ForexYard's Commentaries - page 6
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23/08/'07 - BOJ Kept the Rate at 0.5% as Expected.
Economic News
USD
There was no real currency-market moving news released yesterday from the U.S markets as the greenback lost some ground against the EUR and the GBP, while strengthening slightly versus the JPY touching the 115.95 level.
Markets began stabilizing on Tuesday after Fed Chairman Ben Bernanke assured he would use all available tools to break the fallout from the U.S. mortgage crisis, after the sub-prime situation continues to be problematic. Yesterday, Lehman Global Investment Bank backed by mortgages became the first company on Wall Street to close its sub-prime lending unit causing its 1,200 employees to lose their jobs. In addition, according to data from the Mortgage Bankers Association, home loan applications fell 5.5% last week, the biggest decline in almost three months. As the sub-prime situation continues to deteriorate, the likelihood of a Federal Reserve rate cut of 0.5% is increasing, and may occur even before the September 18'th FOMC meeting.
Today will be very light on market moving news from the U.S markets as the only news coming out of the US will be the Unemployment Claims index. The figure is expected to be released at 315K which is a slight improvement from last month's figure of 322K. It looks as if the USD should continue to trade in a tight range, as no significant move is expected to occur.
EUR
Yesterday, the EUR gained some strength against the USD but also had its best day against the JPY in nearly four years. The EUR\JPY climbed 1.2% to the 157.00 level, where against the USD; the EUR extended gains and climbed up $1.3534. According to ECB president Jean-Claude Trichet, the European Central Bank remains devoted to the "strong vigilance on inflation" policy. In fact, that phrase has signaled each of the eight rate increases since late 2005. It looks like a rate hike in the September ECB meeting is very probable. Due to the ongoing liquidity shortage, the ECB stated that it would add 40 billion EUR in 91-day funds to the European money market today and added that the operation was a "technical measure". Yesterday, there was no significant news coming out of Europe except for the British CBI Industrial Trends Orders. The indicator was released at 9 points, beating expectations of -4, hence supporting a currently ongoing bullish trend of the GBP. There'll be no significant economic news released in the EUR today apart from the GBP Business Investment. The expectations for that indicator release are currently standing at 2.0%, which is significantly higher than last month's figure of -0.6%. If the economic news from the GBP will release inline with market expectations, we should see the GBP resurrection continue, thus pushing the EUR up.
JPY
Last week, the JPY posted its biggest increase against the EUR since March 2000 as the sub-prime mortgage crisis spread through global credit markets. The JPY trades at 156.91 against the EUR, after dropping 1.4% yesterday, the most significant drop since June 2004. The JPY traded at 115.33 against the USD after falling 0.8% yesterday, the highest in two months. Today the BoJ kept rates unchanged at 0.50% as expected. The markets are showing some tentative signs of a return to normality after the release and the market may return to carry trades, with equities stabilizing after the aggressive carry trade unwinding in the last 2 weeks. Bottom line is that the JPY seems to be getting back to normal as traders and hedge funds inject carry trades positions into the market which strengthen the high yielding currencies against the JPY.
Technical News
EUR/USD
The pair is trading at 1.3540 which is the 38.5% Fibonacci level of the 1.3850/1.3370 move and the level is established as a key resistance level. If a breach through this level will occur we might see a bullish move that will take the pair to the 1.3640 level.
GBP/USD
The cable is trading in a bullish channel as the slow stochastic on the 1 Hour chart indicates that there is still room for more. On the 4 Hour and the daily charts the oscillators show that some kind of a correction might be imminent. The overbought short range status indicates that it would be preferable to wait for a stronger signal on the dailies before taking a position
USD/JPY
There is a bearish cross forming on the 4 Hour chart, which could indicate that a small correction move might occur before the bullish trend continues. The daily charts are bullish, with more room to run. A preferable strategy for position traders might be to go long, as for day traders it might be to go short
USD/CHF
There is a stable consolidation at the 1.2060 level for the fifth consecutive day. The daily charts are showing a triple doji formation, and are now in neutral territory. The 4 Hour chart support the neutral signals. The extremely neutral status of the pair indicates that a violent move is imminent, and could be in any direction. A recommended strategy might be to wait for a clear signal before entering the market.
The Wild Card
Crude Oil
The bearish trend continues with full steam and Oil is now traded at 69.50. The daily chart and the hourly studies show that there is still more room to run. The 4 Hour RSI is floating at 50 which provides Forex traders with a great opportunity to get in the trend at a high bearish momentum.
28/08/'07 - Will the FOMC meeting minutes stirr the market?
Economic News
USD
Existing home sales released yesterday align with expectations at 5.75M and only slightly below the previous value of 5.76M, there was only a slight reaction from the market because the value was already anticipated by investors. Despite a low release of Existing Home Sales and with the difficulties in the US housing market, New Home Sales rose last week substantially from 846K to 870K. We are getting mixed signals from the housing market this month as the New Home Sales release surprised on the upside while there was a fall in the decreasing Housing Starts and Building Permits figures. Today the data for US Consumer Confidence will be released with an expected value of 104.8, which is below the previous value of 112.6, this indicates a degrading of consumer confidence which can influence the USD negatively.
Today's FOMC Meeting minutes are critical as investors are trying to get hints on a possible interest rate cut by the Fed during the next meeting. Although the general consensus is that an interest rate cut can be expected to occur, the timing is unclear. The Fed might await further reactions to its discount rate cut and the liquidity injections to the financial sectors before cutting the interest rate. In the meanwhile the Fed acknowledged in its August 7th meeting minutes that "risks to growth have increased" and therefore the fragile economic growth along with persistent risk aversion in the markets could favor a rate cut already in September.
As there is a lot of uncertainty involved in the recent market developments, investors should look out for indications in the FOMC Meeting Minutes today to get a hint about future Fed monetary policy and the timing of an interest rate change.
