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11/10/'07 - Japanese Interest Rate, US Trade Balance, Import Price Index & Unemployment Claims
Economic News
USD
Despite appreciation which the dollar experimented over the last days it changed its direction after the publication of the Meeting Minutes of the FOMC, from September 9. Yesterday, there were no important news events in the US ,however today we expect the Trade Balance, which measures the difference in value between imported and exported goods and services, and the forecast is a little down from the last figure of -59.3B .Thus ,we foresee an anxious trading day brewing . At the same time, The Import Price Index is due to be published, which is supposed to come up at 1.0% leaving negative territory of -0.3% that may have a positive influence on the USD ,and also at 12:30 GMT The Unemployment Claims is expected to released at 315K with a previous figure of 317K as traders hope to get a "message" from the US economy regarding jobs employment which may have implications on a possible recovery of the economy after the last strong NFP which some analysts translated as a signal of the USD recovery that will start the appreciation of the Greenback against the majors and especially against the EUR .
Later on, we have the Crude Oil Inventories and after all the data traders will expect to hear an implications on the future monetary policy from the Fed Governor Kroszner .
EUR
Despite weakening economic data ,ECB President Trichet which has been pressured to initiate actions for restraining the EUR level for Euro zone exporters, has not changed his monetary policy stance or expressed any concern about the level of the EUR. Instead, in his speech this past weekend, he simply credited the central bank for their decisive and active response to the recent market turmoil. Now that the earning season is beginning however, the central bank head may not have any choice but to recognize the damage that the EUR is having on corporate profitability. Last week, European Aeronautic Defense and Space Company said they stand to lose 1 billion EUR for each 10 cent drop in the USD against the EUR and we are sure that they are not the only ones feeling the pain. Over the past few years, European companies have become more adept at hedging currency risk, but most of these companies probably did not expect the EUR to break 1.40 and head towards 1.50. Many companies will be blaming their losses on exchange rate fluctuations. In terms of economic data, even though Euro zone manufacturing PMI remained unchanged, activity slowed in both France and Germany. Switzerland has been experiencing a more material slowdown even though the central bank remains optimistic. Despite a weakening currency, the country has been hit hard by the global financial turmoil. Swiss consumer prices are due for release tomorrow and forecasted to be weak comparing the last figure which may start a decline of the CHF and should boost inflationary pressures that with no doubt will effect the EUR as well .
JPY
Normally it is difficult to get surprises from the BOJ and today proved to be a normal day with the BOJ committee voting 8:1 to retain an unchanged policy for the ninth consecutive month, keeping the interest rate at 0.75% causing the current JPY reduction against major currencies . The decision will enable the Bank to observe the recovery in the credit markets and also that of the U.S. economy on which Japanese exports have a sizeable exposure. Fukui is likely to maintain the same statement in his press conference later today, confirming a gradually improving economy and that inflation will soon re-emerge. However, his argument is wearing thin. As given his desperate wish to normalize rates, this is consecutive ninth month of no change and that in itself emphasizes the fact that not all is well, and certainly the central expectations of the BOJ have not developed. Seven of these meetings were before the market turmoil which resulted in credit tightening and since then global conditions have worsened and therefore cast significant doubts over whether the Japanese economy can break out of its 17 year doldrums. The Japanese market has started to show impatience as no action is been taken in favor of handling the current turmoil and the credit crisis. Unadjusted Current Account Surplus which registered a solid 42.1% YoY gain in August. While it is below forecasts of 49.8% it still marks a large gain over the earthquake depressed July numbers at +4.5% YoY. Further moderation was seen in Japan's money supply with M2+CD in line with forecasts at +1.7% and down from August's 1.8%. Only Trade Balance which came in at JPY 892.2 bn and above forecasts of 854 bn was positive in the last figures however this tends to reflect the resumption of shipments following the delays caused by the Niigata earthquake in July. Broad Liquidity rose by 4.1% ,which actually is a good sign however, the shrinking in money supply is consistent with the recent slowing in the economy and the major apprehension is a delay reaction which may cause a serious damage to the Japanese economy. Bottom line ,it is clearly reflected in the market reactions that carry trades are back on track and a consistent appreciation of the high yielding currencies among the JPY is expected.
