ForexYard's Commentaries - page 11
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
13/12/'07 - US Retail Sales And PPI On Tap
Economic News
USD
The USD fell vs. the EUR on Wednesday after the previous day's 0.25 point rate cut from the Federal Reserve disappointed investors hoping for more aggressive action to help the economy and credit markets. It actually looks as if the Fed delivered the bare minimum of what was possible. Some investors expected a larger reduction of a 0.5 point to stave off a recession. The Fed's board also reduced the discount rate, covering direct loans to banks, by 0.25 point to 4.5%, half of what many economists predicted. In addition, a joint decision by the U.S. Federal Reserve and other major central banks to increase liquidity available to private institutions also helped to ease fears over the current credit market crisis. The Federal Reserve plans to reduce the "elevated" short-term funding pressures by injecting cash to banks through auctions and providing $24 billion in currency swaps.
This negative USD momentum was further exacerbated yesterday by the weaker than expected U.S. trade balance with the final figure of -57.8B.
Today's the US calendar is expected to be more supportive of the USD. The most significant news coming out of the US will be the Retail Sales and the PPI. Both of these indicators are expected to fair better than in the previous month figures.
EUR
The EUR made strong gains against some of the majors yesterday, particularly against the USD and the JPY. The EUR gained against the JPY as there was a resurgence of risk-appetite among investors thereby bringing the carry trade strategy back into action. The EUR rose from 1.4639 to 1.4748 against the greenback during the European trading session. This sharp rise against the USD was mainly driven by the negative sentiment surrounding the greenback in the aftermath of the disappointing 0.25% rate cut by the Fed. Many investors felt that a 0.5% discount rate cut, which is the rate that banks pay to borrow directly from the Fed, would have been more adequate in terms of alleviating the credit crisis. Therefore the EUR gained strongly yesterday as the dollar sell-off continued.
The main news yesterday was the Fed's decision to make up to 24 Billion dollars available to the ECB in order to increase the supply of dollars in the Eurozone and help alleviate the current credit squeeze. Analysts still view the European economy as being robust, but the ECB has been struggling to balance inflation versus growth, nevertheless yesterday's decided cash injection was seen as a positive sign for the Eurozone as it will provide credit relief . This will also set up a potential interest rate hike for the ECB, whose hands have been tied with regards to raising the interest rate at its last meeting because a rate hike would have caused further credit problems. There was more positive news for the Eurozone yesterday as Industrial Production released better-than-expected at 0.4%, thereby indicating an increase in the total value of output produced by factories, mines, and utilities.
Looking ahead to today, there is a string of news events to be released from the Eurozone and they are not expected to be market moving, however they will provide investors with another piece in the complex puzzle that is the state of the European economy. The greater outlook for the EUR remains bullish and yesterday's strong momentum could push the EUR up further today but traders should be cautious of an intraday correction as the EUR has lost some steam since its peak yesterday.
JPY
Amidst the release of the US Interest Statement yesterday, the Yen rose from a one-month low against the greenback. Speculation by investors was that growing losses in the credit market would trigger investors to shy away from high-yielding assets funded by Japanese loans.
The JPY posted a strong Wednesday as it gained versus 15 of the 16 most-actively traded currencies on the market, as the BoJ announced its attention to sufficiently fund its currency until years end, as its own exporters once again began to settle payments by way of the JPY.
As the JPY started yesterday's trading day it was slowly weakening its position against its major counterparts until just around 14:00 GMT shortly after the US Trade Balance was released to relatively expected results, when it saw a significant drop. EURJPY quickly went from 164.00 to just over 165, GBPJPY climbed from 228.30 to 230.25. Finally, the USDJPY jumped from 111.44 to hit a one month low of 112.47. The JPY than turned around and posted steady gains for the rest of the trading day, recovering from what at the time was unexpected price change.
On tap today in the Japanese economic calendar is the release or the Tankan Large Manufacturers and Non-Manufacturers Indices. The figure is expected to show that business confidence regarding profit and credit is dwindling. Indices are expected to be released at 23:50 GMT.
Tailor-made trading conditions?
Technical News
EUR/USD
After a very choppy trading day yesterday, the pair now consolidates around 1.4710 as the volatility goes down. The daily chart is bullish as the RSI is floating at the 60 level, which indicates that the momentum is still up. The hourlies are showing mixed signals with a slight bullish tendency. Traders should wait for a clear signal on the hourly level before entering the market today.
GBP/USD
The cable spiked to 2.0570 on yesterday's peak point, and has been correcting to 2.0425 since. The momentum appears to be bearish on the hourlies and mildly bullish on the daily chart. It looks as if the next target price on the short run should be around 2.0400.
USD/JPY
The bearish channel on the daily chart has been breached yesterday, and the direction appears to be up. Next target will be 112.00 and if breached will validate the final stage of the bullish move that might take it to the 113.00 levels. Going long appears to be preferable today.
USD/CHF
The correction move that was initiated at 1.0900 continues with full momentum, as the daily chart is showing that there is still much more room to run. The bullish notion is supported by the 4 hour chart which shows the RSI at the 50 level and ads to the ongoing bullish move. Next target price might be around 1.1400.
The Wild Card
Crude Oil
The bullish move has returned with full power, as Crude Oil now consolidates around 94.00. All oscillators are in a bullish formation, and forex traders now have a great opportunity to re-enter the very expected move up again to the 99.00-100$ a barrel. Being on the buy side appears to be very lucrative in the near future.
17/12/'07 - Greenback Appreciates Ahead of Christmas.
Economic News
USD
Last week's trading session ended on a tremendous high note for the greenback as it steadily gained against 14 of the 16 major currency pairs. As economic data continued to surprise forecasters, the dollar gained on its major counterparts, going so far as to post record gains, not seen since late 2004 against the EUR. When trading came to a close on Friday, the dollar found itself under the 1.45 support level, a level most thought was far from being reached.