EUR
Yesterday the president of the ECB spoke at the annual congress of the European Economic Association in Budapest about the decrease of productivity in the Euro Area and monetary policy. His speech elaborated reasons for the decline of factor productivity and its connection to interest rate changes. Decreased productivity growth in the Euro Zone could be an argument against an interest rate hike during the ECB's next meeting.
Today we will see the release of the German Ifo Business Climate Index as well as the German Ifo Business Expectations Index, both values are, with 105.5 and 100.2 respectively, expected to lie below their previous values of 106.4 and 101.8 and reflect the firm's slightly negative prospects for the next 6 month.
With talks yesterday about a possible sale of the Sachsen LB, which is the state bank of Saxony, another German bank became a victim of the US sub-prime crisis. The SachsenLB had billions of asset backed securities in its portfolio which are now about to default on the back of the US credit woes. The SachsenLB is privatized, in contrast to most other state banks which are state owned, and its securities were backed up by the banks owners; however the clear overexposure of the bank through risky investments called for more transparency of banks investments. With only little market moving data this week, a downside outcome of today's German Ifo Index could depress the EUR's uptrend.
JPY
During the last days the market demonstrated the return of carry trades, where investors sell the JPY in order to buy higher yielding currencies. Carry trades won't be back to full speed immediately as risk aversion is still high, but their return could mean that we will see the weakening of the JPY against all major currencies in the near future.
In the Minutes of the Monetary Policy Meeting on July 11 and 12th, which were released today, the members of the committee acknowledged the substantial growth of Japans economy. Exports as well as business fixed investment increased, private consumption is on an uptrend and production increased due to rising domestic and external demand. The BoJ still wanted to monitor the development of various indicators and decided in a majority vote to leave the interest rate unchanged at 0.5% for the time being. With an expanding economy and increasing commodity prices, there might be support of an interest rate hike to 0.75% during the next BOJ Meeting on September 18-19. On the other hand the still unresolved problems in the US housing sector could prompt the BoJ to wait. As for today it seems that the JPY will continue to range trade against the major currencies and movements will mostly be dependent on the developments in the US sub-prime crisis which is still very uncertain.
Technical News
EUR/USD
The volatility has increased and Bollinger bands are widened. The pair seems to be consilidating around the1.3625 after yesterdays drop from the 1.3682 mark. On the 4 H chart both momentum and the RSI are both giving strong indication that the pair will range trade today. However there is a flag formation appearing and if this pair breaks the 1.3600, then we may see another move downwards.
GBP/USD
The cable has been on steady fall in the last 24 hours, sliding from 2.0186 to the 2.0154 mark. However the hourlies are indicating that we are now in oversold territory as the RSI is at the 20 mark and momentum is bullish. On the 4 H chart the bullish formation is weak so we should see this pair make a slight correction possibly leveling out at the 2.0120 level.
USD/JPY
After last weeks violent drop this pair has been on a steady uptrend. On the hourlies there is a strong bearish cross appearing on the slow stochastic and the 4 H chart also supports a bearish notion. However the dailies are still bullish so a preferable strategy for today may be to buy on dips and sell on highs.
USD/CHF
The 4 H and the hourlies both support a bullish notion. The dailies also indicate that this pair is oversold as there is a strong bearish cross on the slow stochastic coupled with positive momentum. Traders can expect this pair to strengthen before making another slight correction down. However since this pair is currently trading at a key level if there is a break below the 1.2000 support level then the downward correction may be significant.
The Wild Card
Crude Oil
The sustained bullish run that we have seen over the last 3 days seems to be losing some steam now and a reversal may be imminent. On the 4 H chart momentum bearish and the RSI is at overbought levels. So Forex traders have a good opportunity to maximize their gains by going short on an early bearish signal.
29/08/'07 - The USD Uncertainty Continues.....
Economic News
USD
Monday's releases from the US markets, which showed that US Existing Home Sales went down by 0.2% in July, caused the greenback to be traded mixed against most of the major currencies. The weak housing figures are raising many doubts and concerns about the health of the world's largest economy. Lower home values have left Americans feeling less wealthy. Investors are waiting for the speech on "Housing and Monetary Policy" by Fed Chairman Ben Bernanke this Friday, which will probably offer a few hints about the future directions of the Fed's monetary policy. As it seems at the moment, the housing market correction could take longer than expected and that could weigh on expenditures going forward.
It should be noted that the sub-prime market is just 4% of the overall real estate market, and its escalating effect is sometimes overwhelming. This ongoing housing problem makes it very difficult for Americans to tap home equity to finance spending. A slowdown in hiring and slimmer pay raises might weaken consumer sentiment and purchasing power as overall economy growth slows. Sales of second hand houses fell in July for the fifth month in a row, as the figure came in the lowest in almost five years, while the surplus of those homes rose to a 16-year high. The labor market shows signs of weakening. Unemployment rose in July to 4.6% from 4.5%. Job growth slowed to 92,000 last month from 126,000, down from last year's average of 189,000 a month. These are quite concerning figures with which the US economy must deal at the short run.
As for today, there is no major news releases expected to come from the US, and the greenback's is floating in a cloud uncertainty. The following two days are packed with major events and should probably shed more light on the Greenback's future behavior.
EUR
Yesterday, the Euro slipped after the IFO Business Climate Index was published in Germany, the country which is considered to have the biggest and strongest economy in Europe. The IFO Business Climate Index fell to 105.8 points in August from 106.4 in July, the third consecutive monthly decline.
In addition the M3 Money Supply y/y index was published yesterday, as the data showed that the M3 money supply grew 11.7% in July year-on-year, up from a 10.9% year-on-year growth rate in June and above expectations for an 11.1% rise.
