as the greenback proved that no matter how maligned the status of its economic outlook is, it is still the primary news maker in the global economy. Despite the strength of the Euro lately, the positive move in the Dow on Friday pushed it down under the 1.47 level to end the trading week.
Amidst the highest Euro-zone consumer spending numbers in 6 years, up 3% in November, consumer confidence faltered. The weakened growth numbers spurred investors to question again whether or not the ECB will have to hike interest rates, putting the ECB in the precarious situation of having to "wait and see" what goes on in the market this week. Today, ECB President Jean-Claude Trichet will address the Eurofi conference in Brussels, with a speech titled “Achieving the Integration of European Financial Markets in a Global Context”. Trichet will be a figure on the podium this week quite a bit, as most of the relevant European economic news this week, will come from his comments
The significant question this week is whether or not the Euro will be able to avoid testing the 1.45 level and continue its strength while entering the closing month in 2007. Also it is important to circle Thursday December 6th on the calendar, as the European interest rate announcement is expected.
JPY
As the first week of December starts, the JPY has been connected with the Moody Investors' Service, as the credit giant is planning its biggest cuts since the subprime mortgage defaults unsettled financial markets. The JPY continued early this week what it had started at the end of November, gaining against the major 16 currencies, as carry trades were once again popular.
As the Asian trading week opened, BoJ Governor Fukui was adamant about his skepticism toward risks in overseas economies like the US. He went on to warn of the continued instability of global financial markets due to the ongoing subprime loan crisis. He was quoted as saying that "Given the continued rise of consumer spending and capital investment, albeit at a slower pace, we believe that the possibility is high that the US economy will eventually achieve a soft-landing and stable growth," The Japanese also joined the ongoing sentiment felt by the US and EU that China must allow their fragile Yuan to appreciate quicker, in order to ease strain on its greenback reserves.
In the week's Japanese economic calendar, we will see the release of GDP numbers as well as several industrial figures. Overnight the Capital Spending figures were released with better than expected results at -1.2%, from -2.5% while expectations had it at just under -5%.Amidst a volatile week of interest rate speculation from the US and EU, we will want to keep an eye on the JPY to determine how it will be "used" by investors.
Forex technical analysis
EUR/USD
The pair has been ranging in the past few days but it still gained no distinct direction. The daily studies are showing bearish signals and the hourlies are currently neutral. On the daily chart, observe a forming Eliot wave structure. A preferable strategy might be to wait for the hourlies to deliver a positive signal, and look for a good entry point for a short position.
GBP/USD
After losing more than 500 pips during the last two weeks, the bearish sentiment seems to carry on. The daily charts are showing that there is still more room to run and the hourlies are showing a light oversold status. A preferable strategy might be to look for a good short entry point.
USD/JPY
The uptrend for the pair could not be any clearer, and all studies indicate there is still more room to run. The pair now floats at the bottom of the upwards channel, indicating a further move up is coming up.
USD/CHF
The Daily and the 4 Hour charts are implying a bullish trend continuation before a reversal will take place. In the long run, the pair is expected to test the 1.1300 Fibonacci level and in case of a breakout, the next target would be the 1.1340 Fibonacci level. It seems that going long will be a preferable strategy in the upcoming few days.
The Wild Card
Silver
There is still a bearish configuration on the 4 Hour chart, indicating that the momentum is still down. The RSI is floating around 50, which supports the notion that there is still room to run. This provides Forex traders with a great opportunity to go short on a very solid downtrend.
04/12/'07 - Greenback Expected to Float in Range Today.
