ForexYard's Commentaries - page 9
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01/11/'07 - Fed Cuts Interest Rate By 0.25%, Market Reacts Accordingly.
Economic News
USD
The main currency trading story yesterday was the much anticipated announcement of US Federal Interest Rate cuts. The Federal Open Market Committee (FOMC) cut rates by one quarter point to 4.5% to help change the trends in the struggling US economy. Traders saw the EUR, GBP and CAD make significant gains on the greenback, with the volatile news period not helping to change the greenback's fate by all that much. It is important to note that losses over a seven day period versus the EUR were halted, however the general trend looks to continue to be prevalent. EUR/USD hovered for most of the day around 1.45, while the cable hit 26 year highs. The Canadian dollar reached its highest point in almost 50 years against the greenback as there was no stopping the maple leaf. Not all the news was bad yesterday, as US growth numbers were positive, putting the onus on other Central Banks to evaluate possible rate hikes. The greenback has continued to endure agonizing results with essential commodities like Crude Oil and Gold, leaving traders with tough decisions on how long to hold onto positions with the USD.
Today's economic calendar is once again crowded with essential news from the US. Core PCE Price Index, Personal Spending, Personal Income, Unemployment Claims, ISM Manufacturing Index and Prices should continue to push the greenback down. Some investors are still concerned that the only positive information released from the US is not backed by real data quite yet. This sentiment has shown itself in trading as the rate cuts yesterday only slightly changed the continued trend in the market in regards to the greenback. It will be intriguing to see if today's news events can provide enough real data to shift trends to relieve some of the heighted stress on the greenback.
EUR
The EUR hit all-time highs once again versus the plummeting greenback, after yesterday's Fed rate cut. Floating at high levels the whole day, the European currency staved off any news time volatility to stay strong. Speculation is that the ECB will need to raise interest rates to combat the soaring inflation from within its members' economies. Doing so could come sooner than later, as US the economic data has not shown much promise as of late.
Today, the EUR stays off the economic calendar, with relevant news coming from only the UK and US. It will be the focal point of many investors over the next couple of days to monitor the relationship between speculative growth in the European economy and the key changes in US economic policy. Yesterday, in the statement released by the Feds, there was mention that "the upside risks to inflation roughly balance the downside risks to growth.'' Comments like these will only further the concern from the ECB over how to handle their currency in relation to the greenback. It should be interesting to see if investors continue to back the rise of the EUR/USD or if they retreat over concerns of a change in trends.
JPY
Amidst the whirlwind of records set against the greenback yesterday, the JPY managed to stay proportionately neutral. Following Japan's announcement that interest rates will stay at 0.5%, Governor Fukui reiterated the Bank of Japans statement noting slowed economic growth in the country. After abandoning initial ideas that consumer prices in Japan would rise, there was not much surprise that rates stayed the same. As Japan is dependent on the growth of the global economy, the latest news from the US will inevitably lead the Japanese to make some changes to avoid damaging the JPY. With the fate of the JPY in the hands of outside factors, look for the JPY to continue to produce volatile results over the coming days.
Technical News
EUR/USD
After a touch at the unbelievable level of the 1.4500 yesterday, the pair eases a bit and now consolidates around 1.4460. The EUR/USD seems to be ignoring technical key points and is simply breaking record highs one after the other. Although charts are showing bearish crosses on the 4 Hour chart and the daily chart, it appears that the momentum is stronger than ever, and that another peak at the 1.4500 should probably return shortly.
GBP/USD
The cable is going through a massive uptrend, as the momentum refuses to calm down. Hourly charts are packed with positive sentiments and are slightly contradicted by a moderately bearish daily chart. Going long in the short run appears to be preferable today.
USD/JPY
The pair still floats within the wide range of 113.00/177.00 with no distinct direction. It appears that the current move is up, and the local sentiment is quite bullish. The 4 Hour chart is indicating that the next target price could be around 116.40.
USD/CHF
The pair is floating at a very strong support level that revolves around 1.1580 and is showing some difficulties breaching through it violently. The sentiment on the daily chart is floating at neutral levels whereas the hourly charts are very bearish. Staying out of this pair until the smoke clears might be a smart move.
The Wild Card
Crude Oil
Oil has breached through the all time high of 96.00 and even touched the 96.20 at some point yesterday. The momentum is stronger than ever, and there is a strong belief that oil is running to the 100$ a barrel soon. This is a great opportunity for forex traders to get in at great entry point and ride that unbelievable trend.
06/11/'07 - USD weakness continues on all fronts.
Economic News
USD
Amidst once again surprising economic numbers, the greenback stayed relatively steady on Monday. The greenback did fall in the early hours of Tuesday, against 14 of the 16 major currencies, challenging investors to determine how and when the greenback will end its slide. The Institute of Supply Management (ISM) released its Non-Manufacturing index at 55.8, up one point from its previous 54.8 mark; forecasts initially predicted a one point drop. The index measures the activity of purchases made by purchasing managers in the service sector and allowed the greenback some breathing room after last week's disaster. Yesterday, saw Fed Governor Mishkin announce that he will "carefully assess economic data" before considering any changes in US economic policies. As oil prices continue to rise and the US financial landscape is in turmoil, the Fed has held its ground in defending its decisions to hold out on any further action.
Forex traders are at a standstill due to the differences in opinion between the majority of investors and the Fed's themselves. Many investors believe that the US will have no choice but to cut rates even more in order to withstand the damage that the winter will bring in regards to gasoline prices. The Fed, in statements released by Mishkin, Rogers and Gross reiterated their faith in economic data, and went so far as to say that the quarter point interest rate cut could even be reversed if all went well before year's end.