During the next month the ECB is expected to raise its key interest rate to 4.25%, but as it seems at the moment this move is not too certain after yesterday's meeting in which the president of the European Central Bank, Jean Claude Trichet, participated in Hungary. During his speech Trichet said that the ECB was not pre-committed to any rate increase at its Sept. 6 meeting. Trichet specified that his monetary policy assessment made at the Aug 2 rate-setting meeting, was made before the recent market turbulence and would be re-evaluated. On the other hand, The ECB has said it expects a significant rise in inflation toward the end of this year and early in 2008. The bank defines price stability as an inflation rate of just below 2%. Most of the trader's focus will be on the US markets in the following two day, as most of the important data will be coming from there.
JPY
Yesterday the JPY was very volatile and strengthened for the second consecutive day against the USD. That means that investors are still refraining from the risky carry trade strategy of selling the low-yielding Japanese currency to invest in higher-yielding ones. The slowing US economy will certainly weigh on the greenback, which may continue to fall to 114.00 against the JPY. The biggest JPY move yesterday was seen against the NZD which is a preferred currency for carry trades. The JPY is the best performer among the 16 most-active currencies this month as U.S. mortgage defaults caused stock markets to drop and banks to limit lending. There are no major news expected to come from Japan today, as most of the important data such as the CPI and Manufacturing PMI will be released on Friday.
Technical News
EUR/USD
The pair is now trading around 1.3600 which is the 50% Fibonacci level of the 1.3850/1.3360 move. If a breach up through that level will occur, we should see the pair initiating a further bullish move into the 1.3650 move. The daily chart is supporting the bullish notion, as the slow stochastic floats around 40, which indicates some more room to extend up.
GBP/USD
The cable is floating at the upper levels of the downward channel that is forming on the daily chart. Together with the slow stochastic and RSI which are both at the 50 level, a bearish signal was created with the next target price located 1.9960. The 4 hour chart is showing a slight oversold level which might sustain the move down in the short term.
USD/JPY
The 4 hour chart is showing two consecutive green bars, and the slow stochastic is showing two bullish crosses under the 20 level. The RSI has violently crossed the 20 level from above which strengthens the notion that in the short run, a reverse move is imminent. Traders should pay attention to the fact that the dailies are still bearish, and there is still more room to go down on a longer time scale.
USD/CHF
The daily chart is showing that there is great uncertainty in the pair's movement, as most of the recent bars on the daily chart are wide doji. This indicates that although there is some price movements, the open and close price are very similar. There was an attempt to break through the 1.1960 level again yesterday, and it failed, which means that the support level is still very strong. The hourlies are showing slight bearish momentum, and in general the trend is unclear.
The Wild Card
Gold
There is a bearish channel forming on the daily chart, as the gold is floating on the upper level of it. The slow stochastic has completed the cross above the 80 level, which validates the move as bearish. This provides Forex traders with a great opportunity to enter a short position with great bearish momentum.
30/08/'07 - Is it going to be all doom and gloom for the greenback?
Economic News
USD
Yesterday the greenback continued on its bearish decent as it lost ground against most of the majors. Earlier in the week investors were expecting the FOMC minutes to give some indication as to when the Fed will cut rates, however the FOMC minutes did not reveal much and this created uncertainty in the forex trading market as to whether the Fed is actually planning to cut rates. There was no significant economic news released from the US yesterday, so the bearish momentum that was created by the discrete FOMC minutes continued throughout yesterdays trading. The main market movement today can be attributed to the US equity markets rebound after Tuesday's large sell off. This caused the USD to weaken sharply against the high yielder's as carry trades were back in action but on the other hand the carry trade winding caused the USD to gain some lost ground against the JPY, so it was not all doom and gloom for the greenback. The US markets sudden rebound yesterday can be attributed to the leaking of a letter by Fed Chairman Bernanke where he explicitly stated that the Fed is keeping a watchful eye on the financial markets and that it will intervene in order to mitigate the negative impact that the problems in the financial markets may have on the economy.
In US news today we are expecting the GDP annualized and deflator annualized figures which are forecasted to release at 4.0 % and 3.7 %, respectively. The previous quarters GDP annualized figure was 3.4 %, so we are expecting a 0.6 % increase in growth which would reaffirm the Fed's view that the economy is expanding at a moderate pace. However these figures are not expected to cause any major movements and the source of today's volatility will be the equity markets. The rebound in the US markets may spillover into Europe and Asia today, so if this occurs the carry trade resurrection will cause the greenback to depreciate against the high yielders but gain against the JPY. If the GDP figures do not surprise the market the greenback is likely to continue on its bearish path against the EUR and GBP, as there is no other data to give the USD some reprieve.
EUR
The only news released out of the Eurozone yesterday was the German Consumer Confidence which came in below the expected figure of 8.5 at 7.6. It was a day light on European news so the EUR movement was mainly pegged to the USD and it continued its bullish rampage against the greenback which started on the back of FOMC minutes release. Investors have been expecting the ECB to hike the interest rate in early September as President Trichet stated on August 2 that the ECB had adopted a stance of ‘strong vigilanc' regarding inflation. However earlier this week Trichet stated in his speech that the ECB will actually make its decision on whether to raise the interest rate at its next meeting. This gave a strong indication to the market that the ECB may keep the rate hike on hold in September. The gradual shift in investor sentiment regarding the rate hike has been putting pressure on the EUR recently.
Today the only news expected from the Eurozone is the German Unemployment Rate and Italian Retail Sales which are forecasted to release at 8.9 % and 0.2 %, respectively. This news is not likely to cause any sharp movements in the EUR, so the direction of the EUR today will remain dollar centric and it should be able to maintain its bullish momentum. Also a rise in carry trades will push the EUR higher against the JPY as European and Asian markets react to yesterdays rebound in US stocks.
JPY
Yesterday, the Japanese currency recovered from its previous losses and rose 0.3% to 115.81from 116.17 against the greenback late into yesterday's New York trading session. As a matter of fact, it posted its biggest daily percentage gain since January 2005 due to an incline in U.S. stocks. The JPY also advanced 2.2% against the EUR, to 158.13 from 158.89 yesterday, as rallying U.S. stocks prompted investors to resume so-called carry trades.