Economic News
USD
The US dollar is weaker across the board as the members of the Gulf Cooperation Council debate their Dollar Pegs. The two largest economies in the region, the UAE and Saudi Arabia are divided on whether they should abandon the dollar in favor of a basket peg or to continue to ride out the move and risk taking a further hit to the value of their reserve holdings. The UAE is in favor of a currency basket similar to the one that Kuwait has, while Saudi Arabia dismissed this possibility. A revaluation will be negative for the US dollar, but if things stay status quo and Saudi Arabia wins out, then we could see the dollar bounce. Uncertainty about the outcome of the meeting is keeping the dollar under pressure. Also, Federal Reserve officials continue to grow increasingly dovish. Rosengren who is typically a more modest central banker warned that foreclosures is likely to get worse and the US economy will grow 'well below' potential in coming quarters. With such gloomy outlooks, the Federal Reserve will have to continue lowering interest rates. The futures market is still pricing in a 40 percent chance of 50bp rate cut. Meanwhile the ISM manufacturing survey was right in line with forecasts yesterday, which was a bit of a disappointment because the rise in the regional indices signaled a stronger increase. What's more, a new multi-month low in the employment reading at 47.8 may suggest a dour long-term outlook on demand and production as employers try to trim costs through layoffs and reduced capital spending. US factory ISM edged down to 50.8 in Nov. Production up, orders steady and jobs down were the three main drivers of the essentially unchanged ISM factory reading last month. 50.8 is the lowest reading the ISM has seen since it dipped below 50 a couple of times, once late last year and again in Q1 this year. That suggests a level of manufacturing activity somewhat weaker than in several of the regional factory surveys (especially New York and Philadelphia), albeit still positive. Notable in the detail (but not part of the composite headline) are the consistently solid export readings, a function of US dollar weakness, and the reacceleration in the prices measure, a function of the oil price.
EUR
Yesterday the EUR traded relatively uneventfully all across the board but it continued to weaken against the USD. In Europe, markets are likely to take direction from interest rate decisions due from the European Central Bank and the Bank of England on Thursday and U.S. jobs data due on Friday. The EUR/USD traded at a low of 1.4621 and a high of 1.4708 before closing the session at 1.4659 at the end of the New York session yesterday. .
According to the latest weak market data, there is very little upside potential for the European GDP to go forward, therefore, even if the U.S. lowers its rates in December it's very unlikely that the ECB is going to increase rates any time soon. The EUR is losing some of its buoyancy because of that. In the following days, traders attention will be focused on Jean Claude Trichets' speech in the post announcement press conference. While no one expects the ECB to hike rates this Thursday, traders will be listening with care to his statement. As for today, there are only the EUR Producer Price Index and the GBP Construction PMI expected to be released, both of a minor importance. Without further news expected from the European markets today we should see the weak EUR momentum continues.
JPY
The yen rose across the board yesterday as continued uncertainty over fallout from U.S. subprime mortgage market turmoil caused investors to reduce exposure to risky carry trades. By early morning in New York; the USD was down 0.7% at 110.33 against the JPY. The EUR was up 0.5% at 161.81. In addition, the economic data out of Japan was mixed, with industrial production and retail sales proving to be better-than-expected. Industrial production in Japan rose 1.6% to a record in October to meet demand from China and Europe, suggesting that a slowdown in the US will not hinder growth in the Japanese economy. This week, economic data out of Japan is expected to reflect improvements in third quarter capital spending and labor cash earnings. However, these "improved" figures are also likely to remain negative. Unless capital spending can surprise to the upside, the fundamental picture for Japan remains bleak. Nevertheless, the JPY may have an opportunity to gain this week, as risk aversion trends remain the primary driver of the low-yielding currency. As a result, traders should keep an eye on global stock markets, as a plummet in equities could push USD/JPY back down towards 109.00.
Technical News
EUR/USD
There is a very solid downward channel forming on the 4 hour chart, as the pair now floats on the upper level. The RSI indicates a bearish momentum towards the bottom of the channel at 1.4550. a breach through that level will unleash an additional bearish move.
GBP/USD
The cable has been trading in a wide range for a while now, and is showing moderate bearish momentum. There is a bearish cross forming on the 4 hour chart, which indicates that the next move might take the cable to the 2.0480. Going short might be preferable today.
USD/JPY
After a touch at the upper level of the 4 hour channel, the pair appears to be back to the bearish route. The slow stochastic indicates that there is still much more room to run, and we might see the 109.00 levels, sooner than we thought.