Technical News
EUR/USD
On the 4 Hour chart we notice that the bullish trend is running ahead. The volatility has increased and the EUR/USD is in a consolidation after it has broken the 1.4160 resistance level. The price should continue to move upwards in a range of 1.4180 to 1.4210. As it seems, the bullish pressure will continue to gather momentum as well today.
GBP/USD
The GBP/USD is in a bearish configuration, as the volatility decreased. The pair moves without a trend and swings around exponential moving averages (EMA 50 and 100). Bollinger bands are tightened and the 4 Hour Elliott pattern implies a continuation of the bearish pressure.
USD/JPY
The massive uptrend continues with full steam, as clearly demonstrated by the slow stochastic and RSI on the daily chart. The momentum is still very high and shows no signs of a stop. Next target price would be 117.50 and if it will be breached than it will probably validate the moves' length towards 118.50 levels.
USD/CHF
The pair is heading down and is now at 1.1798. The next key level is 1.1750. If a break through that level will occur, we might see a much bigger move been validated. If the pair will be shy of a breach it will constitute a great entry point for a long position.
The Wild Card
Crude Oil
Over the past two weeks there has been an extremely accurate upwards channel on the daily chart, although for the last few days the Gold is floating around 730 - 740 levels. The next significant resistance level is around 745.50 which provide Forex traders with a great opportunity to jump in to this massive uptrend with large momentum still steaming.
15/10/'07 - US Empire State Business Conditions Index.
Economic News
USD
The greenback was trading within a wide range last week, and started to show some positive momentum towards the end of the week. On many occasions we saw the USD showing massive volatility and price action due to several important news events. US Retail Sales showed a figure of 0.6% after an initial consensus of 0.3%. The US PPI also helped to push the greenback as it came out of negative territory from -1.4% and jumped to 1.1% which was even higher than the expected 0.5%. The sweet taste of positive news was damaged with the release of the Consumer Sentiment that dropped from 83.4 to 82.0 and was expected to rise to 84. The general USD situation is causing the Feds to rethink whether they will hike the rates one more time this month, and if indeed a hike will occur, than it will be a 0.25 hike and not 0.5 like September.
As for today, traders are expecting the Empire State Business Conditions Index to be released at 12:30 GMT. The Index measures the general Business conditions of manufacturers in New York State and is considered to be quite important in the manufacturing sector. The forecast for the index is a slight decrease from 14.7 to 13.0. Later today, at 23:00 GMT Federal Reserve Chairman Ben Bernanke will speak about the economic outlook at the Economic Club of New York, and will probably cause some choppy price movement around the time of the speech.
The rest of the week will be relatively packed with major news events such as the TIC Net Long-Term Transactions, Industrial Production, CPI, Housing Starts, and Building Permits. These will determine whether the USD will continue the positive momentum it started last week, or keep with its already weakening trends.
EUR
The European calendar was quite light last week, as most of the price action was derived from US events. Most US data came out relatively high which caused the EUR to trade lower against the USD and halted the massive uptrend that took the EUR to all time highs. The EUR/JPY on the other hand showed no hesitation and continued to go up as the JPY grew weaker against all its crosses. The upcoming week will be full of European news events that might push the EUR back up to break another all time high, as it is already trading in a relatively close area. Traders will be expecting the Swiss Retail Sales, the German ZEW Economic Sentiment, the UK Minutes Meeting, the UK Retail Sales and GDP to be released this week. These events should probably take the EUR higher this week, as most of them are expected to announce higher figures than in previous releases. Together with a relatively packed US calendar it should be an interesting week all around.