Today look to see even more discussions regarding such issues as Fed Chairman Ben Bernanke speaks in San Antonio. Bernanke will address the audience at the ACCION Texas Summit on Microfinance, about community development. It is safe to say that the market will fluctuate around the time of his speech, as Bernanke is known for leaving hints regarding future policies in his speeches.
EUR
The EUR entered this week in positive territory as it finished last week with all-time highs against the greenback. News has been dominated predominately by the US, but this week sees the tide change with major news events on the EU schedule.
Forex investors saw the EUR/USD move yesterday between a low of 1.4440 and highs at 1.4530 levels. Similar range trading should be expected today as there are no real major events on tap. PPI, Retail Sales and Service PMI are to be released this morning, with not much movement expected to come from them as investors will try and hold positions ahead of Thursday's ECB Interest Rate statement. Sentiment is that the ECB will hike rates to offset current economic trends regarding the EUR. Today should see much of the same in regard to the EUR as investors will most likely see the EUR stay strong.
JPY
Yesterday, BOJ Chairman Toshihiko Fukui Spoke and hinted that a future interest rate hike might take place sooner that we expected. Since then we saw the JPY strengthen against all across the board. Fukui added that a timely interest rate hike is needed and that keeping rates too low could pose risks in the future that the BOJ would like to avoid. We are expecting the JPY to maintain its strength against the majors, and carry trades are more likely to reduce especially against the USD until the rate hike will take place. Tomorrow, Core Machinery Orders is expected to be released. The figure measures the total value of new orders placed with machine manufacturers, excluding orders for items with a volatile sales cycle. The forecasted figure is -2.0% which is better in comparison to the previous figure (-7.7%) implying a rising trend which is a positive effect on the JPY ,since if the manufacturers increase their purchasing of machinery it signals that the manufacturing industry is in an expansionary phase.
It appears that the JPY will continue to float on relatively quiet waters, and that the direction will be directly effected by the ongoing USD weakness.
Technical News
EUR/USD
Daily and hourly indicators are in neutral territory which indicates range trading today, traders need to pay attention to the bullish flag structure which is establishing on the 4 H chart and may signal an upcoming bullish trend however not yet completed. In case of completion, this pair may head to 118.83 the Fibonacci resistance (61.8%) and then going long seems to be the preferable strategy.
GBP/USD
After losing more than 230 pips in the last three days, the bearish sentiment continues. 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
Recent unwinding move seems to have bottomed at 114.00 and the pair has gone up since Friday. The daily studies are bullish, and the hourlies support the bullish notion. A breach through 115.00 will validate the move, and create a great opportunity for a long run buying position.
USD/CHF
The bearish rally continues at full steam, and is confirmed with extremely bearish dailies. The hourlies are a bit oversold, which indicates that traders should look for a high entry point before resuming the down trend which appears to have plenty of room to run. A breach through 1.1495 will validate the move and take it to the 1.1480 zone
The Wild Card
Crude Oil
The strong momentum continues. Crude Oil now consolidates around 94.90 with a clear intention to continue the uptrend. The dailies are showing the third consecutive bearish cross. That provides Forex traders with a great opportunity to establish an entry point and continue the bullish ride.
Economic News
USD
The bearish trend on the greenback continued yesterday as it once again got weaker against the sixteen most actively traded currencies, but mainly against the Cable and the 13 nation currency. The greenback's value kept falling yesterday, and has reached a new record low against the EUR at 1.4663.
The belief of many Forex traders has been that even more pain is yet to come for the U.S. economy. We are only in the first phase of the tumultuous state of the weakening US economy, as banks in the United States are yet to reveal all the losses that have occurred in the mortgage sector. We are still expected to witness additional downward slides which will create further pressure on the greenback in the short and long term, as we saw on Sunday when Chuck Prince, CEO of the U.S. bank Citigroup quit, taking the blame for unexpected losses of $8-11 billion before taxes.
The greenback is 12.5% weaker against the EUR than it was a year ago, compared with a 3 percent slide against the JPY and a 5.4% drop against the Chinese Yuan.
The dollar looks to decline more as the outlook of lower Fed rates will stimulate investors to alter assets into higher-yielding currencies. It seems like the huge losses from subprime-mortgage and the credit crisis will continue to grow and emphasize uncertainty, which will only obligate the Federal Reserve to cut interest rates on Dec. 11, the third time this year.
EUR
The EUR kept up its forward progress in a firm and solid direction against the US dollar on Tuesday, even after the U.S. Federal Reserve cut interest rates by a quarter of a point last week. The EUR and the GBP have been hiking steadily against the US dollar since August, due to uncertainties in the strength of the U.S. economy, on the basis of the subprime credit crisis. Yesterday the 13-nation EUR traded at $1.4556 in morning sessions, down from its record high of $1.4545, and as it is expected the US dollar may fall to $1.50 against the EUR by the end of the year. The U.S. economy is on course for a serious slowdown and still faces upcoming pressure. Outside of the US growth and a weaker dollar there are boosting exports from the US to Europe. Many investors began recently to relocate numerous funds to European countries where their deposits and mixed income investments can obtain higher returns. The Euro is being pushed forward by sentiment that the European Central Bank is working slowly but surely to increase rates. The pound will benefit from expectations that the Bank of England will not touch rates, and will leave them safe and sound rather than follow the Fed in cutting the cost of borrowing.
JPY
Yesterday, the JPY fell against all sixteen of the most-actively traded currencies. The JPY declined to 166.74 per euro, and may fall to 167.50 per euro today. Australia's dollar strengthened 1 percent against the JPY while New Zealand's currency gained 2%. In addition, yesterday saw Japan's index of leading economic indicators published. The index dove to zero for the month of September after a mark of 27.3 in August. The index hit zero for the first time since December 1997.
The Bank of Japan kept again its benchmark borrowing cost at 0.5% last week, the lowest among major economies but still the JPY is being considered as a favored currency among many forex trading investors for carry trade positions for the long term.