In addition, an Australian hedge fund filed for bankruptcy protection yesterday goading investors to sell riskier assets purchased with loans from Japan. Worries that more financial institutions will suffer from the U.S. subprime mortgage meltdown caused investors to halt risky positions in high-yielding currencies.
Looking ahead to today, there are several news releases expected today from the JPY market. The first one will be the Tokyo CPI which is expected to release in negative territory at -0.2 %. Later, the Manufacturing PMI is expected to be released without a significant change at 50.0 and the Japanese Industrial Production is also expected to release in negative territory at -0.4%, down from last month's figure of 1.3%. Nonetheless, these weak figures are expected to generate small interest as they would be overshadowed by the direction of the carry trades which will heavily depend on today's performance of the global markets. It is also very important for traders to monitor whether yesterday's boom in the US stock market will have a ripple effect on the European and Asian markets.
Technical News
EUR/USD
Bollinger bands are widened indicating increased volatility. On the 4 H chart the slow stochastic is crossing above 80 indicating that we are in overbought territory but the momentum and RSI are both relatively flat. The hourlies give us a bullish signal with strong positive momentum. The relatively weak bearish 4 H chart and weak bullish 1 H chart give us a strong indication that this pair will range trade today.
GBP/USD
This pair has breached the key 2.0150 resistance level with resilient positive momentum. The RSI and slow stochastic confirm that this move is indeed validated and it is now targeting the significant 2.000 level and we may see it head even further north in the near future.
USD/JPY
After a strong but brief bullish run this pair has been on a steady decent falling from 116.21 to the 115.18 mark. The slow stochastic indicates that there is still room for this pair to move down but according to the dailies a correction is imminent.
USD/CHF
This pair is in the middle of a clear channel that seems to be heading south. The upper level of this channel is located at the 1.2030 level and it now indicates a key resistance level. If it is breached then the pair will begin target the 1.2100 mark. However if this pair continues to float in this channel then this pair will continue on its bearish path.
The Wild Card
Silver
The hourlies are very bullish as the slow stochastic is crossing just above 20 and there is strong positive momentum. Also the RSI indicates that this pair should continue to head north. However there will be an opportunity for profit taking as the 4 H chart gives a bearish signal all round so taking all factors into account the preferable strategy for Forex will be to buy on dips and sell on highs.
04/09/'07 - ISM Manufacturing on Tap.
Economic News
USD
As the US market was closed yesterday for the labor's day holiday no news was released from the US and movements in the market were still an echo of Ben Bernanke's speech on Friday. The President of the US Fed spoke on Housing, Housing Finance, and Monetary Policy at the Federal Reserve Bank of Kansas City. Investors understood his concerns of mortgage market developments and their "possible implications for the broader economy" as a sign for a rate cut, furthermore the "deterioration in financial market conditions and the tightening of credit since its August 7 meeting had appreciably increased the downside risks to growth". The announcement of ISM Manufacturing Index today and Non-farm employment change on Friday will indicate further if this rate cut will already occur in the September FOMC Meeting.
ISM Manufacturing Index, which measures the activity of purchasing managers, is expected to fall from 53.8 to 53.2 supporting the notion of an economical slowdown. ISM Manufacturing Prices are expected to fall from 65.0 to 63.1 indicating a reduction of inflation experienced by manufacturing organizations. Non-farm employment for August, which will be released on Friday, is expected to rise from 92K to 110K and will, together with the ISM data today, be crucial in order to determine the timing of a Fed rate cut possibly as early as September 18th. A negative surprise regarding the Non-farm Payrolls will probably bring about the rate cut, indicating that the economy already was in a slowdown before the sub prime credit woes shook the market.
Without further market moving news today the USD will only react to the ISM Manufacturing Index and prices, and if the outcome takes course as expected the USD will trade flat today.
EUR
Yesterday was a quiet day for the EUR principally because of the U.S. holiday, although there was a bit of a spillover from Friday's U.S. session. The EUR traded around session lows against the USD after dropping to the 1.3610 level late yesterday evening. There was a comfort factor from Bernanke's speech that the Federal Reserve is equipped to act in any moment of necessity. In addition, yesterday's UK economic news proved far more supportive as GBP Manufacturing PMI surprised with strong 56.3, beating expectations of 55.1. German Manufacturing PMI released inline with expectations at 56.0. The GBP Retail Sales Monitor came yesterday in just above expectations at 1.8%. The 13 nation currency managed to appreciate all across the board ahead of Thursday, which is expected to be the "all European" day with major events like the BOE and the ECB Interest Rate Statements and the ECB President Trichet Speech. The ECB is expected to keep its benchmark refinancing rate at 4%.
Today is also devoid of any significant data so we should see the EUR continue range trading. We could see some strong volatility through the following days, so it will be crucial for traders to identify how the preceding economic indicators from European and the U.S markets will affect the currency.
Despite the good European fundamentals, currency traders remain nervy mainly about the stability of the credit markets.
JPY
News out of Japan offered little hope for yen strengthening at the beginning of the week as both labor and business data were very unsatisfactory with the headline figure slumping into negative territory. Sunday's JapaneseCapital spending came in much weaker than expected at -4.9% in contrast to a 13.6% gain in the previous month. The Average Cash Earnings has also suffered a drop to a -1.9% level. In fact, it was the worst performance of that index in more than three years showing that Japanese consumer spending will likely remain relatively weak as wages refuse to rise. This adds to expectations that the BOJ's rate hike will be delayed for the rest of this year. However, the impact on yen trading was limited with most yen traders still focus on the carry trade theme. Yesterday the JPY dropped slightly against the USD touching the 115.80 level.
The following days will provide almost no news from the Japanese markets except the Machine Tool Orders and the Leading Index, both of a minor importance. Therefore, most price movement on JPY pegged currencies will be derived from the European and American markets, while carry trades and equities might resume their gains this week.
