ForexYard's Commentaries - page 14
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11/02/'08 - UK's PPI Input & Trade Balance.
Economic News
USD
The greenback began the week on a slight downward trend following some concerning news from the G7 over the weekend. After a meeting of the leading industrial nations in Tokyo, the G7, without specifically singling out a specific country voiced its growing concerns over the trembling global market. The US economy, while not being the sole catalyst has magnified the situation that much more, as the housing and credit crisis in America continues to press on. These issues coupled with the uncertainty of financial markets contributed to losses for the dollar against its major rivals as the new week began. The greenback was down nearly 25 pips in early Monday trading against the EUR at 1.4529 following a positive showing on Friday which saw the currency dip below the 1.45 EUR/USD support level ahead of the G7 meeting over the weekend. Similar results were seen against the Sterling, and while not nearly as significant, the move still concerns some dollar enthusiasts as most good performances by the dollar lately have not lasted very long. With another week of essential economic data on tap, many investors expect a bearish dollar trend to develop.
The US is expected to release a batch of important economic data that will likely map the near future for the dollar. Retails Sales, Trade Balance, TIC Net Long-Term Transactions and Consumer Sentiment are only some of the more standout figures expected to affect trading throughout the currency market. Thursday, traders should expect a speech from Fed Chairman Ben Bernanke, which according to the results from the aforementioned data, could dictate the reaction by the Fed as it tries to ease pressure off the greenback.
The dollar faces significant risk over the next week or so if it can't pose a big enough rally, as the EUR, Sterling and JPY will continue to eat away at gains made at the end of last week. Barring a standout result from economic data and consumer confidence from the US, the dollar could face another costly drop this week, especially with the ongoing rise of gold prices.Today's US calendar has no economic data scheduled for release.
EUR
The EUR spent most of last week fighting off a string of negative data and rising concerns of a heavy slowdown in the Eurozone economy. As production numbers throughout the major European nations continued to be released the EUR managed to slip over 300 points against its staunch rival the greenback before ending Friday trading just above 1.45.
The weakening state of the Eurozone economy has convinced many that ECB President Jean-Claude Trichet will cut interests rates to ease growth related pressure. This would be a move in a different direction as the hawkish stance held by the ECB had led many to believe that if any action was taken, it would have been a rate hike.
The week ahead will produce a set of economic data that should help the EUR recover from last week's turbulent performance. French Nonfarm Employment, French and German GDP, Industrial Production, German ZEW Economic Sentiment are all on tap, as the week will begin with today's release of French Industrial Production. As data is expected to disappoint, two separate speeches by ECB President Trichet later this week should give us an idea how serious the Eurozone slowdown is.
JPY
Despite the fact that U.S. stocks continued to weaken and last Fridays' Eco Watchers Survey printed at weaker than expected, carry trades have since stabilized. Overall, the JPY finished off trading last week 0.2% higher at 107.32, as investors looked across the water to Europe and the U.S. to find more attractive returns on their money. According to the latest Tankan survey most Japanese corporations forecast the value of USD/JPY in 2008 to be at around 113.00. With the pair now trading at 107.30 those hedges are deep in the red indicating that profit margins for exporters will suffer.
Today, the Japanese market will be closed due to the National Foundation Day. Currency markets are expected to be relatively quiet with Japan on a holiday, and there probably will not be too much volatility in the wake of Friday's Interest Rate Announcement and the BoJ Monthly Report. In the week's Japanese economic calendar, we will also see the release of GDP numbers as well as several industrial figures.
Technical News
EUR/USD
An ascending triangle structure is forming on the daily chart which implies a bullish comeback with a first target price of 1.4623. The ascending triangle may offer even more significance as the top barrier is located at 1.4878 and the Slow Stochastic was crossed at 12, indicating that there is more room for the bullish trend.
GBP/USD
The daily chart is bullish as the Slow Stochastic crossed at 10 and the RSI shows a positive slope. The next resistance level is located at 1.9568, and the next support level is at flat 1.9400. If the cable drops sharply beyond that level, a strong bearish move might be in place.
USD/JPY
The trendless tight range the pair has been going through continues with no hint of a distinct direction. The 4 hour chart is indicating that locally the move within the channel is bearish. Traders must wait for a significant break on any side in order to swing back in.
USD/CHF
The 4 hour chart is showing a classic reversal formation in the form of an upwards channel. The channel is supported by a cross in the slow stochastic which indicates that the bullish move might be quite imminent. Going long appears to be the right move today.
The Wild Card
GBP/JPY
There is a very distinct downwards channel forming on the 4 hour chart as the pair now floats around its upper level. The RSI and slow stochastic are floating in the mid section which indicates that the next move would be towards the bottom of the channel. This could be a great opportunity for forex traders to enter the market on a short position with a chance that a bearish break beyond the channel will unleash an even stronger move.
12/02/'08 - Greenback Indifferent to Poor US Data.
Economic News
USD
In spite of last week's disappointing US economic calendar, with most of its indicators printing much worse than expected, the greenback is behaving as if there were no fundamental data at all. Through the last week, the USD gained 300 points in a near vertical fashion as market sentiment changed completely from focusing on US economic woes to worrying about the slowdown in the rest of the world. The string of negative data from the US markets leaves little doubt that the Fed will probably continue to lower its interest rates, perhaps to 2% by the middle of this year.
The U.S. economy has benefited substantially from increased trade and from the rapid growth of exports. Changes in terms of trade associated with recent exchange rate trends made American goods cheaper relative to those of some other countries. But the overall U.S. Economic growth in the fourth quarter of 2007 slowed to a 0.6% annualized pace, and U.S. employers cut jobs in January for the first time in four years, raising concern about a possible recession. Indeed, President George W. Bush's administration predicted U.S. economic growth will weaken in the first half of 2008 and accelerate later this year, buoyed by exports and tax rebates.
Today, for the second consecutive day, there is no economic data expected to come out of the US markets. It's most likely that the greenback will perform solidly today against the majors. As for the rest of the week, the fundamental data could play a much more critical role as traders will get a look at Retail Sales, Trade Balance and TICS. Federal Reserve Board Chairman Ben S. Bernanke is scheduled to testify Feb. 14th on the condition of the economy and financial markets to the Senate Banking Committee.