The unexpected positive results originated from a host of US economic data begining early last week, ahead of the Tuesday December 11th interest rate cuts by the Federal Reserve. Most were convinced that the rate cuts would be the driving force in amending dollar positions, instead the change began on Thursday December 13th, as a wide range of Retail and PPI numbers were released far and above the anticipated marks. The dollar then began its move, gaining on the GBP, CHF, JPY and EUR especially, posting its biggest single day rally since spring 2005. Inflationary concerns also spurred on the bullish dollar behavior.
There were several moves within the private sector that allowed for a boost in the greenback as Lufthansa, the German airline giant bought a significant stake of US budget airline JetBlue. Friday, than followed with surprisingly positive Consumer Price Indices and Industrial numbers, allowing the dollar to post its record gains. As consumer purchasing power is high now during the holiday season, and continues to contribute to sales within US businesses, many awaited a possible correction of prices upon return to the new week of trading. However, Sunday night saw the dollar correcting below the 1.44 level to return to trading at 143.89, extending the growing possibility that a correction might be further off than expected.
This week's economic calendar is rich with US news, which has suddenly become even more intriguing. Housing Starts, GDP figures, Unemployment Claims and Personal Spending figures are to be released. Today, we will see the early afternoon (GMT) publication of TIC Net Long-Term Transactions and the Empire State Business Conditions Index. It will be wise to watch if and when the greenback reverts back to its latest spell of mediocrity.
Crude trading? More than just oil...
EUR
The Euro found itself in a precarious position at week's end, as the dollar achieved significant growth, shattering the 1.45 support level. Euro-zone data regarding consumer prices and growth came back higher than initially expected and still was not able to combat the dollar's ttireless push toward record high rallies. The big difference between the two currencies is the importance which the ECB gives to certain economic figures that are considered the less significant in the Federal Reserve's mind. The attention paid toward headline prices versus that of core prices is what has made the ECB stand out in past months
Economic figures have all been on target, and generally positive from the Euro-zone, which leads some to believe that most of the movement will once again fall on the greenback and its surrounding data.
The German IFO report, Euro-zone PMI, Trade Balance and Production Prices are the key economic events on this week's calendar. Still though, how much will these reports affect the outlook of the Euro currency pairs, especially versus the greenback? As we saw towards the end of last week, the hawkish economic mentality regarding the 13-nation currency has prevented it from reflecting any of its inspiring economic data. Expectations are that all the aforementioned data will return positively, and still skepticism regarding dollar strength can be felt.
JPY
Japanese stocks fell for the fourth straight session on Monday, tracing falls on Wall Street after fresh data pointed to a surge in U.S. inflation, on concern accelerating inflation in the U.S. and Europe will curb spending and limit further interest-rate cuts. Against the JPY, the USD rose 1.1%to 113.46, after rising to a five-week peak at 113.59. Also yesterday, Japan's tertiary index, which measures spending in the services sector, rose 1.1% in October from the previous month as the cold weather buoyed spending on winter clothing, according to a Ministry of Economy report.
In the week ahead, the Japanese economic calendar is ostensibly busy, while the markets have shown few noteworthy reactions to the JPY economic data. A December 20th Bank of Japan interest rate announcement could prove to be the exception to the rule. The bank is very widely expected to leave rates unchanged at 0.50%, but any noteworthy shift in rhetoric could potentially spark JPY volatility.
Technical News
EUR/USD
The pair is deep in the bearish trend that was initiated at the end of November, and shows no sign of a cool down. The momentum in the 4 hour chart is strong, and the slow stochastic is pointing at another bearish burst quite soon. 1.4350 appears to be next target price.
GBP/USD
The cable is heading back to the 2.0000 level with full energy, creating a very impressive channel on the daily chart. The next significant key level will be 2.1000, as a break through that level will validate the next move that will probably end the 2 USD per Pound, at least for the short run.
USD/JPY
After the bearish channel on the daily chart was breached, it unleashed a strong bullish move, as the pair now floats around 113.00. Range trading within the new bullish channel is expected to dominate, and a breach through 114.05 will validate a stronger bullish move.
USD/CHF
The pair is still in the bullish trend which started at 1.0900, and appears to be heading to the 1.1700 level at full throttle. All daily oscillators are pointing north, and are support by very bullish hourly studies. A breach through 1.1505 will validate the move to 1.1700.
The Wild Card
Gold
There is a very distinct bullish flag pattern on the daily chart, as Gold now floats around 793.00 which is the bottom barrier of the flag. If a breach will not occur at this level, it will strengthen the notion that the flag is indeed valid, which will create a great opportunity for Forex traders to enjoy the break of the bullish move.
18/12/'07 - US Housing Data On Tap.
Economic News
USD
The greenback continued Friday's robust bullish run yesterday and it strengthened all across the board. The main driver of the bullish greenback has been the recent speculation that U.S inflation figures will be on the rise and may cause the Fed to be more dovish with regards to cutting interest rates at its next meeting. On Friday, both the headline and core CPI figures released significantly higher than last month and well above expectations. Therefore this upside inflationary surprise has got many investors believing that the Fed's interest rate cuts have taken there toll on the market and that now inflation will begin to spike. The dollar has been booming on the back of these inflationary expectations, as now many analysts believe that the Fed may keep its key benchmark rate unchanged at its next meeting. Although the greenback's yield advantage has suffered this year with the string of successive interest rate cuts by the Fed, it seems that going into the New Year the dollar could be in a strong position as the global growth concerns may prompt other major central Banks to cut rates or to at least leave them unchanged.
The greenback was given another boost yesterday by more favorable data as the TIC report, which measures the monthly difference in cross-border foreign and domestic purchases of long-term securities, released at 114.0B which was significantly more than the forecasted figure of 49.0B. This upside surprise elevated the greenback as it gave investors a good indication that there is rising foreign demand for the dollar. In other U.S news, the Current Account also released at a beating expectations figure of -179B which can mainly be attributed to the recent weakness of the greenback that has caused exports to increase significantly. Another dominant reason for the strong greenback yesterday can be attributed to the squaring off of year-end transactions, which is now driving dollar buying.