Technical News
EUR/USD
On the 4 H chart we notice that the bearish trend is running ahead. It appears that the pair is going to break the 1.3600 support. The volatility decreased and the EUR USD is consolidating after it broke the 1.3610 support level. The price should continue to move downwards in a range of 1.3630 to 1.3580. As it seems, the bearish pressure will continue to gather momentum.
GBP/USD
The GBP USD is in a bearish configuration. The volatility decreased. The pair moves without trend and swings around exponential moving average (EMA 50 and 100). the pair is now forming a downwards channel with strong resistance at the 2.0145 level. Its recommended to time the entrance to the market with short term charts, 2.0170 seems like a strong entry point. Bollinger bands have tightened. 1H, 4H Elliott pattern implies a bearish pressure. The target is expected at 2.0120.
USD/JPY
USD JPY is in a downtrend supported by 1H exponential moving averages. The volatility is low. Bollinger bands are tightened. We should expect to see also today a bearish configuration. 1H, 4H Elliott pattern implies that the USD JPY will continue to gather momentum. The target is expected at 115.15 level.
USD/CHF
The USD CHF is in a bearish configuration. The volatility decreases. USD CHF moves without trend and swings around exponential moving averages (EMA 50 and 100). Bollinger bands have tightened. 1H, 4H Elliott pattern implies a continuation of the bearish pressure. The target is expected at 1.0480
The Wild Card
Gold
Gold broke the 673.45 resistance level. Gold is in an uptrend supported by 1H exponential moving averages. The volatility is low. Bollinger bands are tightened. We should expect to see today a bullish configuration. 1H, 4H Elliott pattern implies that the Gold should to gather momentum also today. The target is expected at 675.00. This provides those trading forex online with a great opportunity to go long on a very healthy uptrend.
05/09/'07 - Raising key interest rates: Market waits for forecast clues
Economic News
USD
Yesterday, the most significant news to be released from the US, relevant to forex trading, were the ISM figures which both released slightly weaker than expected. This should have further bolstered expectations of an imminent rate cut by the Fed; however the market is tentative ahead of some key economic data releases later this week. Yesterday's trading began slowly with the greenback pulling back some ground against the majors. Equities also began to rise moderately and this was reflected in an increase in the USDJPY pair. However the greenback experienced a whipsaw reaction on the back of the weak ISM data and it gradually slip to its current levels against the majors. Although the ISM was poor there was still relatively light movement as the market is waiting for further information in order to accurately asses the probability of a rate cut by the Fed.
Today there should be some sharp volatility as we are expecting the release of the Beige Book, which is a Fed survey based on anecdotal evidence. Usually the Beige Book is not the main driver of volatility but today its tone should cause sharp movements as the Fed is trying to dig into the real economy and this will provide the market with another strong indication of whether we will see the Fed cut rates in September. In other news today the ADP Non-farm Payrolls Report is expected to release at 82K, beating the expected figure of 48K. After having a relatively quiet two days of trading the market will come alive today with release of the ADP report and in particular with the release of the Beige Book. If the tone of the Beige Book springs a surprise then the greenback will once again tread in uncertain territory.
EUR
The EUR has been steady all across the board but it did relinquish some ground to the greenback yesterday. However on the back of weak US data the EUR did manage to stage a small rally back against the greenback. In Eurozone news yesterday the GDP figure released inline with expectations at 0.3% indicating that growth in the resilient European economy has remained steady. Also the PPI figure released at 0.3 %, beating the expected figure of 0.1 %. The stronger than expected producer inflation figure supports a further rate hike by the ECB but the global liquidity problems that resulted from the US subprime crisis have forced the ECB to keep rates unchanged at least for September. In European news today we are expecting the Services PMI, German Services PMI and Retail Sales figures. None of these figures are expected to cause any sharp movements in the EUR and we expect this currency to range trade today ahead of tomorrow's ECB interest rate decision. However the EUR may experience some sharp volatility against the greenback on the back of key economic US data releases, therefore any EUR volatility will be dollar centric.
Traders will be tentative ahead of tomorrow's ECB interest rate decision which is expected to remain unchanged at 4.0 % but all eyes will be on ECB President Trichet's speech that will follow this announcement for an indication of when the ECB is likely to hike rates. This speech will be the center of attention as the market sentiment that will develop from this with regards to Eurozone interest rate policy will be a key determinant of the future direction of the EUR.
JPY
Yesterday was a good opportunity for investors to identify the strong correlation between carry trades and the equity markets, as the US equity markets experienced a moderate rise and the greenback gained on the JPY. Most of the JPY crosses were up yesterday indicating that carry trades are back in action, however it is still too early to determine whether they are here to stay. The JPY was also under pressure earlier in the week as a result of data that showed weaker capital spending in the second quarter. Many investors hence believe that the Bank of Japan may delay hiking its key benchmark rate, which is extremely low when compared to the global average, and this could place the JPY on a slippery slope. There is no market moving news from Japan for the rest of the week so the direction of the JPY will be mostly determined by carry trades but with the JPY failing to gain ground against the NZD yesterday it may still be premature to hop onto the carry trade Ferris wheel.
Technical News
EUR/USD
There is a bearish configuration forming on the 4 Hour chart. The volatility is high and the EUR/USD is not in a consolidation stage, especially after the pair has broken the 1.3555 support level. The price should continue to move downwards in the 1.3650-1.3530 range. As it seems, the bearish pressure will continue to gather momentum at least until the week end.
GBP/USD
In the past few days the pair is going through a choppy session, and is giving mixed signal on the hourly level. The daily chart is showing massive bearish formation, and it looks as if the pair is heading 2.0000 again. A preferable strategy might be going short for the short run.
USD/JPY
A bullish flag is forming on the 4 H chart which might take this pair to 123.73 Fibonacci (76.4%). 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 proves to be very significant level. A preferable strategy might be to wait for the oversold hourlies levels as traders should pay close attention to the 1.1990 level to unwind before taking a long position.