EUR
Over the weekend, ECB President Jean-Claude Trichet attempted to refocus markets on Euro zone inflation, however market skepticism continued as a string of weak economic data hurt the EUR. Steep declines within the service sector were one of the main catalysts behind the bearish trend of the 15- nation currency. It was the first time in 2008 that the market saw credible evidence that the EZ economy is not immune to the US slowdown and that an interest rate cut within the near future is unavoidable.
Lately, the Forex market has reflected that leading economies cannot tolerate a weaker greenback, as it is noticeable that in spite of negative figures from the US economy the greenback is strengthening. This behavior is indication that the weakness of the Euro zone economy is legitimate and should continue to reduce EUR value.
Traders should pay attention to the fact that the Euro zone's building price pressures are hurting consumer income and piercing profit margins for businesses, as this is only the beginning of what could be even more detrimental losses. The European Commission's flash estimate for January CPI surprisingly rose to a 14 year high of 3.2%, which puts the European Central Bank into a tight corner and stifles their ability to maneuver regarding monetary policy. Today, the German ZEW survey is due to be released as well as Euro zone Investor Sentiment, which is anticipated to deteriorate even more, as another fall for the ninth straight month is expected. The figure is forecasted at -45.0, the lowest number in almost 15 years.
Forex traders are expecting the Euro zone GDP on Thursday, which will hold as a good measure of the negative impact being experienced as a result of the US slowdown. GDP data is forecasted at 0.4%, down from the last figure of 0.8%, as the market already expects more lethargic growth. If however, the data comes back with on the upside, some of the major concerns facing the EUR could slowly fade away.
JPY
General market unease helped the JPY continue to benefit from heightened global risk aversion, edging higher yesterday against the USD at 106.30. Last weekends' Group of Seven Industrialized Nations meeting in Tokyo offered little news for foreign exchange markets. Finance leaders' focus on the crumbling U.S. housing market and its impact on world economic conditions and bank lending added to risk aversion, thus helping the JPY.
Today, will be very light on market moving news from Japanese markets with only CGPI and Current Account due to be released at 23:50 GMT. The CGPI, Corporate Goods Price Index, measures the rate of inflation experienced by corporations when purchasing goods. The Current Account measures the quarterly difference in value between imported and exported goods, services, income flows and unilateral transfers. Both of the indices are not considered to be market movers. Today, the USD/JPY still remains vulnerable to risk aversion sell-offs. The JPY should continue to range trade at current levels and may even retreat slightly.
The week ahead will feature several key pieces of data from Japan, including January consumer confidence,Q4 GDP, industrial capacity and more importantly, the Bank of Japan monetary policy decision. Also, the BoJ will release its February monthly report.
Technical News
EUR/USD
The pair is in the middle of a corrective move which seems to have some more steam in it. The slow stochastic and RSI are floating around 50 in the 4 hour chart. The break beyond the 1.4500 was validated which indicates that the next target price might be 1.4590.
GBP/USD
The daily chart indicates on a strong bullish reversal after a very long and consistent downtrend. The bullish cross on the daily slow stochastic together with positive slope of the 4 hour chart, indicates that the cable might be testing 1.9700 quite shortly.
USD/JPY
The pair marked more than a month of a very tight range trading with no significant breaks. The Bollinger bands are tightening on the daily chart which indicates that a break is quite imminent. The positive slope on the daily slow stochastic indicates that the break might very much occur on the bullish side, with a target price of 108.50.
USD/CHF
The corrective move which was initiated in 1.0760 is losing momentum. The 4 hour chart is showing that there is little room left for the move, and the daily chart is showing its first signs of a reversal. A preferred strategy might be to wait for a clear bearish signal before entering the market.
The Wild Card
GBP/JPY
The sharp bullish move that can be seen on the 4 hour chart indicates that the positive momentum is back with regenerated energy. All oscillators are supporting the bullish notion and forex traders can enjoy the regeneration of oil's ongoing journey to the 100$ level.
13/02/'08 - US Retail Sales On Tap.
Economic News
USD
The greenback drifted lower against the EUR and the GBP yesterday ahead of today's much anticipated Retail Sales report, which is expected to disappoint and therefore increase speculation that the U.S economy is headed towards a recession. It is highly unlikely that the Retail Sales figure will surprise on the upside amidst a slowing U.S economy, so traders already began to short the dollar yesterday ahead of today's report. There were no significant economic indicators released from the U.S yesterday, however there was some major market moving news as billionaire investor Warren Buffet offered to take a $800 billion state in municipal bonds guaranteed by troubled MBIA Inc., Ambac Financial Group Inc and FGIC Corp. in his attempt to control approximately 33% of the debt insurance market. This news bolstered U.S stocks as there was speculation that this move would ease credit markets and help prevent a slump in the value of municipal debt. Therefore it was not all doom and gloom for the greenback as it did manage to rally sharply against the JPY on the back of this news, due to the resulting momentary resumption of risk appetite among global investors. On the other hand this willingness to take risks among investors due to some real positive market news was another major reason why the greenback depreciated against the Sterling and the EUR yesterday. Since the interest rate gap between the U.S and Europe has widened substantially in recent weeks and so it now makes the greenback susceptible to carry trades. Also the dollar gains against the JPY were cut short as investors concluded that the so called “Buffet Plan” was insufficient to relieve the grey cloud surrounding the U.S econom
Today, the only important data from the U.S will be the Retail Sales headline and core figures. Analysts expect a downside surprise amidst a slowing U.S economy and much of this speculation was already incorporated into yesterday's dollar slide. However, should Retail Sales drop far beyond expectations then this will throw the dollar back to the bears, any other outcome will result in a greenback consolidation after yesterday's sharp decline.