JPY
The JPY showed strong negative momentum all throughout last week, taking the USD/JPY to 117.63, and the EUR/JPY to 166.90. Sentiments are showing that carry trades are in full motion and massive shorting of the JPY is in play all across the board. Bank of Japan (BOJ) Governor Toshihiko Fukui spoke last night at a BOJ Branch Manager meeting, in Tokyo, and together with Industrial Production release continued to push the JPY down throughout the night. The upcoming week has no major news scheduled to come from the Japanese market, as most of trader's attention will be focused on US and Europen events.
It is not a secret that shorting the JPY will probably be the right move throughout the following week. Carry trades will probably grow even stronger, even into the following weeks taking the JPY to levels it has not seen for several months ago.
Technical News
EUR/USD
The pair is starting to lose its positive energy, as another break on the upper level of the range has failed. The daily chart is showing a bullish cross on the slow stochastic and together with the RSI the signal is very bullish. Next target price appears to be around the 1.4270 level, and a breach through that level will validate a greater move up.
GBP/USD
The cable is trading in a wide range since the middle of September, and there is a very distinct horizontal channel, as the pair is floating at the bottom area. It appears that a move is quite imminent and will most likely be bullish. Next target price should be around 2.0420.
USD/JPY
The pair is in a very distinct upwards channel with all indicators showing strong bullish momentum. The RSI on the daily and on the 4 Hour chart is floating around 50 which indicates that there is still more room to run.
USD/CHF
The pair is range trading after the relatively big correction from the 1.1600 level. There seems to be a slight bearish signal on the 4 Hour chart that might take the pair below 1.1750 which is a key level. A breach through that level will validate a bigger bearish move.
The Wild Card
Crude Oil
Oil is floating at all-time high levels and has managed to breach through the 83.90 mark. The uptrend appears to be very strong, and there is a great opportunity for forex traders to get in a strong uptrend after a key level break.
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16/10/'07 - Crude oil and Greenback flying in opposite directions.
Economic News
USD
Yesterday the greenback slipped sharply against the EUR on the back of significant US stock market losses. Nevertheless it managed to gain back some much needed ground against the EUR. The USD was trading at 1.4241 against the EUR yesterday but it managed to rally later on and break the key 1.4200 mark. The main driver of this small greenback recovery was the release of the Empire State Business Conditions Index which surprised on the upside coming in at 28.8, beating the expected figure of 13.0. This Index measures the general business conditions of manufacturers in New York State and it was the only significant US economic event that was released yesterday. This positive data also helped the greenback find some reprieve against the GBP, as although it did not strengthen against the British currency it did manage to hold its ground which is a positive sign as the GBP has been on a sustained bullish rampage against the greenback. On Friday, there was also a string of positive US data, however the greenback fell sharply as the unexpectedly strong PPI figure once again raised inflation concerns for the Fed. However it will be important to monitor inflation as the previous rate cut by the Fed seems to already be bolstering producer prices, so it will be a major concern for the US economy if this results in a significant rise in consumer prices. On the back of last week's FOMC meeting the Fed was expected to once again slash its key interest rate. However, this expectation has been offset by the latest string of robust US data. Yesterday's strong Business Conditions Index reinforced the sentiment that the Fed will not cut the interest rate at the end of this month thereby boosting the greenback.
Looking ahead to today, there is more significant news to be released from the US, kicking off with Industrial Production which is expected to release slighlty lower than last month's figure of 0.2% at 0.1%. Also, Treasury Secretary Paulson will speak today about the housing market, which will be closely followed by investors for hints on the Fed's future monetary policy as a another monetary easing may be what is necessary to help the struggling housing sector. If the recent trend of US data is anything to go by then today's news events, including the Capitalization Rate and the NAHB index, may very well spring another surprise on the upside. However with the current negative USD sentiment and with the ever rising Oil prices, the greenback is likely to remain under pressure.