Looking ahead to today, we are expecting the U.S Housing Starts and Building Permits figures. These figures are expected to release lower than last month and they will be closely watched by investors for an indication as to how much the Fed rate cut has assisted the struggling housing sector. In recent months the housing figures have been on a downward trend and many analysts believe that it could still take a few months before the impact of the Fed rate cut is fully felt by the housing sector. Therefore the greenback may correct from its bullish path today if the housing figures disappoint. Nevertheless there are positive signs beginning to appear for the greenback, and today's housing figures followed by Thursday's GDP figures will paint a clearer picture of the state of the U.S economy.
EUR
The EUR lost ground today against some of the majors, particularly against the greenback as investors paired off year-end transactions. The EUR also weakened noticeably against the JPY as the recent widespread carry trade unwind was once again favoured by traders. However it was not all gloom for the EUR because as a result of this heightened risk-aversion among investors the EUR strengthened against the high yielders. The EUR reached a low of 1.4330 against the greenback yesterday and will be in the interest of the ECB to let the 16-nation currency continue its long overdue downward correction. The main reason for this is because a very strong EUR could have long term implications on exports which will in turn affect manufacturing and growth. However the EUR should not be discounted so soon as there is a good possibly that we could see it once again trading at its all time high levels if the ECB decides to raise the interest rates at its next meeting. Nevertheless ECB President Trichet's hands remain tied as long as inflation risks are still on the upside. The only news that came out of the Eurozone today was the Manufacturing and Services PMI figures, which disappointed slightly. These figures were not expected to cause market movement, but they provided another indication to investors that they may be some slight cracks in the Eurozone economy.
Looking ahead to today, the only Eurozone news will be the Trade Balance which is expected to release lower than last month's figure of 3.9B, at 3.1B. This once again can be attributed to the sharp rise of the EUR over the last few weeks, as it has dampened European exports. We may see the EUR consolidate today after the last two day's sharp losses, as news from the U.S is expected to be negative.
JPY
The JPY strengthened all across the board yesterday, particularly versus the high yielders as carry trades once again began to unwind. The JPY recovered some of its recent losses against the greenback yesterday as risk-aversion was once again the preferred strategy by investors. The JPY rose to 113.20, on the back of weaker U.S equities coupled with rising inflation and dropping holiday retail sales speculation. The Bank of Japan will probably refrain from raising interest rates on Thursday after a drop in business confidence signaled that companies are bracing themselves for slower economic growth. The interest rate is expected to remain at 0.5%, which is the lowest among the major currencies making it a key player in the carry trade strategy. The direction of the JPY will heavily depend whether risk-appetite will return to the market, in the meanwhile it seems that carry trades may continue to unwind so the JPY could pullback some more of its recently lost ground.
Technical News
EUR/USD
The corrective move continues at full steam, and the pair appears to be heading to 1.4350 and will probably look for support there. The hourly studies are still bearish, as the dailies are slowly shaping into neutral form. A break through the 1.4350 will validate a bigger bearish move to the 1.4270.
GBP/USD
The cable continues to have quite choppy trading sessions with the pair's direction downward. The volatility range is around 40 pips in width and the movement is revolved around 2.0200. Both hourlies and dailies are floating in neutral territory, which means that traders must look for entry points on the 15 minute chart and try to take short term positions.
USD/JPY
The pair has been on a steady robust uptrend over the last 2 weeks and the bullish rampage is refusing to let up. Bollinger bands have widened indicating increased volatility. Therefore traders can expect today movement to be sharp. It appears that the USD/JPY is heading towards 114.00.
USD/CHF
There is a steady upward channel appearing on the daily chart. The pair will once again target the 1.1600 level and if breached we could see another sharp move north. The hourly charts are also bullish, with a local resistance at the 1.1550 level that if breached will carry the pair into the 1.1620 on that move's momentum.
The Wild Card
Gold
There is a very impressive flag on the daily chart, as the final triangle is now forming. Gold is floating at the bottom of the flag indicating that the bullish break is imminent. This is a great entry point for forex traders, who wish to use a very strong and classic technical pattern that might produce high profit potential.
19/12/'07 - Economic Data Continues Euro Downtrend
Economic News
USD
The dollar was steady on Tuesday, holding gains from the past week after unexpectedly strong U.S. economic data. Retail sales and inflation data scaled back expectations for aggressive monetary policy by the Federal Reserve next year. Traders hinted that the dollar was also supported by investors' covering dollar short positions before year-end book closings. Trading volume continued to thin yesterday as traders wind down action for the year-end holidays, which could exaggerate price movements. Expectations for a decisive step by the Fed, which will describe or even imply monetary policy for the upcoming 2008 calendar year, are still likely. After the FOMC's 25bp cut on December 11th, the committee's policy statement made a point of keeping all options open when it comes to the next meeting in January. By noting the upside inflationary risks, the downside risks to growth and an uncertainty in the financial markets, Bernanke & Co. could do or say just about anything next month. However, with the Fed joining forces with the ECB (Europe Central bank), the BOE (Bank of England) and the BOC (Bank Of Canada), in an effort to boost liquidity, the US central bank's next policy move will likely depend primarily on whether the lending facilities actually help ease the pressures in the credit markets. Until then, investors have little choice but to wait and see.