EUR
There was positive news yesterday for the EUR as both the German and Euro-zone ZEW Economic Sentiment released better-than-expected. These figures measure institutional investor sentiment and the monthly indicator reflects the difference between the share of investors that are optimistic and the share of investors that are pessimistic. Now although both the German and Euro-zone ZEW figures are still negative indicating that the share of pessismism outweighs the share of optimism, yesterday's figures nevertheless indicated an improvement in sentiment because there is declining pessimism. Therefore the EUR rallied against most of the majors, particularly versus the USD and the JPY on the back of the so called “Buffet Plan”. Also the negative speculation surrounding the greenback ahead of tod's U.S Retail Sales report was another key contributing factor in the EUR's sharp rally versus the greenback. The EUR's rally versus the JPY was eventually capped as investors concluded that the “Buffet Plan” was not enough to remove the negative sentiment surrounding the U.S economy. Nevertheless, the EUR was able to maintain its gains versus the troubled U.S currency which faces another difficult day today with the looming Retail Sales figure
Looking ahead to today, there should be more positive news for the EUR as Euro-zone Industrial Production is expected to release at 0.5%, which is significantly better than the previous figure of -0.5%. Therefore this is a very positive indication for the European economy as high levels of production are signs of a strong economy. So although the German economy is heavily reliant on exports, the Euro-zone economy is still showing resilience despite the strong EUR. We expect the EUR to continue its rally against the greenback today but much depends on how the U.S Retail Sales figures release.
JPY
The JPY declined all across the board yesterday after Warren Buffet's plan to shore $800 billion worth of municipal debts. This news sparked a risk appetite among investors and therefore carry trades were back in full swing, albeit temporarily. The JPY managed to recoup some of its losses as investors realized that this move was not enough to change the current negative sentiment surrounding the global economy. Earlier today during the Asian trading session the only news released from Japan was the Current Account and the CGPI figures. The Current account came in at 1.86T, which was slightly below the previous figure of 1.90T but still very strong. The CGPI figure, which measures the rate of inflation experienced by corporations when purchasing goods, released at 3.0% which was noticeably better than the forecasted figure of 2.7%. The JPY should continue to rebound today as risk fear resumes it's strangle hold on investor sentiment as the market now moves forward from yesterday's positive news. So with the outlook for the global economies remaining bleak, carry trades should continue to unwind and the JPY should maintain its positive momentum although a JPY level below 106.00 versus the greenback could dampen Japanese exports dramatically.
Technical News
EUR/USD
The daily chart indicates a relatively high bullish momentum as the slow stochastic is floating around the 50 level. The 4 hour chart is supporting the bullish notion yet it might be preferable to wait for a significant break above the 1.4600 in order for the next move to be validated.
GBP/USD
There is a very distinct downwards channel forming on the 4 hour chart as the cable now floats in the mid section of it. The momentum is locally bullish, and traders must wait for a breach beyond the upper level of the channel at 1.9620 in order for the correction move to be fully validated. A failed breach will keep the cable floating within the channel in a mild bearish movement.
USD/JPY
The flat tight range is still in place, as the pair is showing very weak bullish momentum within the range. The Bollinger Bands are very tight on the daily chart which indicates that the break can't be very far away. The slow stochastic has a positive slope which might imply that the break could be beyond the 107.60.
USD/CHF
The bullish momentum is slowing down and the pair now consolidates around 1.1020. The daily chart is giving mixed signals, and the tight Bollinger bands and the doji formation are implying an upcoming strong move. The direction of the move is still vague, and traders are advised to hold for the break and swing into it.
The Wild Card
Gold
Gold is being traded within a very distinct channel on the daily chart, and is now floating at a strong key point of the bottom barrier. forex traders are advised to wait for a break beyond the 899.00 which will validate a sharp dropping move that might take gold prices into a deep abyss.
14/02/'08 - US Trade Balance and Unemployment Claims on Tap
Economic News
USD
The USD continued to rebound yesterday after a surprising gain in January Retail Sales suggested consumer spending was holding up. Retail Sales increased 0.3% last month, following a 0.4% drop in the prior month. Government data showing higher Retail Sales in the month of January - diminished economists' expectations for a decline in the greenback. The report was also a surprise for investors because it followed a weak January jobs report and shrinking service sector numbers, which normally acts as an early indicator to sub par Retail figures.
Yesterday's data pushed the greenback primarily against the JPY, while against the rest of the major currencies such as the EUR and GBP, the USD remained relatively unchanged. Traders continue to scale back positions ahead of today's' testimony by Fed Chairman Ben Bernanke. The Federal Reserve Chairman may signal more rate cuts in the near future, as the last few days of bullish dollar behavior may only be a glitch in the bearish dollar trend that has existed for most of 2007 and 2008. Based on Interest Rate Futures, markets are expecting the Fed to reduce its benchmark interest rate to as low as 2% this year, although expectations for another 50bp rate cut have decreased. The market is now pricing in a 68% chance for 50bp cut, down from yesterday's 80%.
Today, the greenback's momentum may continue as all attention will be focused on the U.S. Trade Balance, Unemployment Claims data and Fed Chairman Bernanke's speech. We may see the greenback extend its gains across the board if the U.S. news surprises on the upside but it may also retreat slightly as the current market sentiment seems to be that the recent USD rally is running out of steam.
EUR
After developing a small rally for 3 days running, the EUR lost ground against the USD on the back of weaker Euro zone Industrial Production and stronger U.S. Retail Sales numbers yesterday. The EUR was down 0.1% at $1.4569 after hitting a session low at $1.4534.
The unexpected increase in Retail Sales, helped ease fears of an economic slowdown in the U.S., placing some additional pressure on the 15 nation currency. The European market was looking for Industrial Production to accelerate in the month of January, but instead the indicator printed at -0.2%, far below the forecasted 0.5%.
Today, we await the release of the GDP data from Germany and France. Both of the figures are expected to drop, further dragging the EUR down. Today's price action could be critical in determining whether the retreat this week is a correction or a larger rebound in the greenback. Also the ECB President Trichet is expected to deliver a speech later today in Spain. The speech will be closely followed by investors for hints on future ECB monetary policy. Today, we may see the EUR extending its losses against the USD if the U.S. news will indeed surprise on the upside.
JPY
Yesterday, the JPY dropped to a one-month low against the USD after U.S. government data showed an unexpected rise in Retail Sales last month, easing concern that the biggest economy will slide into a recession. On its way down, the JPY reached a low of 108.37 before easing to 108.10 by the end of Tokyo session yesterday.