Technical News
EUR/USD
The 4 Hour bullish channel was breached and the new all time high was set at 1.4664. The Momentum and RSI indicators still correlated and have a positive slope, thus indicating a possible continuation of the current bullish trend. Traders should wait for the reversal which may take place soon and is expected to test the 1.4577 Fibonacci support level.
GBP/USD
An opposite head & shoulder structure is establishing on the 4 Hour chart, indicating the continuation of the current bullish trend. 2.1050 is the next resistance level which this pair is going to test. Going long seems to be preferable.
USD/JPY
A falling wedge structure in a bearish trend has been established on the 4 Hour chart which may bring this pair to test the 113.00 support level. It should not however break the level and therefore going long at this value might be preferable.
USD/CHF
An opposite 1 2 3 wave structure is establishing on the daily chart offering this pair to consolidate at 1.1100 in the long term.
An opposite 5 Elliott waves is establishing telling us that this pair should test the 1.1300, in case of a breakout the next support level is located at 1.1253.
The Wild Card
GOLD
A bullish channel was established on the 4 Hour chart and a breakout took place which caused the Gold to strengthen to 845.28. Currently, the slow stochastic and RSI indicators are clearly on overbought territory and Forex traders should anticipate a reversal. There is still room for the Gold to strengthen before any such reversal takes place.
08/11/'07 - ECB Interest Rate Statement, Crude Oil nears $100
Economic News
USD
Yesterday, U.S. stocks fell, erasing gains that were made since the Fed's Sept. 18th interest-rate cut, which accelerated a sell-off in the U.S. currency. The dollar slid even further after comments from senior Chinese officials stirred concerns about China's central bank shifting reserves away from the U.S. currency. As a result, the USD has been dragged down to its lowest point in 30 years against a basket of six rivals yesterday.
Meanwhile, the recession of the housing sector is progressing. Following the downdraft from the housing industry spreading to other sectors, traders increased wagers that the Fed will lower its benchmark interest rate to 4.25% by the end of the year. Futures contracts show that the odds of a 0.25% point rate cut at the central bank's Dec. 11 policy meeting are currently standing at 70%. There are also a lot of concerns about the health of the U.S. economy in general and the greenback seems to be losing its status as the major global currency.
Today the most significant news coming out of the US will be the Unemployment Claims. The figure is expected to be released at 320K, slightly better last month's mark of 281K. Later, at 15:00 GMT, Fed Chairman Bernanke is scheduled to speak about the economic outlook during his testimony in Washington DC. Bernanke is known for dropping clues during his speeches, as it is the FOMC's tenet to keep the public aware of their monetary policy before interest rates are changed. Heavy market volatility is often experienced during Bernanke's speeches. Recent price action in the EUR\USD suggests that the aggrandizement of the currency pair may not stop at least until the 1.50 level is breached. According to our internal data, positioning has not reached extremes, as traders continue to fade the move.
EUR
The EUR surged vs. the USD, on track for its biggest one-day percentage gain this year, sending European stocks down nearly 1%. The European currency hiked after Chinese officials suggested that their country should look to diversify its 1.4 trillion dollar currency reserves into stronger currencies and explicitly mentioned EUR, which sent the single currency flying to fresh record highs. Yesterday, the EUR raced to an all-time high of $1.4730, before retreating to $1.4627 in the late evening, still up 0.7% on the day. It's likely that the EUR will reach 1.50 against the USD, but whether or not this will happen soon will be dependent upon ECB President's Trichet comments at today's news conference regarding the interest rate statement. The European Central Bank has kept a 4% overnight lending rate for the last four policy meetings. The ECB is expected to announce today, that it will keep interest rates unchanged. The central bank's statement and the news conference, in which President Jean Claude Trichet will offer up the monetary policy's outlook on growth and inflation, could trigger a strong move from the high flying EUR. Failure from Trichet to show any displeasure with the EUR rally at today's press conference will most likely trigger a move to $1.50 per Euro.
JPY
For the past two weeks, the JPY had been trading in a range, but yesterday broke downward, closing in on a two month low. A sharp rise in risk aversion only exacerbated the greenback's downfall against the JPY, with the USD losing a substantial 200 pips to lows of 112.66 JPY. Growing uncertainty on the global economy, which faces rising losses from the credit crisis, was fed by higher oil prices, encouraging investors to unwind carry trades funded in JPY, thus boosting the Japanese currency. The impact of the high JPY is a substantial worry for the Japanese economy and if Crude Oil does rise as expected toward the $100/barrel level, this will lead to rising gas prices and start to really have an impact on the already dampening Japanese domestic demand.
Today, Japan's economic calendar gives us the release of Machine Tool Orders and the Eco Watchers Survey; neither of which should be particularly significant in moving the market. The JPY may push further upwards against the USD today following Fed Chairman's Bernanke speech.
Technical News
EUR/USD
After the touch at the all time high of 1.4735, the pair now consolidates at 1.4630 and appears to be heading to 1.4600. The momentum is very bullish on all fronts, especially on the 4 Hour chart, where we see a bullish cross forming, which will probably take the pair higher, back to the 1.4700 level.
GBP/USD
The cable is in the midst of a very strong uptrend which peaked at 2.1060 yesterday. The hourly charts are showing that a certain correction is imminent, while the daily charts are showing an intensive bullish sentiment. It looks as if the 2.0900 level might be reached before the cable breaks an additional record level.
USD/JPY
The ongoing wide range the pair has been going through in the past two months has been violently breached. The USD/JPY is steadily heading to 112.00 which is a key support level. A breach through the key level will validate a much deeper downtrend that might end at 111.00 on a weekly perspective.