USD/CHF
The pair has made a corrective move to the very strong resistance level of 1.1300. There was a very strong bearish cross on the 4 hour chart, which shows that the correction move might be over, and that the pair is now ready to continue the strong bearish move. Next target price appears to be around 1.1200.
The Wild Card
Crude Oil
The bearish channel on the 1 hour chart has failed to breach again. A bearish momentum is being created as the RSI clearly indicates. That is a great opportunity for Forex traders to enter the bearish correction move at a very good stage of the trend.
05/12/'07 - US Non-Farm & Non-Manufacturing Figures On Tap
Economic News
USD
Yesterday was void of any significant news from the U.S, so the greenback did not experience much movement against the EUR. However the greenback did strengthen noticeably against the CAD on the back of the unexpected Canadian interest rate cut to 4.25%. The main market movement yesterday was still driven by comments by the Fed that the subprime crisis will have a significant drawback on U.S growth. This attitude by the Fed has unsettled the financial markets again and shoved global stocks lower, leading to a risk-averse attitude by investors and a subsequent reversal of carry trades. Therefore the USD saw most of its action yesterday against the high yielding currencies, where it gained noticeable ground on the back of the carry trade reversal. On the other hand the greenback lost ground against the JPY as the increasing concerns about the credit crisis prompted investors to cut back on risky positions.
Looking ahead, today is filled with significant U.S data which may prompt some dollar movement. The most important news out today will be the ADP Nonfarm Employment Change which is expected to release well below its previous figure of 106K at 50K. This figure will be closely watched by investors for an indication of where Friday's all important NFP report will release, even though the accuracy of the ADP remains questionable. If this figure surprises on the upside the dollar could claw back some lost ground against the EUR. However although there is a string of data releases expected today it seems that the market will remain cautious ahead of Friday's NFP report, but is also important to note that the increasing speculation of an aggressive rate cut by the Fed could shove the greenback onto its recently familiar slippery slope.
EUR
The only news released from the Eurozone yesterday was the PPI which came in at 0.6%, beating the expected figure 0.4%. However this news was not expected, and it did not, have any impact on the EUR. The EUR remained stable against the USD, but it did experience sharp movement against the high yielders and the JPY on the back of the carry trade reversal. Investors will be tentative of ahead of Thursday's ECB Interest Rate Decision, which is expected to keep interest rates on hold at 4.00%. However this will be a very tricky decision by the ECB as Trichet has reiterated over-and-over again that short term inflation risks are still on the upside and therefore the ECB are currently struggling to balance slower growth with higher inflation. A rate cut by the ECB at this stage is unlikely, as although it will stimulate Eurozone growth it could spike inflation which is already a major concern.
In the Eurozone news today we are expecting the Retail Sales, Services PMI and German Services PMI figures. These figures could cause some movement but investors will be cautious to buy the EUR ahead of Thursday's difficult ECB decision. The current sentiment surrounding the EUR remains positive but when the full impact of the U.S housing crisis on the Eurozone will be revealed, this sentiment could change quickly.
JPY
The JPY continued to gain all across the board yesterday as the increasing concerns over the credit turmoil has driven investors away from the so-called carry trade strategy. The JPY bounced back from a two week low against the greenback on the back of an announcement by Moody's that it was preparing the largest credit-rating cuts since the subprime crisis shook the financial markets. The stress in the credit markets is continuing and it does not seem that there is relief in sight, so the JPY will continue to get stronger as risk aversion persists. The JPY rose to 110. 22 against the greenback from Friday's 111.12, and it may even hit 109.00 by the end of the month if risk aversion persists.
Technical News
EUR/USD
On the 4 Hour chart, we should note that the bearish trend continues to push forward as volatility is increasing. The price should continue to move downwards to a range of 1.4800 to 1.4650. As it stands, the bearish pressure will continue to gather momentum on the EUR/USD today as well.