Carry trades unwind resumed yesterday as the Japanese GDP figure rose to 0.9%, after growing only 0.3% through the previous quarter. On the other hand, The GDP deflator, a broad measure of prices used to derive real growth from nominal, fell 1.3% from a year earlier, the biggest drop since 2006.
Today the Japanese economic calendar is barren of any scheduled events. Forex traders should keep an eye on the economic events around the world, as today could prove to be very volatile.
Technical News
EUR/USD
The pair is consolidating around 1.4570 with a moderate bullish momentum. The 4 hour chart is still bullish and the daily chart indicates that there is still room to run. 1.4590 is a key Fibonacci level which if breached will validate the next move up with a target of 1.4650.
GBP/USD
The 4 hour chart is showing a very strong uptrend with increasing momentum. The 1.9650 level was fully breached indicating that the bullish momentum will continue to grow locally. The daily RSI is floating around 50 which indicate that on the longer run we might see the trend reach 1.9850 as a valid target price.
USD/JPY
The much anticipated breach through the 108.00 has occurred, as the pair now heads up north. The positive slope on the daily slow stochastic strengthen the notion that the bullish momentum is about to grow. Being on the buy side appears to be the right choice today.
USD/CHF
The pair maintains the bullish move with a diminishing momentum. The daily chart is indicating an upcoming bearish with a potential to bring a bearish correction move. The 4 hour chart is still bullish which make the selling on high strategy quite feasible today.
The Wild Card
Gold
The massive uptrend continues with full momentum as Gold is now regaining energy for the next move on the daily channel. All oscillators support the bullish notion and this could be a great opportunity for forex traders to enter a very intensive uptrend with no intentions to stop.
18/02/'08 - Will The Dollar Continue to Slip This Week?
Economic News
USD
The greenback slipped all across the board on Friday as a host of negative U.S data increased speculation of another Fed rate cut in March and was another strong indication that the U.S economy is heading towards a recession. The main driver of the dollar slide on Friday was the soft Consumer Sentiment figure which released at 69.6, well below the expected figure of 76.0. This was the lowest Consumer Sentiment figure in 16 years, indicating that U.S consumer spending is in a sharp decline and this once again sparked recession fears. The U.S currency gained some ground against the majors towards the beginning of last week but its positive momentum quickly reversed on the back of growing recession fears. There was more bad news for the greenback on Friday as the Empire State Business Conditions Index, which measures the general business conditions of manufacturers in New York State, released in negative territory signaling a sharp contraction in the level of general business activity. Also the U.S TIC Report, which measures the monthly difference in cross-border foreign and domestic purchases of long-term securities, came in well below expectations thus indicating that the demand for the greenback has declined drastically. All this negative data would now justify another rate cut by the Fed and as long as the U.S economic indicators continue to disappoint, the greenback will remain under pressure. Looking ahead to today, low liquidity is expected during the New York trading session as U.S banks will be closed in observance of President's Day. Therefore, the greenback should trade relatively flat, especially since there is also no major market moving news expected from Europe or Asia. The next key U.S data release will be the NAHB Homebuilders Survey on Tuesday, which should give forex investors an indication as to how the struggling housing market is reacting to the string of aggressive rate cuts by the Fed. The short term outlook for the greenback remains grim as investors are now betting on a 0.5% rate cut at the next FOMC meeting.
EUR
The EUR continued to gain ground all across the board last week, in particular against the greenback and the Sterling, as expectations of a rate cut by the ECB all- but diminished. ECB President Trichet emphasized that the problem of inflation is of greater concern than growth thereby eliminating any room for a rate cut in the near future. Now although the strengthening EUR has been dampening exports, the Euro-zone economy has remained resilient. So with the Fed and the BoE expected to continue slashing rates, the EUR is now in the driver's seat among the basket of major currencies and it is likely to target new highs in the near future. The only way that the EUR bubble will burst is if Euro-zone growth begins to show signs of a significant slowdown that would eventually force the ECB to lower rates.
There is no real significant Euro-zone news expected today or tomorrow, so the EUR should be able to maintain its bullish movement. The short term outlook for the EUR remains bright as speculation of further rate cuts in the U.S and the U.K is resulting in the EUR being favored by global investors.
JPY
The JPY fell sharply last week as carry trades were back in action on the back of Warren Buffet's offer to shore up more than $800 billlion worth of municipal debts. However this carry trade reversal was only temporary and as the market digested this news of the “Buffet Plan”, the JPY climbed back onto the bullish wagon because global economic uncertainty continued to heavily weigh down on investors and risk aversion once again seized the financial markets
The most significant news from the Japanese economy last week was the Interest rate Announcement by the BoJ on Friday. The BoJ kept its key benchmark rate unchanged at 0.5%, which is one of the lowest interest rate levels in the world making the JPY a carry trade favorite. BoJ Governor Fukui stated on Friday that the BoJ will assess the downside risk to the economy more closely as global financial markets have continued to display signs of instability and the global economic outlook is still uncertain. However the Japanese economy is still on the recovery path and it seems that the BoJ intends to resume its interest rate adjustment as economic circumstances permit it to do so. Therefore the JPY should be able to maintain its bullish momentum in the near term, especially if the global economy continues to slowdown sparking further risk aversion.
Technical News
EUR/USD
The key Fibonacci level of 1.4660 was breached on the 4 hour chart indicating that locally the momentum is still strong. The daily chart is showing a bearish cross forming on the slow stochastic which implies on a possible bearish correction if validated. Taking positions for the short term might be a preferable strategy today.
GBP/USD
The cable is showing renewed bearish momentum within the bearish channel. The daily RSI and slow stochastic are floating at the 50 level which implies that the bearish move might be relevant on the daily level as well. Next target price might be 1.9500.
USD/JPY
After the much anticipated bullish break failed to touch 108.50, it appears that range trading might continue this week. The 4 hour chart is moderately bullish, and the daily RSI is showing a positive slope. Buying on dips might be the right move this week.
USD/CHF
After another failed attempt to break the 1.1100 it appears that the bearish momentum is back. The 4 hour chart is showing strong bearish momentum and the daily chart supports the notion. Next target price might revolve around 1.0900 on the first move.