USD/CHF
The 1.1250 level failed to be breached yesterday, and was marked as a very strong support for the pair. The 4 hour chart is indicating a strong bearish momentum and dailies support the notion that we might see 1.2175 today. Looking for a good short entry point appears to be preferable today.
The Wild Card
Crude Oil
The uptrend the Oil is going through at the moment is probably the strongest trend in world markets today and has massive implications on world wide economy. Forex traders have a fantastic opportunity to join a trend which is supported by much more than the technical indications we see in the hourly and the daily charts. A great entry point might be available at the moment as the pair now floats around the bottom section of the 4 hour channel and might be a great entry point for Oil's journey into the 100$ zone.
Online Forex Trading
Veterans Day - US Market Is Closed. Japan's GDP on tap
Economic News
USD
Since the beginning of last week, the USD posted a modest rebound on expectations that this week's U.S. economic data will help to determine the condition of the biggest economy. Last week's US calendar showed a poor picture for future growth and inflation prospects, with Import Price Index going sharply higher and Consumer Confidence is at its lowest in 2 years. Following the string of that disappointing data, Fed's Chairman Ben Bernanke offered a relatively pessimistic outlook for domestic growth and inflation prospects last Thursday, stating that the U.S. GDP expansion would slow considerably in the final quarter of this year. Bernanke also forecasted that inflation will remain elevated through the same period.
These trends leave the traders with the difficult prospects of slowing economic activity. Moreover, investors worry that financial institutions have not yet revealed the full impact of the turmoil triggered by the subprime crisis, fearing that more U.S. financial firms will be hit by credit market turmoil, which will subsequently influence the U.S. currency. High energy prices are also a key factor in the latest slowdown. With Crude Oil reaching almost $100 a barrel, consumers are forced to cut back on a very large spectrum of purchases.
Today, the U.S. market will be closed due to the Veterans Day Holiday but the rest of the week is expected to be quite full with economic events that will indicate whether Federal Reserve Chairman Ben Bernanke was right to be more worried about growth than inflation. The forecasts for October Retail Sales are low, currently standing at 0.2%. Later, Producer and Consumer Prices might surprise to the upside given the rise in food and energy prices. In addition, Pending Home Sales, the Empire State Manufacturing Survey and the Treasury International Capital flow report are also expected during the week.
EUR
Last week was a very extreme week in Europe, as most of the European currencies were traded at record level, including the EUR which topped a new all time high 1.4745, and the GBP that touched 2.1150 which is a level we have not seen in more than 26 years. It was quite clear that the situation is mostly deriving from the ongoing crisis in the US market much more than EUR strength.
The most important piece of data expected to come from Europe today is the UK PPI Input and Output at 9:30 GMT. The Index measures the rate of inflation (i.e., the rate of price changes) experienced by manufacturers when purchasing goods and services. The expectations on the input release which is the important of the two are lower than last month's 3.2% and now stand on 1.5%. The release might cause the GBP to continue it local correction against the crosses. Other than that the calendar is quite empty, and together with closed US markets, we should have a calm trading day with low volumes and liquidity.
JPY
The JPY was the biggest beneficiary of the last week. Risk aversion has dominated and we've seen the carry trade unwind on credit-market concerns. The Japanese currency rose 11% against the USD since the end of June and has hit a 1.5 years high on Friday as fears of wider credit-related losses at U.S. financial firms dulled investor's appetite for risk, the causing an unwinding of carry trades.
The JPY is now trading at 110.15 level and we estimate that if the Yen will break below 110.00 it would probably continue to 105.00 before heading up again. By now, falling house prices and high energy costs had pushed the U.S. consumer confidence to its lowest. Fear is predominant in the market that the worst is not behind. As a result, all risk is getting liquidated and the JPY benefits tremendously when the carry trades fail to return.
This week, the Japanese economic calendar will be relatively packed with major news events starting today with quarterly GDP. Later on Tuesday, an Interest Rate Announcement will be followed by the BOJ's Governor Fukui Speech during which traders will look for clues on future monetary policy action. Wednesday will seal the string of Japanese macro data with an Industry Activity Index with the figure expected to release in negative territory at -1.0%. Apart from that, the JPY will also be determined by if there is any further write-down news from U.S. financial institutions. If there are more to come, then the yen has more chance to appreciate.
Technical News
EUR/USD
After topping at the all time of 1.4745, the pair now corrects to the 1.4640 level, and appears to be having some more bearish momentum. There is a bullish cross starting to form on the 4 hour chart and showing that the move up will probably resume shortly. The target price will probably be around 1.4710.
GBP/USD
After a massive uptrend that took the cable to the 2.1150 level, the pair is now in the midst of a very aggressive corrective move. The hourly charts are showing that the trend still has momentum, and if the 2.0750 level will be breached a validation of a longer corrective move will occur. Selling the cable on the short run appears to be preferable.
USD/JPY
The breach through the wide range is showing the full power of the bearish momentum. The pair is trading at the 110.00 levels, and another bearish move is quite imminent. All the indicators are showing that the bearish momentum has not yet said its last word, and a target price of 108.00 will no be a big surprise.
USD/CHF
There is a very strong support level that the pair is establishing at the 1.1200 level. 3 consecutive doji bars on the 4 hour chart are showing that some kind of move is imminent. The aggressive bullish cross is showing that as for now the support level might hold, but further indication should be found in the hourlies as the smoke clears. As for now the hourlies are neutral.
The Wild Card
Crude Oil
The oil has created a local low at 94.80 and is now gathering the momentum for the continuation of the journey up. The RSI on the 4 hour chart is floating at 50 which provides forex traders with a great entry point to join the bullish wagon. 96.00 appears to be a valid target price for the current move.
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13/10/'07 - Pending Home Sales on Tap.