GBP/USD
On the 4 Hour chart, a rising wedge (bearish) is forming which may imply a continuation of the bearish momentum. It's recommended to time the entrance into market with short term charts as 2.0650 looks to be a possible strong entry point. At the moment GPB/USD is being traded at around the 2.0750 to 2.0450 range. The volatility is high and we should expect to see bearish pressure today on the GBP. The downtrend should continue to the 2.0500 support level.
USD/JPY
The USD/JPY broke the 109.60 resistance level yesterday. USD/JPY is in a downtrend trend, supported by 1 Hour exponential moving averages as volatility is low and Bollinger bands are tightened. We should expect to see throughout the day, a continuation of the bearish configuration correction for this pair. 1 Hour and 4 Hour Elliott patterns imply that the USD/JPY will continue to gather momentum. The target is expected at 110.00 for today, as it is recommended to take in to consideration the long run weakness of the Japanese currency against the American Dollar for future positions.
USD/CHF
The USD/CHF is in a bearish configuration as volatility is decreasing. USD/CHF moves without trend and swings around exponential moving average (EMA 50 and 100). Bollinger bands are tightened and 1 Hour and 4 Hour Elliott patterns imply a continuation of the bearish pressure on the currency pair. The target is expected to touch in and around the 1.1130 level.
The Wild Card
Gold
Gold broke the 800 resistance level and is in an uptrend supported by 1 Hour exponential moving averages. The volatility is low and the Bollinger bands are tightened, as we should expect to see a bullish configuration. 1 Hour and 4 Hour Elliott patterns are implying that Gold should gather momentum today, which provides Forex traders with a great opportunity to go long. The target is expected at around 810.
10/12/'07 - All Eyes On US Rate Statement Tomorrow.
Economic News
USD
We begin this trading week with tremendous speculation over how the greenback will perform ahead of Tuesday's interest rate statement. Last week, the dollar bounced back against the Euro due to surprising figures from ADP and Non-Farm data. Combined with the surprise cut in UK interest rates the dollar strengthened against its major counterparts, before re-adjusting itself back to levels of above 1.46 against the Euro prior the close of trading on Friday.
Most indications are that the Federal Reserve will once again cut interest rates by a quarter of a percent from 4.50% to 4.25%, making it twice in the last two months that the Fed has had to step in to control the dwindling dollar. The interest statement, set to be released on Tuesday, December 11th at 13:30 GMT is one of many pertinent economic news events on schedule this week. The US will see the release of discount rates, Import Price Indices, Retails Sales, Core Retails Sales, PPI, Core CPI, and Industrial Production numbers. The aforementioned news will be overshadowed of course by the Trade Balance numbers on Wednesday and the Interest Rate statement on Tuesday. On tap for today's economic calendar are the monthly Pending Home Sales numbers. The figures are expected to be down a bit over 1 percentage point from 0.2% to -1.0%. It should be said however that last week's forecasts were way off, so we should wait and see.
This should be an important week for the greenback as it will have to react strongly to rates cuts in order to set a corrective trend as we grow even closer to 2008. One should be wary of how the Dow Jones performs as well this week to gage how much confidence is still behind the greenback.
EUR
The European community was hit with quite a stunner, as the British unexpectedly cut interest rates to spark even further gains to the dollar in the early part of last week. What had already been a slow week for the Euro, turned into quite a scare, as the dollar exhibited some of its old school dominance in the marketplace. The Euro, which had been above levels of 1.47 quickly dropped to under 1.46, before correcting itself by week's end.
ECB President Trichet noted at a press conference shortly after EU interest rate statements, that there was talk of an interest rate hike at ECB meetings, but that "The reappraisal of risks in financial markets is still evolving and is accompanied by continued uncertainty about the potential impact on the real economy, and that is the reason why we consider that it is not opportune to decide today (to hike rates)".
The EU Economic calendar is reserved with several indicators of little to no significance. Of the 15 or so events due up, only the ECB Monthly Bulletin and German ZEW Sentiment are of any real consequence. The fate of the 13-nation currency will rest heavily on trader response to US interest cuts and the invigorating progress coming from the Dow.