EUR
Yesterday, the EUR maintained its bullish surge against the USD and the JPY in particular; however it did lose some of its gains on the back of the positive US data. The strong EUR is definitely beginning to be a concern for the European economy as it will dampen growth in the long run and it seems that this topic will be raised in the upcoming G7 meeting. The main reason why the strong EUR will dampen growth is due to the fact that European exporters are finding it harder to compete against the US and the Chinese in the global trading market. Therefore cracks are beginning to appear in the European economy as indicated by recent data because the German economy, which is a major player in the EU, is heavily dependant on exports. Today, the most significant news to be released from the Eurozone will be the German ZEW Economic Sentiment, which measures institutional investor sentiment, this figure is expected to release lower than last month's figure of -18.1 at -22.0. However any negative data is unlikely to cause the EUR to reverse as it has shown its resilience in recent weeks and with the greenback under pressure, the EUR should stay on its bullish path.
JPY
The JPY experienced a whipsaw trading day yesterday, as it fell to 117.91 against the USD on the back of stronger equities. However as stocks began to experience significant losses the JPY recouped and it touched the 117.09 level against the greenback. The US stock market took a tumble yesterday after fresh concerns were raised about global credit. The way the JPY traded yesterday gives a strong indication that there is once again a correlation between equities and the JPY crosses. The fall of US stocks caused investors to drop their carry trade strategy and seek a safe-haven investment, thereby causing the JPY to rally after being sold-off sharply. However in the longer term all the JPY crosses should remain bullish as it seems that carry trades will remain the preferred strategy by investors, as the BoJ is no position to hike its interest rate in the near future. Nevertheless, traders should closely monitor the performance of equities as the correlation between stocks and the JPY crosses has been evident over-and-over again and the future direction of the JPY may very well depend on the performance of US stocks.
Technical News
EUR/USD
The pair is floating in a relatively tight range for several days now, as can be seen on the 4 Hour chart. No significant break through the 1.4240/1.4260 range has occurred, and the hourlies continue to deliver mixed signals. The daily chart is giving a moderately bullish sentiment with a bit more room to run.
GBP/USD
The 4 hour chart notes that a tight bearish channel is forming and traders should seek the breakout to get into the market at a good entry point for a long position. The daily charts are delivering mixed signals.
USD/JPY
There is a local consolidation around 117.40, after a moderate rally. On the daily and 4 H chart indicators seem to be sailing in neutral territory as usually indicates an upcoming breakout of the neutral channel barriers which is located at 117.00 - 117.60. Hedging seems to be the right strategy until the breakout direction will be determine.
USD/CHF
USD-CHF has had a sharp fall during the day and it is coming close to its important Support of 1.1760-50, the lower end of the 1.1900 and 1.1750 range within which the pair has been trading in the last two weeks. The pair could hold at its Support near 1.1760 for the next few hours, however a break below that would result in the pair becoming bearish. If that is seen, then there could be a fall towards 1.1710-00 later on in the day or tomorrow.
The Wild Card
Crude Oil
Over the past two weeks there is an extremely accurate upwards channel forming on the 4 Hour chart. Oil has made a significant move and is displaying a healthy consistent move up with plenty of room to run. The next significant resistance level is around 88.00 which provides forex traders with a great opportunity to jump in to this massive uptrend with large momentum still steaming.
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22//10/'07 - The Greenback Continues to weaken all accross the board.
Economic News
USD
The USD fell to a record low vs. the EUR and was the weakest in 5 weeks against the JPY after the G7 failed to address the currency's record decline at a meeting of finance officials on Friday. The EUR/USD flew to 1.4347, only to consolidate around 1.4310 later on.
Last week's record lows of the USD were also triggered by a set of dismal statistics, raising expectations that the Federal Reserve will cut interest rates at the end of the month, further weakening the USD. The dollar's drop could also extend during this coming week as the key economic data is likely to show further weakness in the U.S. housing market, deepening on the expectations for the future interest rate cut by the Fed.