Economic News
USD
Yesterday, the greenback continued it's much needed recovery and it made some significant gains against the EUR and the Sterling. The main reason for the USD rebound this week was concern that U.S Banks will continue to project credit related losses and this caused carry trades to unwind. The leading financial institutions in the U.S have already reported more than $50 b in losses and many investors are sure that there is more to come. Therefore this created a risk-aversion scenario as investors reduced there risk abroad and backed away from investing in higher yielding currencies. Last week, Fed Chairman Bernanke created more negative sentiment surrounding the greenback by stating that the he expects the rising oil prices to increase inflationary pressures and that there will be a significant U.S economic slowdown in the near future. However ,with investors now shying away from carry trades and with losses in financial stocks expected to spread globally, the greenback may just be able to hold on to its positive momentum particularly against the Sterling and other higher yielding currencies despite losing some ground this morning. Nevertheless, the majority of analysts believe that this was just a corrective move upward and that the main trend of a bearish dollar will prevail.
Yesterday, there was no significant economic data released from the U.S as the country celebrated the Veterans Day Holiday so the greenbacks rally may have been slightly exaggerated. Today, there is no market moving news expected from the U.S and the market will look ahead to the CPI, PPI and Retail Sales figures, which will be released later on this week, and will help investors better gauge the state of the U.S economy and the direction of future interest rates. For today, traders can expect less volatility and the greenback should be able to maintain its positive momentum as investors remain risk-averse.
EUR
Yesterday, the EUR dropped sharply against the USD on the back of widespread risk aversion by investors. There is a hint of negative sentiment beginning to surround the EUR as investors fear that the ECB will intervene in the currency markets by selling its own currency in order to protect exports and growth as the EUR rises further. The German economy is heavily reliant on exporters and it is one of the key players in determining Eurozone growth performance, so the ECB will be hesitant to see the EUR strengthen any further. Therefore the current risk aversion sentiment coupled with a possible intervention by the ECB in the currency markets will dampen any upward resurgence by the EUR.
There was no significant data released from the Eurozone yesterday. Today the most important news that will come out of the European market will be the German Zew Economic Sentiment, which is expected to release below the previous figure of -18.1 at -19.5. This figure measures the institutional investor sentiment and it will give another indication to the market of whether the strong EUR has made a noticeable negative impact on the Eurozone economy.
JPY
The JPY strengthened all across the board yesterday on the back of a sharp carry trade unwind driven by the turmoil of major U.S financial institutions. The Japanese interest rate, at 0.5%, is the lowest in the industrialized world and so it gained significantly against all the other major, particularly versus the carry trade favorites such as the AUD and the NZD. However, the bullish rampage of the JPY was halted earlier today during the Asian trading session on the back of speculation that BoJ Governor Fukui will hint at leaving interest rates unchanged in the near future. The main reason for this speculation is that the decline in the housing sector will significantly jeopardize economic growth. Earlier today, the Japanese interest rate statement remained unchanged and released inline with expectations at 0.5% but all attention will now be focused on BoJ Governor Fukui's speech. Although carry trades have unwounded very sharply, if Fukui hints at leaving interest rates unchanged then the JPY will lose more of its recently gained ground, particularly against the USD and the EUR.
Technical News
EUR/USD
There is a bullish 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 returned to the 1.4628 resistance level. The price should continue to move upwards in the 1.4600-1.4730 range. As it seems, the bullish 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 period, 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 2.0800 again. A preferable strategy might be going long for the short run.
USD/JPY
A significant bearish trend is shown on the daily chart and it seems that there is still steam left for the continuation of the JPY strengthening as the Slow Stochastic ,RSI and Momentum still have a negative slope.
USD/CHF
The RSI and Slow Stochastic support the current bearish trend when the next support level is located at 1.1222, in case of a break out we may see this pair breaking the 1.1200 and heading for 1.1173.
The Wild Card
Gold
The 4 Hour chart implies that the current bullish trend is to maintain its momentum and when the first barrier is located at 807.28 and expected to breached since the Slow Stochastic, RSI and Momentum are supporting this bullish trend. Forex traders may use this opportunity to go long which seems preferable today.
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14/11/'07 - U.S Retail Sales, PPI on Tap.
Economic News
USD
As has been the case for the last several weeks, the US news cycle should have a great effect on how the greenback responds versus the most actively traded currencies. The greenback had seen some gains from late trading last week into early this week, only to see it weaken again yesterday. Investors continued their cautious behavior avoiding risk-laden trades while awaiting today's economic schedule.
Today, the dominant US news consists of Retail Sales and Core Retail Sales figures, as well as the PPI and Core PPI reports. Retail numbers are forecast to come in less than in previous months, however even if there is a rise in such numbers, it doesn't look like it will effect the already tenuous trader sentiment versus the dollar. As short term price action helps to slow down greenback losses, traders are gearing up for how the Fed will react to the deteriorating state of the dollar.
The release of the aforementioned events is to be followed by a speech at the 25th annual Monetary Conference in Washington D.C. by Fed Chairman Ben Bernanke. Bernanke is slated to discuss FOMC communications; however it is safe to assume that he will address questions regarding the day's consumer reports as well. As has become the norm, we should expect some volatility in and around the Fed Chairman's speech, as he is known for leaving hints of future US policies. As more important information is still to be seen before weeks end, we should see the greenback continue once again to fall in today's trading.
EUR
Yesterday saw the release of the German ZEW survey fall to its lowest point in fifteen years. Still, the EUR returned to its latest form against the greenback as it gained throughout the day. Euro-zone businesses continue to strengthen amidst much more negative views from analysts. The likelihood of the ECB hiking interest rates continues to grow as even the troubled German economy has staved off effects from the strengthened 13 nation currency and continues to bring promise to traders. The ECB will keep a close eye on Crude Oil prices as a significant rise toward $100 per barrel will only solidify the inevitability of an ECB interest rate hike. On the contrary, there are several treasury officials pressuring the ECB to wait with the rate hike since they think the EUR is overvalued, which severely hurts Euro zone exporters and has a negative impact on all of the Euro zone economy .