JPY
The Japanese Yen has watched along as the Dow Jones has begun to recover some ground, thus forcing the inevitable drop in carry trading. The Yen's lucrative position on carry trades has left it dependent on outside factors, with the most pertinent information being that from the US. Last week, the USD/JPY rose steadily as investors foresaw the Dow movement and began to abandon high yielding assets. The currency pair jumped from 109 support levels to over 111 as early morning trade in the Far East began.
The economic calendar for Japan this week stays somewhat dull as the only real highlight should be that of the Tankan Large Manufacturers Index. The index measures the general business conditions of large manufacturers and is important to be noted that traders pay special attention to the Tankan survey because it's one of the few growth indicators produced directly by the BoJ. It looks as if the JPY will continue to float on a moderate bearish notion, at least until the end of this trading week.
Technical News
EUR/USD
A bearish channel is establishing On the 4 Hour chart that might take the pair to the 1.4500 - 1.4560 levels. The first target price is located at 1.4615 (Fibonacci 38.2%) and the second target price located at 1.4579 (Fibonacci 23.6%). If the 1.4660 level will not be breached, then going short looks like a preferable strategy for today.
GBP/USD
On the 4 Hour chart a falling wedge structure is establishing and in case of a completion, we might see the pair relocated at 2.0100. The Slow Stochastic has crossed the 82 level and momentum has a negative slope that supports the upcoming bearish trend. It looks as if the bearish trend might continue for the short run.
USD/JPY
The pair's massive correction from the 107.00 level continues, as we now see the second bearish cross on the daily slow stochastic. Together with the Doji formation there is a great possibility of a local bearish move that might take the pair back to the 110.50 level.
USD/CHF
The pair's movement is quite moderate and characterized by relatively low liquidity, with a slight bullish move. Indicators on the 4 hour level shows mixed signals, as the daily studies are still a bit bullish. Waiting for a clear signal on the hourly level before entering the market might be wise.
The Wild Card
Crude Oil
The bearish trend continues at full steam, as all oscillators show that there is still more room to run probably into the 86.00 levels on the next local move. This is a great opportunity for forex traders to use the strong bearish momentum and take profits on the short run.
11/12/'07 - US Interest Rate Statement On Tap
Economic News
USD
The USD depreciated against most major currencies on Monday for the 3rd consecutive session, ahead of today's widely expected FOMC Interest Rate Statement. Also, yesterdays' data on U.S. Pending Home Sales for November showed an unexpected gain and gave the greenback a modest boost.
Markets have recently pared back aggressive U.S. rate cut forecasts, with analysts citing more optimism that the Feds' action will be enough to prevent severe fallout from market volatility. Analysts estimate that the U.S. economy will slip into a ``mild'' recession next year, essentially predicting a downturn for the world's largest economy. Nevertheless, it is expected to pick up as early as the second half of the next year. Meanwhile, the depreciating dollar has helped American exports rise to record highs in the last 7 months. The U.S. trade deficit narrowed to $56.5 billion from the record $67.6 billion in August 2006 as a falling dollar made American goods cheaper in foreign markets.
Today, all eyes will be on the Interest Rate Statement from the Federal Reserve. Futures fully reflect a 0.25% point easing in the Fed funds rate to 4.25% from 4.50%. Chances of a bigger move have shrunk following a string of somewhat stronger-than-expected economic data. However, lower expectations for such a big rate cut have left the USD back in a downward trend.
To summarize, the market is already reflecting the expectation that the Fed is going to cut. Given all of the dovish potential surrounding the upcoming FOMC meeting, we expect the USD to remain relatively weak before the rate decision.
EUR
The EUR continued its rally yesterday as traders were looking ahead to today's U.S. Interest Rate Statement. During yesterdays' late New York session, the EUR was up 0.4% at $1.4712.