There is a growing fear that stagflation (period characterized by an increase in unemployment and a decrease in economic development and growth (combination of stagnation + inflation)) will plague the US economy and may keep speculation of another rate cut in January high. The Federal Reserve moved Tuesday to impose tough new restrictions meant to curb unfair and deceptive home-lending practices and prevent a recurrence of the meltdown in subprime mortgages this year. By a 5-to-0 vote, the Fed approved a plan that would tighten provisions meant to protect borrowers and apply them to a far larger share of home loans, whether from banks, mortgage companies or other lenders. The proposed rules underscore the more assertive role the Fed is now prepared to take in regulating lending, a big shift from the central bank's approach in the past. In general, the rules are meant to deter unscrupulous lenders from persuading people that they can afford loans that ought to be out of their reach. By extension, the rules are also intended to keep would-be buyers from deceiving themselves about the debt that they are capable of bearing. "We want consumers to make decisions about home mortgage options confidently, with assurances that unscrupulous home mortgage practices will not be tolerated." said the Fed chairman, Ben Bernanke. He continues by saying that "Our goal is to promote responsible mortgage lending, for the benefit of individual consumers and the economy." The plan includes provisions that would require more extensive disclosures, restrict advertising and make it harder to lend to borrowers with little or no documentation and a questionable ability to repay. It would also allow borrowers, in some circumstances, to sue lenders who violated the rules. Meanwhile, new speculations are rising, which indicate that a proposed US tax rate cut could ease any US recession concerns, and in turn show a boost in the greenback against its major counterparts. Today is a slow economic news day for the US, as the 15:00GMT release of the Federal Auction Summary is the only real significant event.
EUR
Yesterday, the European Central Bank pumped a record €348 billion into the financial system, dramatically easing the tight conditions in credit markets that have been grappling with a global lending crunch linked to the U.S. housing crisis, on top of traditional year-end demands for ready cash. As a result of yesterday's funds injection, the EUR is expected to maintain its depreciation period especially against the Greenback. It is important to remember that funds injection is being interpreted as an interest rate cut by the market, and in turn has reacted negatively within the forex market. The initiative behind the aforementioned cash injections was to bring down the spreads (difference between their benchmark policy rates and the rates that banks charge one another for short-term lending) but unfortunately there was no positive reaction from the market. Late Monday, the ECB announced that it would guarantee unlimited two-week loans to banks at a fixed rate of 4.21%, rather than taking its standard approach of fixing the amount it lent and allowing overall demand to determine the cost of borrowing. The normal tactic would have resulted in an infusion of roughly €180 billion into the economy, the ECB said. Overwrought primarily by ripple effects from the United States, global credit markets are also coping with the surge in demand for cash that is common for this time of the year as banks clean up balance sheets and meet obligations before Dec. 31. It will be an important few days for the European economy as economic data looks very likely to add to the latest downtrend against the Euro. Today, we will see the release of the German IFO Business Climate and Expectation Indices. The figures are expected to be lower than in previous months, and could be part of the focus during ECB President Trichets remarks today. Look for today's economic data to have a relatively negative affect on the EUR.
JPY
Actions taken yesterday by the ECB, translated into successful rallies for the high-yielding JPY crosses as the currency recouped from early morning lows. More specifically the EUR and AUD crosses on the dollar saw gains of 30 plus pips as traders showed bullish behavior against the JPY.
The latest speculation regarding the Japanese economy was affirmed yesterday, as the government announced a 2% growth in the economy for the coming fiscal year (beginning April 1st). This held in sharp comparison to the readjusted forecast of the current fiscal year, as the Japanese have had to downgrade initial expectations. "With the global economy recovering in fiscal 2008/09, the corporate sector will remain firm and households will show improvement gradually," government official said. These comments came as the BoJ began its two-day economic policy review. Today's Japanese calendar is close to empty, as the late night release of the Trade Balance will set the path for tomorrow's Interest statement followed by words from BoJ Governor Fukui. The interest rate is expected to stay at 0.5%. As economic data continues to put pressure on the EUR, it will be intriguing to see if the JPY will find some room to make up yesterdays down swing.
Technical News
EUR/USD
A bearish wedge is forming on the 4 Hour chart offering to drift this pair to 1.4332. In the case of a breach, the bottom barrier is located at 1.4380. RSI and Momentum indicators have a negative slope which is supporting the current bearish trend.
Going short seems to be preferable today.
GBP/USD
Range trading is expected today on this currency pair as a mild channel is offering today's movements between 2.0100 to 2.0200. In the event that the bottom level is breached, going short seems to be preferable.
USD/JPY
A bullish flag structure is forming on the 4 Hour chart. The pair could possibly drift toward 114.10. This structure is supported by the Momentum and RSI indicators which both have shown a positive slope.
As a result of such indications, long positions on the USD/JPY look to be the preferable strategy for today's trading day.
USD/CHF
A bullish flag structure looks to be forming on the 4 Hour USDCHF charts. The structure is supported by several indicators such as Momentum and Stochastic, which have both shown positive slopes.
Going long on this pair seems to be the preferable option.
The Wild Card
Silver
Slow Stochastic indictors show a cross at 72, which implies an upcoming bearish trend. The first barrier is located at 13.69, in the event that it is breached we should see a support level at 13.40. For forex traders going short seems to be today's more preferable strategy.
20/12/'07 - US GDP & Unemployment Claims - On Tap.
Economic News
USD
As 2007 draws to a close, the USD is making a nice comeback. Yesterday the greenback continued to gain ground against most of the majors. Even though the Fed estimates that the economic growth will be weak into next year, the USD was bought anyway as risk aversion continues to seep through the market.
The U.S. currency appreciated against the EUR and surged to a 3 month peak against the GBP amid signs that the financial market turmoil was starting to threaten economic growth beyond U.S. borders. In mid-afternoon trading, the USD was 0.3% higher at $1.4365. Analysts say that the greenback continues to draw strength from last week's unexpectedly strong U.S. Retail Sales and inflation data that was seen limiting the need for the Federal Reserve to cut interest rates further next year.
Meanwhile, the U.S. Financial markets are continuing to be a significant source of uncertainty. The Federal Reserve warns that the overall economic growth will be slowed down into next year as the housing market is set to keep contracting. Home construction and sales are also unlikely to bottom out before the middle of the next year and it is most likely that housing will continue to be a drag on growth well into 2008.
Looking ahead to today's' fundamental offerings, there are far more scheduled indicators in the lineup. The final readings on the 3rd quarter GDP could see small modifications as the GDP numbers are final figures with no further revisions expected. Therefore the figure will probably not move the market. GDP annualized is expected to hold unchanged at its 4 year high. Later, the Philadelphia Fed's factory activity survey is expected to slip slightly. Trading volumes are foreseen to be typically light ahead of year-end.