Today's economic calendar in Europe is highlighted by German GDP numbers, which are expected to be high, as well as words by ECB President Trichet. The president will speak in Paris at a conference held by Banque de France and Fédération Bancaire Française at 8:00 GMT. With the lion's share of news coming from the US and the UK, the euro-zone should look to see steady growth to continue with yesterday's trends.
JPY
The positive trends in carry trades continues after yesterday's interest rate decision which left the interest rate unchanged and once again pushed the JPY down today. Still being affected by remarks made by Bank of Japan Governor Fukui, the JPY slid against the 16 most-actively traded currencies, most versus the Aussie and New Zealand dollars. With equity growth being shown across the board, investors are more inclined to invest in risky positions thus driving down low yielding currencies such as the JPY.
The Japanese calendar is relatively barren for the rest of the week, with only two minor news events scheduled. Today's Tertiary Industry Activity Index along with Thursday's release of Monetary Policy meeting minutes, should do little to change the JPY. It has become more evident that the movement in the JPY is in the hands of the sub-prime mortgage crisis in the US coupled with growth in EUR dependability. Uncertainty, of which there is a lot these days, is what can hurt the Japanese currency the most. In Fukui's words, "As the global capital markets undergo a re-pricing of risks, financial markets continue to be unstable". It is imperative to keep an eye out on the coming day's news events from Europe an the US to properly gage the direction of the JPY, all signs now continue to point down.
Technical News
EUR/USD
The Pair was range trading yesterday between a support level of 1.4590 and a resistance level of 1.4620. Should the pair trade today above the pivot level of 1.4675 we could see a break through the resistance level and then the bullish trend for the EUR/USD could continue up to the 50% Fibonacci Level. An outbreak through the resistance level instead could indicate a drop down to 1.4550, the 0% Fibonacci level.
GBP/USD
The 4 hour chart indicates on an upcoming bullish trend when the long term Moving Average (Weighted 21) crossed by a bullish bar. Additionally the ADX (Average Directional Movement) also strengthens our opinion while the DI+ is on its way to crossing the DI- from below which is considered a bullish signal. Going long seems to be preferable.
USD/JPY
The pair moved yesterday with a slightly bearish trend between the upper level of 110.50 and the lower level of 109.20 slow stochastic on the hourlies indicates that it won't become a reversal soon and that the pair might instead continue range trading today. Also MACD and RSI reside in neutral territory and thus point to an uneventful day for the USD/JPY.
USD/CHF
The 4 hour chart implies on an upcoming bearish trend as the Slow Stochastic crossed at 78 and has a negative slope, however we need to pay attention to the current 4 hour bar, when a positive bar may indicate an upcoming bullish trend and negative bar will imply range trading. Traders need to be aware during the next 4 hours where the market is headed and to take action.
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 plenty of room to run. This provides forex traders with a great opportunity to go short on a very solid downtrend.
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15/11/'07 - CPI Data on Tap.
Economic News
USD
The greenback resumed its downhill slide against the EUR yesterday, although it did recover slightly later on, as problems in the U.S housing sector coupled with credit woes still making investors negative towards the U.S currency. Although the USD slipped against most of the high yielding currencies, it did manage to gain some noticeable ground against the GBP on the back of the BoE's disappointing inflation report, which highlighted the fact that the BoE is facing weaker growth and higher inflation. There are many analysts that believe that the Fed is intentionally keeping the greenback at low levels in order to improve the competitiveness of U.S exporters against the Chinese in the global market and this is possibly the main driver of the current negative market sentiment surrounding the dollar. The Fed has lowered its key interest rate in its last two meetings and it is expected to do so again next month, with the main aim of preventing the U.S economy from hitting a recession. However the main sector that this rate cut has benefitted so far has been the U.S stock market which has recently been reaching all time highs, but the financial, automobile, manufacturing and housing sectors are all in a slump or in a so-called “recession”. Therefore maintaining a weak dollar may be the best option for the Fed in order to maintain growth and prevent the economy as a whole from falling into the recession pit
There was also a string of significant forex trading data released from the U.S yesterday that did not help the greenback's cause. Although the headline Retail Sales figure released inline with expectations at 0.2%, the core figure came in slightly below the previous figure of 0.3% at 0.2%. Also both the headline and core PPI figures released lower than expected at 0.1% and 0.0% respectively. Looking ahead to today we are expecting the CPI figures along with the Empire State and Philly Fed manufacturing surveys. These figures may surprise on the upside which will temporarily boost the fledgling greenback. However it will be important to note if the lower producer prices have been passed on to the consumer. The general picture for the greenback is very much bearish as this seems to be inline with the Fed's long term objective of sustainable growth, however there will be rallies on its way down as the market continues to push the USD into oversold territory.
EUR
The EUR resumed its bullish rampage against the greenback yesterday as the grey cloud continued to hover over the U.S currency. However the EUR did struggle to maintain its gains despite the strong European economic data released yesterday. The most significant news released from the Eurozone yesterday was the German GDP figure which released slightly better than the expected figure of 0.6% at 0.7%. The stronger EUR may be explained as the main driver of Tuesday's weaker German investor sentiment report, as the German economy is heavily reliant on exports, and this may have raised speculation that the ECB will intervene to halt the EUR's sharp climb. However yesterday's positive German GDP report negates the possibility of ECB intervention as there is no reason for the ECB to intervene if the economy is expanding.