The Wild Card
Crude Oil
The strong bullish bonanza appears to continue with no signs of a halt. All oscillators are indicating that this bullish trend will continue, and the daily is showing that Oil is ignoring all bearish cross on the slow stochastic. This is great timing for forex traders to swing in while the momentum is still high.
19/02/'08 - Will the FEDs Cut Again?
Economic News
USD
U.S. traders were off yesterday celebrating Presidents Day and there was no news or economic data to drive the market. By the end of the trading session, the USD was up 0.4% against the EUR, mainly as a result of position unwinding. This week, inflation will be in focus as the U.S. consumers expect the rise in food and energy prices. Although the greenback edged higher yesterday, analysts estimate that the U.S. data releases may keep the pressure on the currency this week. Bernanke's remarks and recent economic data have left investors betting on another half percentage point cut at the central bank's March meeting. Futures contracts on the Chicago Board of Trade indicate traders see 74% likelihood the Fed will lower its benchmark rate by 0.5 %point at the next FOMC meeting. The rest of the bets are on a 0.75 % point reduction. Today, the U.S economic calendar is relatively tame with only the National Association of Home Builders (NAHB) data providing any meaningful guidance to traders. NAHB index is measuring the demand outlook of single-family home builders. Also, during the day, Minneapolis Fed President Stern is scheduled to speak about the U.S. economy at the Financial Planning Association of Minnesota. Traders scrutinize his speeches closely for clues regarding future monetary policy. Traders may expect little major action in the U.S. currency till tomorrow, when the CPI report, Housing Starts and FOMC Meeting Minutes will be released. Overall, we expect that bearish dollar sentiment will persist during the rest of the week.
EUR
With the absence of data coupled with the U.S. holidays, the EUR held broadly in a range yesterday. Overall the EUR/USD traded with a low of 1.4612 and a high of 1.4688 before closing the day at 1.4654.
Meanwhile, there are more comments coming out of the ECB, which confirm the market's belief that the Central Bank is growing less hawkish. The ECB member Liikanen, said that the European growth will likely fall below 2% this year due to weakening sentiment and the ongoing financial turmoil. Currently, the market is pricing in between 50 to 75bp of interest rate easing by the ECB this year. But the biggest story in the European financial market yesterday was the British Prime Minister's announcement that the government will be temporarily nationalizing Northern Rock, one of the top 5 U.K. mortgage lenders. The decision has triggered a wave of GBP selling. The British Pound dropped to $1.9490 yesterday, from $1.9612 late on Feb. 15. It also fell to the lowest level in two weeks against the EUR. There is no Euro zone economic data due for release till tomorrow, when we expect German Producer Prices Index. Today, the EUR should continue to gain on speculations that the Fed will probably cut its benchmark rate at the next FOMC Meeting.
JPY
The JPY depreciated vs. the USD yesterday as the pair tested offers around the 108.30 level and was supported around the 107.75 level. The Bank of Japan monthly report echoed the same tone held by BoJ Governor Fukui last week. The report talked about the ongoing slowdown in the U.S. economy and its potential impact on the Japanese economy. The JPY also declined against the USD after Japan's former top currency official said the economy may enter a recession for 1 or 2 quarters this year. Also yesterday, the Tertiary Industry Activity Index deteriorated in the month of December, led by a sharp decline in retail activity.
The Japanese economy continues to be extremely sensitive to global demand and the interest rate policy will remain dormant until the BoJ sees concrete signs of improvement. Ironically, negative news on the global economic front will likely lead to a strengthening of the Japanese currency while positive news will drive the JPY lower as carry trades dominate flows. Today, the only news to come out of the Japanese financial market is the Monetary Policy Meeting Minutes. The Bank of Japan Meeting Minutes is a detailed record of the bank's Interest Rate meeting held about one month earlier. This indicator is of quite a minor importance, therefore today, most price movement of JPY pegged currencies will be derived from the U.S. and the European financial data.
Technical News
EUR/USD
The pair is showing strong bullish sentiment again, and has made a relatively fast move that topped at 1.4710. The 4 hour chart is bullish and the slow stochastic is pointing to a strong bullish momentum. Next target price is 1.4750.
GBP/USD
After several failed attempts to breach through 1.9480, it appears that the cable is showing some bullish signals with increasing momentum. The bullish cross with the positive slope on the 4 hour chart strengthens the notion that a move back to 1.9600 is quite imminent.
USD/JPY
The consolidation around the 108.20 level has ended, and the pair is showing strong bearish momentum again. It appears that the bullish breach above the range was not validated, and that range trading might be the name of the game. Taking short term selling positions might be the right move today.
USD/CHF
The 4 hour slow stochastic is showing a strong bearish cross, as the pair already started to drop. Both daily and 4 hour chart are showing plenty of room for the bearish trend, and a touch at the 1.0900 might be very possible today.
The Wild Card
Crude Oil
The pair has been going through a very strong bearish trend in the past month, and has been showing some consolidation lately. The daily chart is showing a bearish cross on the slow stochastic, and together with the negative slope on the 4 hour one, it could be a great opportunity for forex traders to get in a short position, before momentum increases.
20/02/'08 - Core CPI On Tap
Economic News
USD
Yesterday's forex trading session was characterized by low volatility due to a lack of any significant economic news events. As a result, the greenback saw small losses as it range traded against its major currency rivals. In U.S. share markets, a more consistent trend of bearish behavior took place as the NASDAQ fell by -15.60 points (-0.67%) whilst the Dow Jones was also down by -10.99 pts (-0.09%). Crude oil floated close to $100 a barrel last night, rising by just under $5 a barrel which contributed to the dollar's mild reduction yesterday. The release of the NAHB homebuilder confidence index yesterday surprised the market by rising for the second straight month, though the figure is still below standards as it creeps towards lows seen last in the US recession of 1991. Looking ahead to today's basket of US economic events, the 13:30 GMT release of Core CPI is expected to show at 0.2%, equaling last month's result. Housing Starts figure, also to be released at 13:30 GMT are forecasted to return at $1.01 Million also on par with last month's number. Building Permits are expected to return with identical numbers to last month's 1.05 Million dollar figure. Wednesday's US calendar will be wrapped up by the 19:00 GMT release of the FOMC meeting minutes as volatile conditions can be expected. The FOMC meeting is generally a good source of information regarding future polices regarding the dollar and interest rates. The January 30 FOMC meeting called for a vote regarding a 50bp rate cut for the dollar. If the aforementioned figures meet their expectations, Forex traders may interpret it as a positive sign in a relatively gloomy period for the US economy. In other dollar related news, ten-year bond yields rose overnight to a one-month high of 3.90% on inflation fears; a strong reading could threaten technical resistance by around 4% and open the door for a sharp move toward higher long-term interest rates around the world. Usually when a sharp positive movement in bond yields is expressed, the market atmosphere can be characterized as uncertain as traders could begin to seek low risk investment alternatives.