EUR
The EUR was down yesterday after an index of German business sentiment came in close to a one-year low, prompting investors to increase year-end dollar buying. The EUR last traded 0.4% down at $1.4345 after earlier dipping to a session low of $1.4327 in overnight trade.
The weak Business Confidence reading in Germany highlighted the difficult situation which the ECB is going to face in the medium term: a slowing Euro zone economy and rising price pressures, suggesting that the ECB may have a tough time raising rates any time soon.
Today will be light on market moving news from the Euro-zone. The British Current Account is on tap today along with the GDP. The GDP figure is expected to stay unchanged while the Current Account might drop to its half a year low.
JPY
Investors refrained from aggressive trade ahead of the Bank of Japan's monetary policy meeting. The USD was nearly unchanged at 113.43 Yen after earlier dipping to a session low of 112.75 Yen on a brief re-emergence of risk aversion.
Today, the Bank of Japan will be announcing their interest rate decision. The market largely expects that the BoJ will forego hiking interest rates at its policy meeting as it needs more time to assess the impact of the credit crisis. Moreover, with recent economic data still reflecting a weak economy, the Bank of Japan does not have any room to raise rates especially at a time when central banks around the world are pumping liquidity into the financial system.
At its last meeting in November, the policy board left Japan's key interest rate on hold for the 11th straight time, with only one board member proposing a rate hike to 0.75%. Analysts estimate that given the uncertainty inside and outside Japan, the BoJ will not be able to hike interest rates anytime before the end of the current fiscal year in March 2008.
Technical News
EUR/USD
A falling wedge structure is forming on the 4 hour chart which might take the pair to test the bottom barrier which is located at 1.4330. However, there is an upcoming reversal expected as indicated by the daily RSI and therefore going long from 1.4330 seems to be a preferable today.
GBP/USD
A bearish channel structure is establishing on the daily chart as the cable is expected to test the lower end today and in case of a breakout the next target price is located at 1.9890. All oscillators support the bearish notion on all time scales, especially on the hourlies.
USD/JPY
The pair is still in the midst of a very strong bullish move that was initiated at the end of November. The daily chart is showing a certain slowdown in the trend's momentum, indicating that the move might come to a halt soon. That notion is supported by a bearish cross in the 4 hour slow stochastic. Waiting for a clearer signal might be a smart move today.
USD/CHF
The pair's massive correction move shows no signs of a stop. The daily chart is still quite bullish and the 4 hour chart is showing that there is much more room to run, making 1.1700 a very solid target price for this trading week. Going long appears to be preferable.
The Wild Card
Silver
There is a very distinct bullish flag on the daily chart, and Gold is floating around the upper level of it. This could be a great opportunity for forex traders to catch a very strong possible trend in case of a violent breach beyond the 800 level. If a break will occur Gold might get to 825 levels quite quickly.
24/12/'07 - Will The Greenback Have A Happy New Year?
Economic News
USD
Yesterday the US dollar continued its bullish movement against most of the major currencies. The dollar strengthened mainly against the EUR and the GBP especially after the ECB reported that inflation risks remain on the upside. While the British are experiencing a drop in inflation after their recent rate cut as indicated by yesterday's lower CPI figures, which could now also be a concern. The EUR was traded on $1.4360 against the US dollar during the early trading hours in Europe, down from $1.4390 in New York late Wednesday, and has reached 1.4313 during noon hours in Europe. The greenback strengthened extremely into the London open with the Cable losing another 100 pips as the pair reached a low of 1.9877. The Sterling sided below 2.0000 per US dollar for the first time since September, decreasing to $1.9869 from $2.0133. The Sterling fell after a government report showed the current account-deficit widened to a record 20 billion Sterling, or 5.7% of GDP in the third quarter. As it stands at the moment, the Bank of England is on the way to another rate cut in January. However as the CPI figures indicated yesterday, falling inflation will be problematic and could halt any further rate from BoE.
The US dollar has rebounded from a record low of $1.4967 per euro last month, paring its yearly drop to 8.5 percent. The dollar has advanced against all of the 16 most actively traded currencies this month, reversing its earlier negative sentiment. U.S. growth slowed this quarter to a 1% annual rate from a 4.9% rate in July to September. Fed bureaucrats forecasted already last month that the growth would slow down to as little as 1.8% by the end of next year. The Labor Department report showed that more people signed up for unemployment benefits last week, suggesting that the job market is softening. Meanwhile, this week the and Federal Reserve Bank of Richmond President Jeffrey Lacker said that the U.S. economy will be very weak in 2008 mainly regarding the housing market contracts. The Fed still makes a massive effort to moderate the economy from the worst housing recession in 16 years, cutting its key interest rate 1% in the last three months to 4.25%, the most significant since the last recession in 2001. However the string of Fed rate cuts this year has provided the housing and credit markets this year with some reprieve. So although U.S growth is expected to slowdown, we may still see underlying strength in the U.S economy which should create positive sentiment for the greenback in the New Year. Many analysts believe that we may see the greenback rebound to the 1.3500 in the next few months.
EUR
Europe's 13-nation currency has dropped by 1.8% versus the US dollar as business confidence in Germany, Europe's principal economy, fell to the lowest in approximately two years in December and did not appear to benefit from an unexpected rise on Thursday. Any economic slowdown would increase the European Central Bank's justifiability to raise interest rates from their current rate of 4 percent. The EUR may weaken to a two-month low of $1.4160 against the dollar should it stay below so-called support at about $1.44, according to Bank of Tokyo-Mitsubishi UFJ Ltd. The ECB is expected to hold rates steady at 4 percent that has been a sharp contrast to that of the U.S. Federal Reserve, which has already cut rates twice to 4.25 percent to try to constrict an economic slowdown from the subprime crisis. Elsewhere the Cable fell to fresh three-month lows versus the US dollar as the fallout from Wednesday's dovish Bank of England minutes continued. The minutes showed the nine-member Monetary Policy Committee voted collectively to cut key interest rates by a quarter point to 5.50%. The news caused the Cable to fall below the key psychological 2.0000 per US dollar level, which marks transfer in sentiment. The cable has hit a fresh three-month low of 1.9878 versus the US dollar. Today the UK Retail Sales are expected to register another uninspiring reading but the report has actually surprised to the positive aspect in the last 3 out of 4 months. So we could see the Sterling consolidate today after its recent pitfalls.