It must be stated that the possibility of a direct ECB intervention in the currency markets is highly unlikely but nevertheless it will be considered if the strengthening EUR begins to dampen Eurozone growth. In the meantime the ECB seems to be moving step-in-step with the Fed with regards to its view on the current price of the greenback and the EUR. Therefore although the EUR is currently faltering slightly due to European inflation concerns still being skewed on the upside, the longer term picture for the EUR is still rosy.
JPY
The direction of the JPY is heavily reliant on whether carry trades are the preferred strategy. There has been a strong correlation between carry trades and the performance of the Dow Jones, and therefore the JPY has had a sharp rise of late. However earlier today, during the Asian trading session, the JPY lost some of its gained ground against most of the majors. This hiccup in the JPY bullish path was as a result of speculation that Japanese mutual funds were investing in higher yielding countries, in other words carry trades were once again the name of the game. Also there was negative news released out of Japan as the Tertiary Industry Activity Index released below the expected figure of -1.0% at -1.6% and this did not help the JPY's cause. There will be more news out of Japan tonight as the BoJ Monetary Policy Meeting Minutes will be released. It seems that the future direction of the JPY could heavily depend on the performance of the Dow, however in the meanwhile the carry trade unwind may be set to continue.
Technical News
EUR/USD
The pair is showing signals of fresh bullish momentum, and has already corrected back the entire fall to 1.4540. Traders should observe the 1.4700 level as an additional break through that resistance level would validate the bullish move.
GBP/USD
After dropping 600 pips, the cable is consolidating around 2.0590. The hourlies are showing moderate bullish momentum, yet the overall direction is surely down. 2.0550 is a key support level, and a breach will confirm that the pair is going to the 2.0400 levels, probably before the weekend.
USD/JPY
After a touch in the 109.00 level and a correction back to the 111.50, the bearish momentum is back. There is a bearish cross on the 4 hour chart that indicates a correction, probably to the 110.00 levels. The dailies are showing that the bearish momentum is also valid for the longer run.
USD/CHF
The pair is showing strong bearish momentum and is now testing the 1.1200 level. A violent break through that level will probably take the pair to the 1.1140 zone quite quickly. On the upper side, 1.1250 is a very strong resistance, that if breached we might see a correction to the 1.1320 level, before resuming the bearish grand move.
The Wild Card
Gold
The bearish momentum is accumulating power, and appears to be back on track. There was a 130 pips correction that appears to be over, and gold is now ready to continue its bearish move to the 780.00 level. This could be a great timing for forex traders, as gold is still traded at a relatively high price which could be an excellent entry point.
Will The US Unemployment Claims Reverse The Greenback Trend.
Economic News
USD
Yesterday the greenback weakened sharply all across the board on the back of the release of the FOMC Meeting Minutes. The greenback slipped to new all time low against the EUR touching the 1.4852 mark, as the minutes gave another strong indication to the market that the Fed will once again cut rates in order to prevent the U.S economy from slipping into recession. The Fed indicated that it expects U.S growth to slow to between 1.8 and 2.5%, which is much lower than previous forecasts. Therefore the Fed is now expected to cut rates by at least 0.25%, in order to stimulate growth by attempting to alleviate the housing and credit crisis.
However, the dollar selling began well before the FOMC Minutes with the release of weaker than expected Building Permits figure. This figure was forecasted to come in at 1.20M but it released at 1.18M, showing a sharp drop from last month's figure of 1.26M. This downside surprise increased the pressure on the greenback as it indicated that the earlier rate cut by the fund is struggling to provide the housing slump with some reprieve and it raised concerns of curbing future economic growth. There was some positive news for the greenback as the Housing Starts figure released better than expected, but this was greatly overshadowed by the negative Building Permits figure and by the FOMC Minutes. The weakness of the dollar yesterday also caused commodities to become more appealing to investors and this shoved Crude Oil passed the key $99 mark. The rising price of oil coupled with the continued subprime crisis will put immense pressure on the U.S economy. However the weak dollar may cause exports to boom as U.S exporters become more competitive on the global market.
Looking ahead to today, the most important news to be released from the U.S will be Unemployment Claims, which is expected to release slightly weaker than last month and Consumer Sentiment, which is forecasted to remain unchanged. If these figures do not cause any major surprises then the greenback should consolidate today after dropping to record lows yesterday. However the dollar sentiment is still very bearish and this is not likely to change in the near future, particularly since many analysts believe that it is in the Fed's interest to maintain a weak dollar.
EUR
The EUR continued its bullish rampage against the greenback hitting another record high. Although the EUR has been a very resilient currency since its inception, yesterday's new high was driven mainly by the negative sentiment surrounding the greenback as opposed to actual EUR robustness. The only news released from the Eurozone yesterday was the German PPI, which came in at a beating expectations figure of 0.4%. This was another positive sign for the EUR as Germany is one of the key players in the European economy. However the strong EUR may concern the ECB as Germany is heavily reliant on exports, but so far there have been no noticeable indications that the strong EUR is dampening growth. Today is also relatively light on Eurozone news as we are only expecting the Italian Retail Sales figure and it should not have any impact on the EUR. After yesterday's sharp spike against the greenback, the EUR may retreat slightly today but with the negative dollar sentiment being so strong, it will target new highs against the fledgling U.S currency in the near term.
JPY
Carry trades continued to unwind yesterday as the volatility of the currency markets is steadily raising the cost of hedging. Therefore since the carry trade strategy mainly involves borrowing from Japan where interest rates are low, the unwind has caused the JPY to gain significantly in recent weeks. The JPY continued to rise yesterday against the greenback after disappointing news put more pressure on the U.S currency. Also the JPY managed to maintain its bullish trend against the high yielding currencies as U.S subprime mortgages widened.
Earlier today, during the Asian trading session, the Japanese trade balance released slightly lower than the expected figure of 1.08T, at 1.07T. Also the All Industries Activity Index, which measures the change in spending for goods and services, released in negative territory at -1.6%. However this could not stop the JPY's positive momentum which should continue in the near term on the back of increased risk aversion.