The Wild Card
Gold
Gold broke the 680.5 resistance level. Gold is in an uptrend supported by 1H exponential moving averages. The volatility is low. Bollinger bands are tightened. We should expect to see today a bullish configuration. 1H, 4H Elliott pattern implies that the Gold should to gather momentum also today. The target is expected at 682.5. This provides Forex traders with a great opportunity to go long on a very healthy uptrend.
06/09/'07 - Packed calendar In US and Europe today.
Economic News
USD
The ADP Nonfarm Employment Change was released yesterday, showing a figure of 38K which is far below the expected 82K. As the ADP Nonfarm Employment Change is a statistical indicator, its potential to forecast the real value is limited. For the real value of Nonfarm Employment Change tomorrow a value of 110K is expected, even above the previous value of 92K. if the NFP release tomorrow does not live up to the expectations, there might be a further weakening move for the greenback.
Today is an eventful day in the international Forex markets with the main event being the ECB interest rate announcement. In the US markets the ISM Non-Manufacturing Index will be released and the Fed's Governor Kroszner will speak at 15:30 GMT. The ISM Non-Manufacturing Index is expected to be released at 54.5 which is slightly below the previous value of 55.8. Kroszer's speech will be closely watched because investors could get some hints on the future interest rate decision which still hangs in balance. There are three more news releases with less importance coming from the US today which are the Nonfarm Productivity, Unit Labor Costs, and Building Permits, that might cause some price movement, but will not be able to draw trader's attention from the ISM release.
After the USD weakened yesterday, the expected news tomorrow and today will be important to determine if the US sub-prime crisis is limited to the housing sector or if it indeed affected the broader economy. If so this would increase the possibility of a rate cut by the Fed at their next meeting. A weaker than expected ISM Non-Manufacturing Index as well as anxious words in Fed Governor Kroszer's speech on "Analyzing and Assessing Financial Crises" could potentially depress the USD today.
EUR
Today is packed with news releases relevant to forex trading from the Euro-zone. In Great Britain the Industrial Production is expected to be released at 0.2% compared to a previous release of 0.1%. Manufacturing Production is expected to be released at 0.2% as in the previous month and the BOE will announce its interest rate which is expected to remain unchanged at 5.75%.
The ECB will also announce its interest rate today which is expected to be left at 4.0%. The ECB intends to wait a little longer before changing the interest rate, in order to monitor the consequences of the sub prime crisis and the effects of the liquidity injections. Of particular concern is the impact of the US credit crisis on the German financial system, as Germany is Europe's largest economy.
The ECB interest rate and the following speech by ECB President Trichet will be important for investors to follow as the market might experience some stability and a reduced risk aversion on the side of the investors. If all news will release align with expectations we could even see a little strengthening of the EUR, depending on how confident President Trichet portrays the European economical outlook.
JPY
The JPY gained ground yesterday all across the board as the weak release of the ADP Nonfarm Employment Change once again increases risk aversion in the markets. In this risk averse situation, carry trades will be constrained and the market will have to wait until carry trades will work on full speed again. Although the JPY is not trading at the high levels it saw two weeks ago, it is still floating in a relatively tight range, and a clear signal that the carry trades are back to normal course has not yet been accepted.
With no market moving news releases from Japan for today, the JPY will react on the market's accommodation to the economical releases in the US and Europe.
Technical News
EUR/USD
The pair is floating in a relatively tight range for several days now, as can be seen on the 4 Hour chart. No significant break through the 1.3550/1.3700 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.
GBP/USD
The cable is in the middle of an uptrend that started at 1.9650, and according to the daily chart still has some more momentum to continue. The slow stochastic on the 4 Hour chart is showing a bearish cross indicating that there could be a correction move before the uptrend continues.
USD/JPY
The hourly studies show that there is a bearish configuration on the 4 and 1 Hour charts due to a bearish cross on the slow stochastic and RSI that is floating at the 50 level. The daily chart on the other hand is showing a slight bullish momentum, which indicates that buying on dips might be preferable today.
USD/CHF
After losing 100 pips yesterday, the pair is in consolidation at the 1.2040 level. The 4 Hour chart is showing bearish sentiment, and is supported by an extremely bearish daily study. Next target should be a breach through the 1.2000 level.
The Wild Card
Crude Oil
Over the past two weeks there is an extremely accurate upwards channel forming on the 4 Hour chart. Oil has made a significant move and is displaying a healthy consistent move up with plenty of room to run. The next significant resistance level is around 78.50 which provide Forex traders with a great opportunity to jump in to this massive uptrend with large momentum still steaming.
10/09/'07 - USD Retreats After Nonfarm Payrolls
Economic News
USD
The USD dropped massively on Friday upon the release of the US Job's report, and in particular because of the extremely negative -4K figure of the Change in Nonfarm Payrolls. As could be easily predicted, investors and economists did not try to speculate or change their forex trading strategy on the present USD trend and continued to massively short the USD. The previous release was 68K, as the market expected 110K. Today, there is no market moving news expected to come from the US, as the only release will be US Consumer Credit which is expected to go down from 13.2B to 8.8B, and will probably not cause a major price movement in the USD.
The U.S. economic development is in serious difficulty. The mortgage industry's decline donated to the net loss of 4,000 U.S. jobs in August and it was the first negative payroll report in four years. As it seems the housing market could sink the country into a full-blown recession. Next week's economic reports include Retail Sales and Consumer Confidence; many economists estimate the U.S. economy's trend will not make any dramatic correction in the short run.
EUR
On Friday, the EUR broke the 1.3750 resistance level after the publication of the weak US economic data. As it seems at the moment, by many economists and major banks, the EUR is running ahead towards the next 1.3900 resistance level. On the basis of the last consecutive pessimistic news from the US economy, many traders have began to favor the 13 nation currency and little by little have begun to neglect and push aside the American Dollar. The European Central Bank is expected to keep interest rates on hold for the remainder of the year, but still we should see the beginning of positive momentum in the Euro zone economic condition. The ECB is going to release several important notifications in the following few weeks and decisions will depend on how the economy coped with the latest market turmoil.