EUR
The latest trends in Forex trading hint toward a strengthening of the EUR ahead of expected Inflation reports. The EUR saw a small boost versus the dollar, as the often traded pair stayed above the 1.47 key level. The Euro zone, along with the rest of the world's economies has been affected by a recent rise in food and energy prices. The futures market is currently pricing a EUR interest rate cut by 0.5% to 0.75% for this calendar year. As such figures have added to speculation regarding ECB interest rate policies, one of the main reasons why the European Central Bank has refused to cut interest rates is the growing inflation pressures on the Euro zone economy. Today, their ongoing hawkish stance may be validated by the German producer price report (PPI), which is forecasted improve by 0.4% compared to last month's figure. As this is the only scheduled event on the European calendar, expect most of the EUR movement to come as a response to today's US data.
JPY
Since the beginning of February, the Yen crosses have been trapped within a wide trading range, making those involved in carry trading struggle to properly define the overall market outlook. Volatility in the financial markets continues to be very high, which has made it very difficult for carry trades to recover from last month's poor showing. Investors should expect this situation to continue as the US economy is not reflecting any signs of stability in the near future. The Japanese economy has found itself once again in its own recession scare, after most investors thought that Japan's economic recovery was completed. Yesterday's monetary policy meeting minutes touched upon Japan's wariness regarding downside risks from the US.
Today see's two scheduled events from the Japanese economy. At 23:50 GMT we will see the release of the All Industries Activity Index and Trade Balance figures. Both are expected to see mild improvement, as it could help put a positive spin on JPY forecasts. Still, the key Japanese event will come on Friday, when BOJ Governor Fukui is expected to clarify the current status of Japan's economy and where it's headed in the near future.
Look for the JPY to continue range trading today, as it will be most affected by today's basket of US economic events.
Technical News
EUR/USD
The pair breached the 1.4720 level which validated the next bullish move, as we now see a consolidation around that Fibonacci level. It appears that the pair is accumulating momentum for the trend which might be expressed in a moderate bearish correction. Buying on dips might be a strong strategy today.
GBP/USD
The 4 hour chart clearly indicates that the bearish trend has not yet said its last word. The slow stochastic is showing a classic positive slope structure which indicate on an upcoming increasing momentum. The daily chart supports the bearish momentum, as no clear reversal cross is in sight.
USD/JPY
The familiar tight range we have seen the pair traded in, continues uninterruptedly. The main difference is that we now see the pair floating in a slightly wider range and with moderate bullish momentum. It would probably still be recommended to stay out of this one until a strong and distinctive signal will appear.
USD/CHF
There is a very interesting wave pattern forming on the 4 hour chart, as the pair now initiated the second bearish move within the formation. Together with relatively strong bearish momentum on the slow stochastic, it appears that 1.0880 might be a valid target price.
The Wild Card
Crude Oil
After spiking to the very impressive $100 level, it seems that Oil is the center of forex trader's focus today. The inability to breach that level violently, together with many bearish indications by various oscillators is strengthening the notion that a sharp correction move is quite imminent. Going short with tight stops and limits might provide high profit potential.
25/02/'08 - Existing Home Sales On Tap
Economic News
USD
The last few weeks have been characterized by Dollar negativity and even despite small gains last week look forward for future downwards pressure on the USD. A major concern has become the severity of the problems in the US economy and how the Fed can solve such issues to bring some stability to the failing dollar. Last week's data from virtually every economic sector in the US reflected the growing instability in what once was the benchmark of global economies.
The Fed's main intervention has been its monumental cuts in US interest rates, as they have been sliced 225bp over the last 7 months. Today's Existing Home Sales index should give us a good measure of how well it has worked. With lower interest rates, the housing market should expect to see a boost; however expectations have the index down 1.8% to 4.8M. Some felt the rate cuts would spur on new buyers in the market, specifically low income buyers who wouldn't necessarily be looking as hard if it weren't for the combination of low prices and low interest rates.
With the dollar already at dangerously low levels versus the major currencies to start the week, any more negative data will likely drive the dollar to record lows versus the EUR and a handful of others. Remarkably, the greenback has pulled itself out of such holes in the recent past, climbing from record setting lows to the EUR to storm back under 1.45. With the week set to see forecasted drops in Durable goods, GDP, Chicago PMI, personal income and spending as well as what will likely be negative comments from several Fed Governors, the dollar looks set to make a slight bearish push before Fed Chairman Ben Bernanke's Wednesday remarks. Generally Bernanke does enough to reassure dollar investors to push the legendary currency back up to more respectable levels, regardless of the overall negative outlook on today's US economy. Look for a falling dollar before pressure from Commodities prices drives the greenback up before weeks end.
EUR
The EUR finds itself in excellent position this week to make historic gains versus all of its major currency rivals, namely the US dollar. EUR/USD begins the week well over 1.48, as we wait what is being forecasted as a strong Euro-zone economic news week. Amidst the deceleration of global economies, the Euro-zone has managed to string together a set of positive data, allowing it to make extra strides versus its most competitive rivals. Last Friday's early release of growing Manufacturing and Service PMI should be enough to push the European currency into bullish trends throughout the week.
Today at 18:50 GMT, we expect a speech by European Central Bank (ECB) President Jean-Claude Trichet, at the New Year's Reception for Asia-Pacific, in Frankfurt. He will more likely than not, map out what we already assume to be a strong week for the EUR. Trichet's hawkish monetary policy has not changed and has allowed a continuation of EUR strength in the currency market. Investors should expect consistent bullish movement from the EUR across the board this week, as no change in policy and or interest rate should be expected in the near future.