JPY
Yesterday the Japanese central bank kept the key interest rate at 0.5 percent, and as stands, the BOJ will probably remain quit passive through the first quarter of 2008.The decision to keep the interest rate fixed was commonly expected by the policy board as the effects of the U.S. subprime mortgage crisis keep on resounding in the global markets and darken the outlook for Japan's economy. Many investors believe that the central bank will not increase key interest rates until the middle of next year. Nevertheless the JPY remained high after the Bank of Japan Governor Toshihiko Fukui said the central bank will raise rates slowly but surely as the U.S. economy slows. Data on Thursday showed Japan's exports are still growing in November from a year earlier but economists said they may be losing momentum, probably due to the credit crunch. Wages have barely risen this year despite strong corporate earnings and tight labor markets. In addition, yesterday the JPY rose against the EUR and the US dollar on speculation that the widening credit-market losses and slow economic growth will carry away demand for higher-yielding assets. Yesterday the JPY press forward against all its 16 most activated currencies as investors reduced carry trades. The yen rose to 162.18 against the EUR from 163.13 yesterday, and climbed to 113.19 against the US dollar from 113.43. The JPY rose to 97.23 against Australia's dollar, from 97.43 yesterday, and got stronger to 85.46 against the NZD from 85.69. It seems that JPY will maintain its bullish momentum today as carry trades continue to unwind.
Forex Technical Analysis
EUR/USD
The Pair was range trading yesterday between a support level of 1.4310 and a resistance level of 1.4380. Should the pair trade today above the pivot level of 1.4400, then we may see a slight correction before another break downwards. Therefore traders should wait for this pair to rise some more before entering an early short.
GBP/USD
The 4 hour chart indicates a continued bearish trend as the long term Moving Average (Weighted 21) crossed by a bearish bar. Additionally the ADX (Average Directional Movement) also strengthens our opinion while the DI- is on its way to crossing the DI+ from above which is considered a bearish signal. However this pair currently seems to have bottomed out, so there should be a rise before the cable breaks down again.
USD/JPY
This pair now seems to be leveling out after a steady uptrend. It is in the middle of a flat channel, so if there is a breach of the key 112.80 support level then we could see another sharp move downward. On the other hand, a breach above the 113.50 could indicate another bullish trend. Traders should be cautious and await further movement for a clearer signal.
USD/CHF
This pair is in the midst of a very strong uptrend which is slowly appearing to be leveling out. 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 this pair could drop below the 1.1500 before we see another sharp bullish move.
The Wild Card
Gold
This commodity is giving a strong bullish signal on the 4 H and daily chart. The positively sloped RSI and momentum support this bullish notion. The Stochastic Slow is also giving a strong signal that this pair's next move will be bullish. Therefore this gives Forex traders the perfect opportunity to catch an early uptrend.
Holiday & New Year Analysis notice
Please note that due to holidays and the New Year period, the FOREXYARD analysis will not be posted on a daily basis. Regular posting will resume during the first week of January.
In the meantime, please click here to visit the FOREXYARD on-site analysis page.
Wishing you a happy New Year!
Regards,
07/01/'08 - Is the US Heading for a Recession?
Economic News
USD
As we begin the second week of the New Year, the greenback will look to curb what has continued to be a weakening position against most of its major counterparts. Amidst a host of negative economic figures over the last few weeks, there is growing speculation that last years Federal interest rate cuts are sure to see the light of day once again. As the Federal Reserve managed to avoid recession upon the completion of 2007, the economic forecast in the US stays relatively grim. Friday saw the release of a set of important economic indicators from the US, most of which came back lower than initially weak expectations. This was highlighted by Non-Farm Payrolls dropping to 18K, far off the expected rate of 70K, which was already in itself, highly disappointing.
Political turmoil throughout the global village has not helped either. The political unrest following Pakistan directly affected the dollar and continues to do so, along with the escalating situation in Kenya. The greenback continues to drop against its most staunch rival, the Euro, as it broke the 1.47 barrier and continues to make its way toward 1.50. As problems within the various American stock exchanges continue, other more volatile currency pairs are also seeing gains against the greenback. The Dow recorded its worst week of trading in nearly 100 years, as it was continually hit with bad economic data. The unemployment rate also took saw a slight bump hitting 5.0%, up from its previous figure of 4.7%.
As we look ahead toward Presidential primaries, the US economy and in turn the dollar, will be the focus of tremendous scrutiny if it cannot recover from the failing credit and housing markets. A Thursday speech by Fed Chair Bernanke will precede Friday's release of the US Trade Balance, as we should have some indication by then about the timetable being used by the Fed regarding interest rate cuts. Tomorrow we will expect to see negative Pending Home Sales numbers as we enter Monday with no important economic events on tap.
EUR
The Euro continues to benefit from the faulty condition of the dollar. Besides the overwhelming strength and confidence being shown by the currency, the European economic forecast continues to release positive data. The hike in US unemployment was met by lows in German unemployment, and the same can be said for a host of economic data; Bad in the US, Good in Europe.
Investors look keen to keep up with the same trends as the 13 nation currency has shown only brief spells of weakness while we ease are way into '08. As the two major currencies continue to move in different directions, look for the European Central Bank to remain hawkish in dealing with it economic policy regarding currencies and interest rates.
With the deterioration of the Dow in recent weeks the European currency could thrive no matter what data is released from the region. Up against a significant share of its currency counterparts the EUR looks to perform very well in January.
As we creep toward the 1.50 EUR/USD rate, look for the 13-Nation currency to dominate, much the same as it has been doing in recent history.
Today, we will see unemployment rates, monthly PPI and Consumer Confidence figures from the EU, none of which should have any real bearing on the days trading.