As for today, the only major release that is expected to come from Europe will be the UK PPI Input and Output; both are expected at 8:30 GMT. The input is expected to rise from -5% to -3% and the output is expected to remain unchanged at 0.2%. Both figures are expected to push the GBP up a bit if indeed the figures will be released inline with expectations.
JPY
Friday's US Jobs report took the USD down all across the board, and the JPY was no exception as we saw the USD/JPY touch 112.80 and the EUR/JPY 155.40. There is a distinct sentiment from traders to get away from carry trades, and the unwinding continues with no clear end on the horizon. The negative USD sentiment is now stronger than any interest rate trading potential. If the Feds will indeed cut the rates as expected, the carry trades will probably take even longer to come back.
As for today, Core Machinery Orders is expected to be release tonight at 23:50 GMT with expectations standing on 5.2% which is a massive increase from last month's -10.4% and might generate JPY appreciation on top of the strengthen trend already in motion.
Technical News
EUR/USD
The pair is in the middle of a very strong uptrend at the moment, and the breach through the 1.3740 level which was a strong resistance and a key Fibonacci level, indicates that the move is validated and we might see the positive momentum continue to the 1.3900 level. The hourlies are a bit overbought which indicates that buying on dips might be preferable.
GBP/USD
The uptrend the cable is going through seems to be very strong and the daily chart validates that there is still room to run. The 4 Hour chart is confirming that the momentum up is still quite strong and that 2.0400 is a valid next target.
USD/JPY
After touching the 112.80 level for the second time this month, the pair seems to be consolidating around the 113.00 level. There is a bullish cross forming on the 4 Hour chart that indicates a slight correction up before the bearish move continues. Selling on tops might be preferable today.
USD/CHF
The pair is consolidating at the 1.1860 level after the sharp drop from 1.2100. The momentum is bearish and the next key level will 1.1820 which is the bottom of the last downwards move which started at 1.2462. If a breach through that level will occur a stronger bearish move will be validated that might take the pair to the 1.1740 level.
The Wild Card
Crude Oil
The perfect channel configuration continues with full steam, as the oil now floats on the bottom section of the channel. The RSI is firmly on the 50 level together with the slow stochastic that strengthens the notion that the momentum up is still strong. This provides Forex traders with the opportunity of a great entry point to go long on a very healthy uptrend.
11/'09/'07 - US Trade Bakance, Fed Chairman Speaks
Economic News
USD
The last week's unexpected weakness in the labor market caused the USD to slump to a 15-year low against six of its most actively traded peers. Yesterday the USD was traded at 1.3808 against the EUR, which is only 0.4% below a record low of the 1.3852 reached in July 24th. The latest weak employment figures proved once again that the housing crisis hasn't been affecting the real estate sector only, but has expanded and now influences other markets as well. Given the circumstances, the Fed is highly expected to lower its benchmark rate by quarter of a point to 5% next week. Moreover, Federal Reserve Chairman Ben S. Bernanke, driven by the first drop in employment in four years, may even be forced to cut interest rates twice, reaching the 4.75% level in the fourth quarter of this year. There was no significant data released from the U.S yesterday, apart from a Consumer Credit index, which was released at a lower than expected figure of 7.5B, dragging the USD deeper into the bear's cave. Today, the most significant news coming out of the US will be the Trade Balance. The figure is expected to be released in negative territory at -59.0B, slightly lower than the previous month. Also today, the Fed's Chairman Bernanke will deliver a speech in Berlin where he is expected to drop clues on current monetary issues. Heavy market volatility is often experienced during Bernanke's speeches and today may not be different.
EUR
The European Central Bank, the Bank of England and the Bank of Japan held off from raising interest rates at their latest policy meetings as they awaited a clearer reading on how the economy was likely to cope with the turbulence. The GBP fell against the EUR and the global financial market turmoil will prevent the Bank of England from adding to three interest-rate increases this year, reducing the currency's yield advantage. Analysts claim that the EUR will maintain its strengthening against the USD and 1.4000 appears to be very close. The bottom line, the EUR seems to be an attractive investment alternative especially against the USD. There are two major news events expected to come from Europe today, the first one is the UK Trade Balance which is expected to maintain the -6.3B level, and the second one is the ECB President Trichet's Speech which will elaborate further on ECB future monetary policy.
JPY
The Japanese yen has appreciated over the past two months as risk aversion has led carry trades to unwind. The last week's unexpected weakness in the U.S labor market caused Asian equities to drop and triggered investors to sell high-yielding assets, thus further boosting the Yen. The USD/JPY dropped to a low of 112.60 and the GBP/JPY to 228.27 yesterday. There was no significant economic data released from Japan yesterday apart from the Core Machinery Orders with the headline figure releasing at 17.0%, beating expectations of 5.2%. Today is also expected to be void of data. Much of the forex trading market's attention will be focused on how the USD will move. Japanese markets are worried that the deterioration of the U.S. economy is worse than they had expected. The main fear is that the demand for Japanese exports could weaken as the U.S. economy. With carry trades unwinding, the JPY should continue to range trade at its high levels and we should see JPY fluctuations being dollar centered today.
Technical News
EUR/USD
On the 4 Hour chart, a rising wedge is forming which may imply a continuation of the bullish trend. It is recommended to time the entrance to the market with short term charts as 1.3758 seems like a strong entry point. At the moment the EUR/USD is trading around the 1.3720/1.3840 range.
GBP/USD
There is a very channel forming on the 4 Hour chart, as the pair now floats on the bottom level of it. The RSI and Slow stochastic are supporting the bullish notion, and we should see the uptrend continue at a steady pace. The next target price should be around 2.0310.