This week we will continue to see what is forecasted already as positive data from the retail sector, namely sales and PMI. Unemployment and CPI numbers, followed by the German IFO report will shape the list of significant economic events from the Euro-zone this week. With slowing markets and under achieving US economic data, the bullish EUR will be a force to be reckoned with.
JPY
The trading week opened today, with a decrease in the JPY against 15 of the 16 most actively traded currencies. A large part of this is due to the resumption of carry trading due to rising stock prices around the world. Investor returns to higher-yielding assets funded with loans from the Japan restarted itself on Friday of last week. As commodities and stock prices charge upwards, the JPY will should see acceleration in the bearish trend.
The week ahead we expect a set of key Japanese data, a rarity in the often dominating European/American relevance of economic data. Retail Sales, Industrial CPI and Overall Housing spending highlight a busy week for the JPY. Still though, with the rising volatility seen toward the end of last week, expect the JPY to make most of its movement in response to US economic data, as has been the case over the last several weeks.
Today we can expect annual CSPI numbers at roughly 23:50 GMT, though it should contribute significantly to JPY movement, expect the JPY to recover from its bearish opening to the week.
Technical News
EUR/USD
The bullish channel continues with strong momentum as the pair now floats around 1.4828. The slow stochastic on the 4 hour chart is floating around 50 which indicates that the bearish signal is in place. The RSI is forming back into bullish formation and supports the general notion. Next target price might be 1.4883.
GBP/USD
The cable is going through choppy sessions within a wide range with no distinct direction in the past two weeks. A fresh bearish signal can be seen on the 4 hour chart, and together with a bearish cross on the daily slow stochastic, the bearish momentum is quite strong. Going short appears to be favorable today.
USD/JPY
After a short period of time that the pair peaked at the 108.40 zone, we see that a consolidation in a tight range is the name of the game again. The local momentum within the channel appears to be bearish, and it appears that a touch in the 106.50 zone might be close. Selling on highs might be a good choice today.
USD/CHF
The pair is entering a bearish formation on the daily chart as the RSI floats near 50 with a bearish slope. The 4 hour slow stochastic supports the bearish notion and points at an upcoming test of 1.0800, possibly by Wednesday. If that level will be breached we will see a stronger bearish move that might take the pair to the 1.0720 zone.
The Wild Card
Gold
Gold is floating at record highs with diminishing momentum as clearly indicated by the daily chart. The 4 hour chart is showing on an upcoming bearish cross which strengthens the notion that a corrective move is quite imminent. This could be a great opportunity for Forex traders to get into a bearish move at record highs.
26/02/'08 - US PPI and Consumer Confidence On Tap
Economic News
USD
The strong selling of USD was boosted yesterday after hopes that a possible rescue plan for 'Ambac Financial Group', the second largest U.S. bond insurer, would help limit the damage from the ongoing credit crisis. Also yesterday, the US Existing Home Sales for January fell to the lowest level in 9 years while prices slid for the 7th consecutive month, posing a threat to consumer spending; the largest part of the enormous US economy. By the end of the day, the USD remained range bound vs. the EUR, while appreciating the most against its' high-yielding counterparts, most notably the JPY. Economic data from the US now shows the effects of the worst housing recession in 25 years have spread into other areas of the economy. The Fed Bank of Philadelphia's general economic index fell this month to -24, the weakest reading in 7 years. With other major sectors such as Employment, the financial markets and business investment; the Fed now has more than just the housing market to contend with when making its monetary policy decision. Currently, the market is pricing at a 65% chance that the Fed will lower its Interest Rate by another 0.25%. Today, traders may expect to see an overall increase in volatility as the US economic calendar filled with eventful releases like the PPI, National Home Price Index as well as the Consumer Confidence data, later in the afternoon. We expect the USD to rally on the back of stronger inflation numbers but weaker consumer confidence could cap the currency's rise.
EUR
The EUR was little changed yesterday at 1.4821, taking a breather after hitting a three-week peak of roughly $1.4862 last Friday. The European markets rallied on hopes that 'Ambac', the embattled U.S. bond insurer, may soon announce a rescue package. 'Ambac', is currently facing billions of dollars of losses from guaranteeing repackaged subprime mortgages. The company is talking to banks and regulators about raising extra capital in order to retain its top credit ratings. With yet another fork in the road for invested US clients, the EUR continues to become a much safer and stable alternative for long term success. Today, investors will focus mainly on the German Ifo Business Climate as well as German Ifo Business Expectations indices for February. Traders will try to find clues on the health of the Euro-zone economy and its' interest rate outlook. The underlying impression remains that the European economy is slowing down and that at some point we could see interest rates in the Euro-zone decline. The hawkish stance by ECB President Trichet could be challenged if the ongoing trends continue. Today's economic news is particularly important for the EUR, and could be responsible for a key turning point in for the 15 Nation currency. It will be crucial for traders to identify how the preceding economic indicators from Europe and the US will affect the currency. Investors may expect another volatile trading session.
JPY
The JPY fell broadly yesterday as news over the U.S. bond insurance sector boosted stock prices and other risky assets. The JPY also fell after a report showed declines in the sales of Existing Homes in the U.S. slowed last month, signaling the housing slump may be closer to a bottom than ever before. The USD/JPY dropped to a session low of 108.21 before consolidating around the 108.00 level by the end of late Tokyo session.
Risk aversion has subsided and appetite among investors to borrow in JPY and invest in risky high-return investments is back in play. The Yen often suffers in times of rising risk appetite because investors borrow it at low Japanese interest rates to fund "carry trades" that invest in higher-yielding currencies and assets.
It appears that in the short term the JPY might suffer in this environment. There is no significant economic news coming out of Japan today. We should see the JPY continue on its bearish path. As for the long term, we need to keep in mind that March is the most volatile month for JPY and we'll take a more in-depth look into what this could mean for the JPY crosses as we approach the pivotal month. As the Japanese fiscal year nears its closing we should begin to get a clear picture of future trends.