JPY
The JPY finished off trading last week, lower than it started as investors looked across the water to Europe and the US to find more attractive returns on their money.
As the Japanese begin 2008, there looks to be no change in site for the interest rate and that could affect the volume of JPY being bought or held in the market. As trading closed out last week, the JPY found itself at just above 160.00 against the EUR and creeping back toward 109.00 against the dollar. Mutual funds have moved out of Japan toward foreign markets as the year begins, and we should continue to see the same, if no clear cut changes are made.
The Japanese are absent from any significant calendar events this week, as its main focus will be on behavior within the global stock exchanges and if investors will continue to trade with more high-yielding assets. It appears that most of the price moving will come from Europe and the US that also have a light calendar but have two rate statement and trade balance which might inject high price action that effect the JPY movement against the majors.
Technical News
EUR/USD
There is a tight opening channel forming on the 4 hour chart as the pair floats on the bottom barrier. Oscillators show that the momentum is bearish and a breach through 1.4700 will validate a bigger bearish move into the 1.4600 levels again.
GBP/USD
The cable is in the middle of a very intensive downtrend that started in the beginning of November and shows great momentum that on a bigger scale appears to have more room to run. In the shorter time frame a bullish cross on the 4 hour indicates that there might be a small correction before the bearish move resumes. Selling on highs appears to be preferable today.
USD/JPY
After failing to breach through the 107.00 barrier in November, the pair seems to be heading that way again, and has established that level as a very strong key support. The 4 hour indicators show that a test of 107.50 is quite imminent, and that the overall momentum is bearish. If the pair will manage to breach the 107.00 level, a much more intensive bearish move will initiate, and might take the pair to very deep places.
USD/CHF
The pair dipped to the 1.1000 level for a short while, and is now correcting back to the 1.1120 zone. There is an interesting channel on the 4 hour chart that indicates a stronger bullish move if the 1.1150 level will be breached. The daily chart is also a bit bullish, and the correction up appears to continue.
The Wild Card
Crude Oil
The very distinct upwards channel on the 4 hour chart has been breach violently at its bottom barrier. That means that Oil still has at least another 100 pips to cover the channel's height. This is a great opportunity for forex traders to enjoy a strong correction move, before the journey to $100 returns.
08/01/'08 US Pending Home Sales
Economic News
USD
After, a relatively intense price action for an empty US calendar yesterday, the Greenback floats around 1.4710 against the EUR and 109.40 against the JPY. There seems to be a certain consolidation for the USD after the massive drop it had after Friday's very low release of the Nonfarm payrolls, and it seems that it is now swimming in calm water before the next key event which may push the greenback further down.
As for today, there are two key events expected to come from the US, the first one will be the Philadelphia Federal Reserve President and FOMC voting member Charles Plosser's Speech about risks to the economy, inflation, and labor markets at the Main Line Chamber of Commerce, in Philadelphia. FOMC voting members are responsible for setting the nation's short term interest rate, so traders scrutinize their speeches closely for clues regarding future monetary policy. The speech might cause choppy price movement and some abnormality in the volatility.
A bit later at 15:00 GMT, Pending Home Sales is expected to be released, as most analysts are very pessimistic about that figure and it now has a consensus release of about -0.7% which is a relatively huge drop from last month's 0.6%, and might cause the Greenback to continue dropping on the local level, and might spike the next long run drop that might take the EUR/USD into the 1.4900 levels again.
As for the rest of the week the US calendar is quite light on important events except for Friday which will have the US Trade balance. Other than that, traders will focus their attention a bit more on the Euro-Zone which has the ECB and BOE rates statements, which might contribute to the USD crisis.
EUR
Yesterday, France became the latest major European economy to warn of a period of sluggish growth and high inflation. Soaring energy prices and fresh signs that the United States may suffer a sharp slowdown are threatening to drag down European expansion.
Echoing concerns are voiced by various leaders in Germany and Britain, such as the French finance minister, Christine Lagarde, who said in an interview that the outlook for Europe had eroded rapidly as oil prices breached the symbolic $100 and with pessimistic analysts marking the $200 a barrel as the next target price for 2008. Credit markets remained nervous and the outlook for the U.S. economy darkened.
The world's top central bankers are gathered in Switzerland this week to discuss the global economy, as voices called for the European Central Bank to make growth a priority over inflation-fighting in the euro area. It is shown that everybody prefers high inflation and high growth, as opposed to stable inflation and lower growth, and expected from the economic leaders and the ECB to be adjusted to the new situation and to act accordingly.
In the euro zone, November retail sales are due, but they are not market movers. German factory orders are more interesting and following the stellar 4.0% monthly rise in October; a partial correction in November is forecasted. In the UK, the BOE interest rate announcement is expected this week, as the board will take note of the British Retail figures for the crucial month of December, released overnight. The BRC said that sales growth rose just 0.3%, compared with 1.2% in November, despite early price discounts to boost sales. The figures may give the doves on the MPC some ammunition to vote for another rate cut on Thursday.
JPY
Most Asian shares edged up today as oil prices recovered from steep falls the prior day; however Japan's Nikkei earlier hit an 18-month low as investor worries about a recession in the United States persisted. It seems that the Japanese economy is shaky as a possible US recession is possible, and investors are seeking for less risky investment alternative to put their money in. This Thursday the Leading Index is due to be out as this indicator forecasted to decrease to 10.0% compared to last month 18.2% which reflects the slowdown in the local economy. This indicator measures overall economic health by combining ten leading indicators including average weekly hours, new orders, consumer expectations, housing permits, stock prices, and interest rate spreads.
The weak USD is hurting the Japanese economy as world importers prefer US goods instead of the Japanese goods thanks to the low cost which are caused by the weak greenback.
Technical News
EUR/USD
The bullish trend is expected to maintain its Momentum as the Slow Stochastic (41) and RSI (44) on the 4 Hour have a positive slope which supports the bullish trend as the first target price is located at 1.4738 (Fibonacci 76.4%). The daily momentum is showing that there might be a correction before the uptrend resumes at full strength. Buying on lows might be a good choice today.