USD/JPY
USD/JPY is in a downtrend supported by 1Hour exponential moving averages. The volatility is low and the Bollinger bands are tightened. We should expect to see a bearish configuration. The 1H, 4H Elliott pattern implies that the USD/JPY will continue to gather momentum. Traders should pay attention to the fact that the dailies are still bearish, and there is still more room to run on a longer time scale. The target is expected at 113.20.
USD/CHF
The USD/CHF is in a bearish configuration. The volatility decreases as the pair moves without a trend and swings around exponential moving average (EMA 50 and 100).the Bollinger bands are tightened and the 1H, 4H Elliott pattern implies a continuation of the bearish pressure. The target price should be around 1.1810.
The Wild Card
Gold
Gold broke the 703.10 resistance level and is in an uptrend supported by 1H exponential moving averages. The volatility is low and the Bollinger bands are tightened. We should expect to see a bullish configuration. 1H, 4H Elliott pattern implies that the Gold should gather momentum today, which provides those trading forex with a great opportunity to go long. The target is expected at around 710.
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12/09/'07 - Traders counting on rate cut to push greenback up.
Economic News
USD
The greenback neared an all time low yesterday against the EUR as the markets' expectation that the Fed will cut interest rates continued to diminish. In Fed Chairman Bernanke's speech in Berlin yesterday, he did not make any direct comments regarding the Feds' future monetary policy but he did mention that the Fed will do whatever is necessary to prevent the credit problems from spilling over into the broader economy. The majority of investors believe that the Fed will cut the interest rate by at least 0.25 % on September 18 but a lot of doubt has crept in recently and this is putting the greenback under pressure. Normally a rise in a country's interest rate has a positive effect on its currency as it will boost foreign investment, however with the current subprime crisis in the US coupled with global liquidity problems only a rate cut by the Fed will significantly relieve these problems and once again spur investment. In other news yesterday, the US Trade Balance released at -59.2 B which was lower than the expected figure of -59.0 B. This gave further indication that the US economy is slowing and investors fear that if there is no intervention by the Fed to cut rates that the US economy will head towards a recession.
Today, there is no forex trading market moving news to be released from the US, so we may see the dollar find some much needed reprieve after slipping against the EUR for five straight days. However the USD bearish momentum is strong, as the effects of the global credit crisis are most pronounced in the US and this is could significantly slow the economy. So today the greenback may continue to extend its losses all across the board and it could even reach a new all time low against the EUR.
EUR
The EUR has performed well of late, forming steady uptrends against most of the majors. Yesterday was no different as the European currency maintained its bullish surge all across the board and on the back of Bernanke's speech; it began to target the 1.3850 level against the greenback. The EUR was also boosted by ECB President Trichet as he stated that the Eurozone credit losses were not large enough to weaken financial institutions. His comments reinforced the markets sentiment that the ECB still wants to raise rates and will do so if market conditions permit. The European central bank has been busy providing liquidity to the financial systems in order to prevent short-term interest rates from rising too fast and prompting a bigger credit crunch. However unlike the Fed that is considering rate cuts in order to ease the credit crisis, this is not an option for the ECB as the inflationary pressures in the Eurozone have not yet been put to bed. In Eurozone news yesterday the German WPI released at 0.5 % and the French Trade Balance released inline with expectations at -3.0 B. However these figures were not significant enough to cause any sharp movements in the EUR which was mainly affected yesterday by Bernanke's and Trichet's speeches.
Today we are expecting the Eurozone Industrial Production and the Labor Cost Index. However both these indicators are not considered significant enough to cause any major volatility in the EUR. With today being light on significant news the EUR bullish momentum may begin to lose some steam.
JPY
Yesterday, the JPY lost ground all across the board as the global equity markets recovered on expectations of a future rate cut by the Fed. This rise in global stocks spurred investors risk appetite and therefore carry trades were very quickly backed in the mix. It is currently difficult for investors to predict whether carry trades will be sustained as the full impact of the subprime crisis is still unclear and the equity markets have been whipsaw trading ever since. However, it was not all doom and gloom for the JPY yesterday as Core Machinery Orders released at 17.0 %, far- beating the expected figure of 5.2 %. This was a strong indication that the Japanese manufacturing industry is in an expansion phase.
Earlier today, in the Asian trading session, the Japanese Current Account released at 1.75 T, well below the expected figure of 1.90 T. On the other hand there was some positive news for the Japanese economy as the Corporate Goods Price Index came in at 1.9 %, beating the expected figure of 1.7 %. However none of these indicators had much of an impact on the JPY whose direction is being ruled by carry trades. If stocks rally in the US and European trading sessions later on today then the JPY slip some more even though in the Asian trading it did manage to pull back some lost ground.
Technical News
EUR/USD
Today, the 4 Hour chart implies on a possible recovery of the USD when both RSI (78) and Slow Stochastic (crossed at 82) are clearly in overbought territory. The 4 Doji bars imply on an upcoming move and it appears that going long might be preferable.
GBP/USD
The key level of 2.0330 was breached today as the pair now consolidates around 2.0350 with clear intentions to keep going. The daily chart is bullish as the hourlies are slightly overbought which indicate that buying on dips might be preferable.
USD/JPY
After a three day correction up, the pair is showing a bearish formation again. The slow stochastic and the RSI are both showing strong bearish momentum. The next target price should be around 113.00.
USD/CHF
The pair is heading down and is now at 1.1850. The next key level is 1.1820 which would the lowest it has been since May 2005. If a breach through that level will occur we might see a much bigger move been validated. If the pair will be shy of a breach it will constitute a great entry point for a long position.
The Wild Card
Crude Oil
Oil is consolidating at 78.20 after it has been going up for more than three weeks from 68.50. the slow stochastic on the daily chart is showing a strong bearish cross, and together with inability of the oil to breach through the strong resistance it delivers a great opportunity for Forex traders to go short at a great entry point.