The EUR got a boost last week as comments by ECB President Jean-Claude Trichet left open the possibility of higher rates next year as a result of growing inflation. Comments made yesterday by ECB policy makers, to the affect that the Euro-zone inflation could be higher in 2008, as remarks once again reaffirmed the view that the European Central Bank is not likely to ease current trends in the near future. The EUR is also benefiting from these inflation risk warnings, as we can recall in the month of October, exports actually hit a record high in Germany, bringing the EUR above 1.45 for the first time. Today, we await the release of the German ZEW survey, which is expected to drop to a new 15-year low.
JPY
Yesterday, the JPY traded close to a one-month low vs. the USD and the EUR on speculation that the Fed will cut interest rates today, encouraging investors to buy higher-yielding assets funded by loans in Japan. The Japanese currency yesterday touched the weakest point since Nov. 9 against both the EUR and USD as it traded at 111.71 per USD and 164.35 per EUR at 16:00 p.m. in Tokyo.
Today's' Fed announcement might be a very critical inflection point for the rest of the year. If worries of a global growth slowdown resume, we could see a renewal of the equity sell-off and JPY crosses could come under pressure again. On the other hand, if a deeper U.S. downturn will be avoided; further gains of higher-yielders are likely to be spurred. The only news to be released from the Japanese calendar today will be the Corporate Goods Price and Current Account indices data. Both of the indicators are of a relatively minor importance and will probably not have a significant impact on its currency. Instead, traders' attention will be focused today on the U.S. Interest Rate announcement and on its possible outcomes.
Technical News
EUR/USD
There is a bullish configuration forming on the 4 Hour chart. The volatility is high and the EUR/USD is in a consolidation stage, especially after the pair broke the 1.4740 resistance level. The price should continue to move upwards in the 1.4700-1.4800 range. As it seems, the bullish pressure will continue to gather momentum at least until the weeks end.
GBP/USD
In the past few days the pair is going through a choppy session, and is giving mixed signals on the hourly level. The daily chart is showing massive bullish formation, and it looks as if the pair is heading toward 2.0500 again. A preferable strategy might be going long for the short run.
USD/JPY
A bullish flag is forming on the 4 Hour chart which might take this pair to 112.00. Slow Stochastic shows a positive divergence which strengthens the possibility of an upcoming bullish trend.
USD/CHF
The pair shows consolidation around the key level of 1.2010 which has proven to be a very significant level. A preferable strategy might be to wait for the oversold hourly levels as traders should pay close attention to the 1.1300 level to unwind before taking a long position.
The Wild Card
Gold
Gold broke the 812.30 resistance level. Gold is in an uptrend supported by 1 Hour exponential moving averages as the volatility is high. Bollinger bands are tightened. We should expect to see a bullish configuration today. 1 Hour and 4 Hour Elliott patterns are implying that Gold should gather momentum today. The target is expected to hit 810. This provides forex traders with a great opportunity to go long on a very healthy uptrend.
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12/12/'07 - US Trade Balance On Tap
Economic News
USD
The greenback experienced some volatility yesterday on the back of the much anticipated U.S Interest Rate Statement. The Federal Reserve cut its benchmark short-term interest rate yesterday by a quarter of a percentage point, to 4.25%, and suggested that it would lower rates again if the credit crisis continued to damage not just housing, but the rest of the economy as well. Since the credit crisis erupted in August, the Fed has shaved a full percentage point from the federal funds rate, which is what banks pay to borrow from each other overnight. However many analysts believed that the Fed would cut the interest rate by at least 0.5% in order prevent the U.S economy from slipping into a recession. Therefore the Fed's decision to cut the interest rate by 0.25% is a positive indication to investors that the Fed believes that the economy is still well clear of a dreaded recession. Policy makers also cut the discount rate yesterday, which is what banks pay to borrow directly from the Fed. The quarter-point cut, to 4.75%, was less than what the market had been expecting, and that triggered a selling spree that sent the Dow Jones Industrial Average (DJIA) on a freefall. On the back of the sharp equity market fall, Fed officials hinted to the market that the Central Bank could inject more funds into the banking system before the end of the year. However the statement by Fed Chairman Bernanke, that followed the interest rate announcement, left the impression that the Fed's policy makers were done with their rate cuts. Although the Fed rate cut caused the greenback to falter slightly it did manage to recoup most of the losses it suffered in the dollar sell-off leading up to the interest rate announcement. The Fed also shyed away from hinting further rate cuts, so this was taken as a positive signal by investors as it seems that the Fed now believes that it has done enough for the economy to now repair itself and we could see the greenback begin a steady recovery. However in order for the greenback to leap onto a sustained bullish path, it will need a string of strong data to indicate to the market that U.S growth and inflation are heading in the right direction. Looking ahead to today, the only news expected from the U.S will be the Trade Balance and the Import Price Index figures. The Trade Balance is expected to release lower than last month's figure of -56.5B, at -57.3B. However we could see this figure surprise on the upside, as the recently weak dollar should have boosted exports thereby reducing the current trade deficit.