GBP/USD
The cable is showing its first signs of a correction as implied by the Slow Stochastic, RSI and Momentum which have a positive slope. The 1.9780 (Fibonacci 23.6%) was breached which validates the bullishness and it seems that the cable is steadily going to the 1.9850 as the next step.
USD/JPY
A reverse Head & Shoulders structure is forming on the 4 Hour chart offering the 109.85 (Fibonacci 23.6%) as the next target price. This structure is supported by the Slow Stochastic, RSI and Momentum which all have a positive slope. It looks as if the bullish trend has been validated and that the pair will move north with a possibility of a touch at the 110.80 level.
USD/CHF
The bearish trend is expected to continue as Slow Stochastic crossed the 82 which is clearly in the overbought territory, the RSI 89 and Momentum have a negative slope offering next target price at 1.1125 (Fibonacci 23.6%). Going short might be preferable today.
The Wild Card
Gold
A tight bullish channel is establishing on the 4 Hour chart supported by the Slow Stochastic, RSI and Momentum which all have a positive slope. The top barrier is located at 863.61 and in case of a breakout next target price is located at 868.18. Forex traders should wait for the break in order to catch the profit potential from the momentum which will be created from the breach.
09/01/'08 - US Housing Starts On Tap
Economic News
USD
The greenback came into Tuesday's trading day reeling from a string of unsupportive economic data. Information coming from the housing and credit markets continued to disappoint as Tuesday's Pending Home Sales numbers once again came back worse than the initial meager expectations. Pending Home Sales, which measures the signed real estate contracts for existing single-family homes, co-ops and condominiums, released down the previous 6 percentage points down from 3.7% to -2.6%, as expectations had the figure as low as at -0.7%.
If that wasn't enough to offset any dollar appreciation, Fed Presidents from both Boston and Philadelphia once again remained unclear regarding expected intervention by the Fed into the failing US economy as investors suspect interest rate cuts are still to come. Philly Fed Chair Prosser said he is "expecting slow economic growth for several quarters" and pointed out that "since monetary policy's effects on the economy occur with a lag, there is little monetary policy can do today to change economic activity in the first half of 2008."
The dollar suffered to establish any sort of rally as the Dow Jones returned another day of abysmal numbers as it fell 238 points to end NY trading. With a combination of negative data from most relevant economic sectors the "recessionary" jargon is slowly being revived once again. A lion's share of investors are still positive that the Fed will cut rates by anywhere between 50 and 125bp. Such failure by important markets leaves a burden on US consumers to hopefully revive the dollar and allow the Fed to cut by only 25bp.
As we look forward to the rest of today trading day, the economic calendar in the US will be rather empty as the only relevant event will be a speech by St. Louis Fed President William Poole, who will likely echo the same uncertainty as his Boston and Philadelphia colleagues. Look for the dollar to continue to struggle against its major currency counterparts.
EUR
The Euro traded on Tuesday to relatively static results, spending the day hovering above and below 1.47 against the dollar. Mixed results from a set of minor economic data kept the currency stable throughout the day.
Retail sales dropped 1.4% from the 2006 figure, which was the steepest decline in over 11 years. The lag from the 13-Nation currency did not last long as German factory orders came back considerably strong as it saw a generous November increase. The Euro has continuously avoided any real bearish activity as a combination of stable Eurozone data and disastrous US and Asian market data has proved that the European Central Bank's hawkish stance on monetary policy will likely continue.
Looking ahead, today, the Eurozone will produce economic data that should not have a very big affect on its movement. The day will see German trade balance, industrial production and retail sales, as well as general Euro GDP and the French trade balance. All should remain quiet at least until Thursday, as we await the ECB monetary policy meeting, coupled with ECB President Trichet's remarks. Look for the EUR to continue to prove its strength against its rivals.
JPY
The JPY finished Tuesday trading down against all 16 major currencies, amidst rising foreign investment by Japanese investors. These investors continue to look for more high-yielding assets as the Dow continues to fall.
With the record gold bullion numbers reached yesterday, as well as the easing of Crude Oil prices, many investors borrowed from the low-yielding Asian currency to purchase lucrative commodities.
The currency should continue to weaken against its Western counterpart's as there looks to be no change ahead, regarding Japan's benchmark interest rate. The JPY found itself trading at just under 260.50 versus the Euro, as well as 109 versus the dollar. Any thought of an interest rate hike, will likely be thwarted by rising concern in the overall health of the Japanese economy.
The JPY continues to be absent from this week's economic calendar. Look toward the Dow as well as commodity prices to define the direction of the Asian powerhouse.
Technical News
EUR/USD
The pair has been trading in a tight range for more than a week and is now showing some consolidation at 1.4717. The daily chart is quite neutral and shows no strong signal of a break direction. The hourlies support the neutral sentiment. Traders should wait for a clear signal before entering the market.
GBP/USD
The bearish channel on the daily chart continues at full strength. The cable is now floating at the upper level of the channel, and together with the slow stochastic and RSI creates a very strong bearish momentum that might take the cable to beyond the 1.9600 level by the end of this week. Being on the short side might be preferable today.
USD/JPY
The bullish correction the pair initiated at 108.00 continues with moderate momentum. The slow stochastic on the daily chart shows that there is still more room to run and that the pair might breach the 110.50 soon. Hourly studies confirm the bullish sentiment, and it appears that going long might be preferable today.
USD/CHF
The pair appears to be heading back to the 1.0900 with a relatively strong momentum, as clearly shown by the oscillators on the daily chart. The hourlies are showing a small bullish cross on the 4 hour chart that might take the pair to a correction before resuming the bearish move. Selling on highs might be a wise move today.
The Wild Card
Gold
Gold has been making an unbelievably strong bullish move to record highs, and shows no indication of a stop. It has been correcting a bit locally but the general direction is quite clearly up. This could be a great opportunity for Forex traders to join a very distinct bullish trend with great profit potential.