Technical News
EUR/USD
The pair has been going through a consolidation phase after a very strong and consistent period of bullish momentum which was initiated near the 1.4450 level. The daily chart is showing its first bearish signals, and the 4 hour chart is floating in neutral territory. It appears that a correction move might be quite imminent with the first target price of 1.4720.
GBP/USD
The daily chart is showing a triple doji formation with a bearish cross on the slow stochastic. The 4 hour chart is already indicating escalating bearish momentum, with RSI and slow stochastic at a negative slope. It appears that going short might be preferable today.
USD/JPY
The pair has not yet made a significant move beyond the flat range it has been going through in the past month. Forex traders are anxiously waiting for any breaks to signal an upcoming strong trend, yet none are coming. All oscillators are quite neutral, and no distinct direction is seen on the horizon. It is advised to wait for a clear sign before entering the market.
USD/CHF
After going through a very choppy month, the pair finds local consolidation at the 1.0900 zone. The daily chart is showing some bearish momentum with negative slope on the slow stochastic, as the 4 hour chart is showing moderate bullish sentiment. It appears that selling on highs might be preferable.
The Wild Card
Gold
Gold is in the middle of a correction move that is now showing strong signs of support. It appears that it will not be able to breach through the 931.00 level which is a key Fibonacci level of the 854.70/953.20 move. The bullish cross on the hour chart is strengthening the notion that Forex traders might enjoy a great entry price for the upcoming bullish move.
27/02/'08 - EUR/USD Breaches 1.50
Economic News
USD
The greenback continued to fall sharply yesterday on the back of more negative U.S economic data which further fuelled speculation of an aggressive Fed rate cut in March. The greenback fell to a new all time low against the EUR after U.S Consumer Confidence released well below expectations at 75.0 for the month of February, which is a 17 year low for this figure. There was some positive U.S data released yesterday as the PPI figure surprised on the upside, releasing at 1.0% which was well above the forecasted figure of 0.4%. However this positive data was negated by comments from Fed Vice Chairman Donald Kohn saying that risks to U.S. economic growth are of greater concern to the central bank than inflation. The greenback is likely to remain firmly rooted in grizzly bear territory in the near term as given the risks to the U.S economy the Fed will be forced to keep cutting rates and ignore rising inflation. Another key factor that drove the greenback to an all time low against the EUR yesterday was the fact that positive Euro-zone data is continuing to make a rate cut by the ECB highly unlikely, while a Fed rate cut is now almost certain.
Looking ahead, it does not seem as though the greenback will receive any reprieve today as we expect the Durable Goods and New Home Sales figures. These figures are forecasted to come in lower than last month and with the U.S economy in tatters there is a high likelihood that these figures will disappoint beyond market expectations. Also Fed Chairman Bernanke will speak before the House Financial Services Committee and he is likely to reiterate Vice Chairman Kohn's comments that U.S growth is of prime concern to the Fed. However many analysts are now of the opinion that since the greenback has crossed the key 1.5000 level against the EUR, it could consolidate before once again being pulled back by the bears. So traders can expect the bears to remain firmly on top in the near term and the greenback will only manage a sustained recovery once all the Fed rate cuts are firmly behind us and there is a steady stream of positive U.S economic data.
EUR
The EUR appreciated sharply against the greenback yesterday, reaching a new all time high and breaching the key 1.5000 level. There was positive news for the Euro-zone yesterday as the German Ifo Business Climate Index, which measures the mood of firms in manufacturing, construction, wholesale and retail, surprised on the upside releasing well above the forecasts at 140.1 up from its previous 103 mark. This news coupled with weak U.S data was the main driver of the EUR's sharp rally against the greenback yesterday. The reason for this is because the stronger-than-expected Ifo survey and high crude oil prices reduce expectations that the European Central Bank will cut rates to deal with a slowdown of growth in the Euro-zone.
Looking ahead to today, we expect the German Consumer Confidence figure, German Import Price Index and the Euro-zone M3 Money Supply. These figures are unlikely to cause any volatility and any sharp EUR movement today will be dollar centric. The EUR will maintain its bullish rampage against the greenback for as long as the interest rate differential between the Euro-zone and the U.S continues to widen. If U.S data once again disappoints today, then the EUR will target another new high against the fragile U.S currency.
JPY
The JPY was one of the few currencies that failed to gain ground against the freefalling greenback yesterday. The JPY range traded against the USD yesterday as the euro-dollar pair grabbed center stage on the trading arena as a result of key U.S and Euro-zone data releases. The JPY may find itself losing more ground versus the greenback despite the fact that the USD has been weakening all across the board. The main reason for this is the fact that the continuing rate cuts by the Fed have reduced global liquidity level concerns and therefore investors may now prefer to place their funds in countries where the yield is high. So we may see carry trades back in action in the near term despite the fact that slowing global economic growth is driving risk aversion.
Technical News
EUR/USD
The pair has breached the much anticipated 1.50 key level and is now traded at all time high levels around 1.5040. The bullish move was validated and the momentum is now very strong. It appears that the pair is going towards the 1.5090 on the immediate level, and that going long should be a preferable choice today.
GBP/USD
The bullish trend is very strong as the cable is carried up on the back of the USD weakness. There is a bearish cross forming on the 4 hour chart, yet with a strong bullish momentum on the daily chart it might be a good choice to buy on dips, as the local correction move unfolds.
USD/JPY
The pair is shaping into a bearish formation within the flat channel. The slow stochastic on the daily chart indicates that the momentum is relatively strong, and the RSI supports the bearish notion. Next target price might be around 106.50, and if breached we should see a stronger bearish move being validated.
USD/CHF
The key level of 1.0700 was breached yesterday, after three failed attempts on the daily chart. The bearish move is validated on the 4 hour chart as no reversal cross are seen. All oscillators are pointing to the continuation of the trend, and the next target price is now 1.0650.
The Wild Card
CRUDE OIL
Oil is traded at historical levels of more than 101.00, and shows no room for hesitation. All technical indicators on all time frames are showing that the direction is up and the momentum is extremely high. forex traders should use this momentum to swing into the trend, and join oil on its journey to fresh all time highs.