Technical News
EUR/USD
After yesterday's ascending triangle breakout shown on the 4 hour chart, brought this pair to an all time high of 1.4856, as an upcoming bearish trend is expected. This might send the pair to the 1.4775 (Fibonacci 76.4%) support level before gathering some new energy. Going short for the short term, seems to be preferable today.
GBP/USD
Today, this pair may hover between 2.0695 - 2.0571 as an upcoming bearish trend is expected and the first target price is located at 2.0637 (Fibonacci 76.4%) support level. In case of a breakout this pair may test the 2.0572 (Fibonacci 50.0%) second support level. Going short seems to be preferable today.
USD/JPY
The daily chart is showing a continuing bearish trend and we may see this pair consolidate at 107.70 within the next 5 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 109.00 level. Going short seems like the preferable strategy.
USD/CHF
The 4 hour chart implies that an upcoming bullish trend is expected as the RSI and Momentum indicators are showing a positive slope, and the Slow Stochastic is crossed in oversold territory. Today, going long might be preferable.
The Wild Card
Crude Oil
An upcoming bearish trend is expected as the Slow Stochastic is crossing on overbought territory. It is supported by the RSI which is also hovering at overbought territory and with a negative slope offering a reevaluation to 97.45 USD per barrel. Those forex trading should be patient and seek an attractive entry point for a long position somewhere below 97.45 USD.
22/11/'07 - US Market Closed for Thanksgiving.
Economic News
USD
Yesterday, the USD posted a mixed performance ahead of today's Thanksgiving holiday in the US, remaining relatively unchanged against major currency counterparts. The greenback continued to hover around record lows against the EUR as expectations that further Federal Reserve interest rate cuts were reinforced by the Fed's projection that the U.S. economic growth will probably slow next year. Federal Funds futures now show that traders predict a 90% chance of a 25 basis point rate cut during the FOMC's December 11th meeting. Such clear interest rate expectations can only hurt the dollar further through short-term currency trading.
The sentiment regarding the U.S. dollar continues to worsen after the Fed stated that tighter credit conditions and high energy costs would likely slow the U.S. growth next year by between 1.8% and 2.5%, sharply below its previous forecast.
Today, all U.S. financial markets are closed due to the Thanksgiving. During the holiday, relatively narrow trading ranges are expected, while recent volatility shows that traders are willing to force major moves ahead of the typically illiquid Thanksgiving holiday. Trading volumes should remain increasingly thin and we believe that risks remain for a slowdown in price movements in the days ahead.
EUR
There was a significant pullback in European stocks yesterday. European shares staged their largest daily fall since the onset of the credit crisis in August. Crude Oil and EUR prices hit record highs yesterday, as local exporters were the ones most greatly affected by the price jump. The EUR hit a record high of $1.4870 against the USD before easing to $1.4833. Since the middle of August, the currency pair has appreciated 11% in total. The hawkishness of the ECB and the remarkable resilience of the European economy have contrasted sharply to the increasingly dovish bias of the Federal Reserve and deterioration in the US economy. By now, the FED is the only major central bank actually lowering interest rates while everyone else is either on hold or raising them. Thus, until the ECB lowers rates, the greenback's weakness could continue.
With the US markets closed today for the Thanksgiving holiday, the European currency looks to be in for a test, as plenty of EUR economic data is due to be released. This includes the EUR Current Account, the GBP quarterly Business Investment, the Euro zone Industrial New Orders and BOE Deputy Governor Lomax Speech, adjourning the trading session. With the greenback coming under fire in the last few weeks, there is still room for the EUR to reach new heights. We estimate that the 1.50 level still remains the next target for European currency.
JPY
The JPY surged to its highest level against the USD in more than 2 years yesterday, as investors pared back exposure to risky trades on worries about credit market losses and the health of the U.S. economy. The Japanese Yen hit a record high as global stocks weakened and Crude Oil pushed toward $100 a barrel. Japanese products are continuing to become more and more expensive in other countries. Losses in global credit-markets are fueling the JPY rise, while Japanese companies are continuing to struggle with slowing economic growth in the U.S., their largest market for exports. The Japanese government's efforts to revive the economy after more than a decade of inconsistent growth, does not seem to bear fruit.
Given the closed U.S. markets and a lack of data on the Japanese side as well, we can expect to see the JPY trading around the 109 level with a possibility of a slight depreciation against the USD.
Technical News
EUR/USD
A rising wedge structure is forming on the 4 hour chart as the pair now floats at 1.4818 - 1.4860. The 1.4818 level might be a good entry point for a long position. If that level is breached, a bearish correction move will be validated and might take the pair to the 1.4780 level.
GBP/USD
A bullish channel is establishing on the 4 hours chart, as the top barrier is located at 2.0731. It seems preferable to go long and wait for the upcoming reversal at 2.0717- 2.0731 and to consider entering short position.
USD/JPY
The 2 hour chart implies that the bullish trend is out of steam and has failed to break the 109.15 (Fibonacci 38.2%) barrier. The JPY will probably continue to strengthen; as the bearish momentum on the daily chart is extremely strong. Going short appears to be a preferable strategy today.
USD/CHF
After a failed attempt to breach through the 1.1000 level, the pair now consolidates around 1.1020. There are very intensive bullish crosses forming on both the 4 hours and the daily charts which indicates that we might see a correction on the local level. It looks as though we will see the pair touching the 1.1060 before dropping again and resuming the bearish course.
The Wild Card
Crude Oil
The bullish trend has returned with full power, and it appears that Oil will probably be heading to $100 a barrel quite shortly. All oscillators are very bullish and there is a great opportunity for forex traders to jump in the strong bullish trend before the $100 bonanza begins.