EUR
EUR The EUR did strengthen temporarily against the greenback on the back of the Fed rate cut, however as the market settled the EUR lost a large portion of its earlier gains. There was negative news for the EUR as the German ZEW Economic Sentiment, which measures institutional investor sentiment, released well below the expected figure of -34.5, at -37.2. The EUR slipped 0.4% yesterday against the greenback, touching the 1.4655 level. The EUR slip can mainly be attributed to the Fed's modest discount rate cut, as many analysts were expecting at least a 0.5% rate cut. Also the EUR fell sharply against the JPY on the back of the collapse of the equity markets yesterday which caused carry trades to unwind. The EUR lost 1.3% against the JPY and it slipped to the 162.15 level. We could see the Eurozone sentiment begin to change to a more bearish outlook, even though the ECB predicts steady growth, as liquidity is still a major headache for the European economy and as long as it persists it will be forced to keep interests rates on hold. Looking ahead to today we are expecting the Eurozone Industrial Production and Employment Change figures. These figures are not expected to be market moving and we should see the EUR consolidate today after yesterday's losses.
JPY
The JPY came out firing on the back of yesterday's U.S Interest Rate announcement which caused carry trades to collapse, thereby driving a carry trade unwind. The JPY gained all across the board, particularly against the high-yielders, which is a reflection of increased risk-aversion by investors as a result of a falling stock market. The JPY surged to the 110.92 level against the greenback and to the 2.0340 mark versus the Sterling, gaining 0.6% on the day against both the currencies. Earlier today during the Asian trading session the Japanese CGPI figure, which measures the rate of inflation experienced by corporations when purchasing goods, released better-than-expected at 2.3%. There was more positive news for the JPY as the Current Account also released better-than-expected at 2.56T. However these figures had little effect on the JPY movement, which is likely to remain in strong correlation with the performance of equity markets, particularly with U.S stocks and the Nikkei.
Technical News
EUR/USD
A widening bearish channel and a bearish head & shoulders structure are establishing on the 4 Hour chart both indicates on an upcoming bearish trend, however only if the current trend won't be able to break the1.4715 resistance level. Today, going short with the trend seems to be preferable.
GBP/USD
The cable is going through a strong downtrend, and we can see new momentum on the hourly charts growing stronger. The daily chart indicates that the next target price might be around 2.0320.
USD/JPY
A bullish channel is establishing on the 4 Hour chart, the Slow Stochastic crossed at 26, Momentum and RSI both having a positive slope which implying that much more room is left for the current bullish trend. Today, going long with the trend seems to be the preferable strategy.
USD/CHF
In the past few days the pair is going through a choppy session, and is giving mixed signals on the hourly level. The daily chart is showing bullish formation, and it looks as if the pair is heading toward 1.1350 again. A preferable strategy might be going long for the short run.
The Wild Card
Gold
A bullish channel is forming on the 4 Hour chart supported by the Slow Stochastic which having a positive slope. An ascending triangle is establishing on the 15 Min chart, indicates on 803.92 as a possible entry point for long position which forex traders may take advantage of.
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