Today, there is no significant economic news expected from the U.S markets apart from Fed Governor Kroszner's and Chicago Fed President Evans's speeches that may provide more clues regarding future monetary policy. In addition New Home Sales is due to be released later this week, with expectations currently standing at 770K, the lowest since May 1997. Existing home sales for September are set for release on Wednesday, with economists expecting an annualized rate of 5.25 million, 0.25 million less then in the previous month. It is difficult to see where the dollar strength will come from, until the expectations of further Fed rate cuts will not be deminish.
EUR
The EUR continued on its record setting trend as it closed at a new all time high against the greenback on Friday. By late afternoon Friday trading in New York, the EUR reversed gains to trade 0.2% lower on the day at $1.4260, having hit an all time high of $1.4319 earlier. Meanwhile, European officials continue to be concerned about the EUR's rise against the USD, since it raises the price of exports to the United States and to China. European Central Bank officials said food costs and record oil prices are fanning inflation pressures in Europe, suggesting they may support further interest-rate increases. The ECB has been on a tightening bias for some time, though some officials want it to cut rates to help push down the value of the EUR and boost European competitiveness.
This week's European economic calendar is expected to be quite devoid of forex market moving events. Most price movement on the EUR pegged currencies will be derived mainly from the U.S events.
JPY
The Japanese currency traded around the 114.05 level against the USD late last week and even touched $113.75, the lowest since Sept. 11. In fact, Yen's strengthening was the clearest outcome of the G7 meeting, as not one of the Japanese Yen crosses have been able to escape the pressure of carry trade liquidation.
The JPY rose to 3 week highs vs. the USD and EUR, boosted by a sell-off in U.S. equities that has become more risk-averse after Caterpillar Inc. slashed its profit estimate and warned the housing downturn was spreading to other parts of the economy. The Japanese currency typically gets a boost in times of increased risk aversion since its low interest rates have funded the purchase of higher-yielding assets in carry trades.The movements in the U.S equity markets will continue to be a predominant driver of the Japanese Yen.
Technical News
EUR/USD
The pair is in a consolidation period around 1.4325 after the touch at the all time high of 1.4345. The momentum is very bullish as clearly displayed by the Hourly charts. The daily chart is showing RSI at the 50 level which indicates that we might see another all time breached quite shortly.
GBP/USD
Both the daily and 4 H charts are bearish. This pair is deep in overbought territory as indicated by the RSI on the 4 H chart. Bollinger bands are tightened indicating decreased volatility. This pair is starting to head down and if the 2.0400 level is breached we could see a sustained bearish trend develop.
USD/JPY
The pair is showing distinct bearish momentum and is currently trading around 113.80. The hourlies are very bearish and are supported by an equally bearish daily chart. It appears that the next target price should be around 113.50. A breach through that level would validate an additional bearish move.
USD/CHF
The pair is testing the very strong and important support level of 1.1610. The 1 Hour chart is showing strong bearish momentum which is contradicted by the bullishness on the daily chart. Waiting for a breach through the 1.1600 level would allow traders to benefit from a stronger downtrend that would probably take the pair to the 1.1540 level.
The Wild Card
Crude Oil
After a breach of the all time high, Oil corrected to the 86.00 level and is now regaining the strong bullish momentum. The daily chart is showing a very bullish stochastic signal which provides Forex a great opportunity to get into a trend that will probably bring the Oil to a new testing of record highs.
23/10/'07 - Will The EUR React To Yesterday's Greenback Move?
Economic News
USD
Amidst overwhelming pressure, the greenback gained some ground on what has been a tumultuous fall against other major currencies. The Fed has done its best to curb any further down trends, but with rising concerns in the US economy it is uncertain if anything short of a major announcement can change things. Unfortunately, much speculation seems to tend toward the notion that a credit crunch similar to the one from August will occur forcing the greenback down again.
The weekend's G-7 talks, produced responses from finance ministers and members of the central banks that called for no action to be taken against the plummeting greenback. As a result, investors changed sentiment regarding how far and how fast the greenback was supposed to fall. The USD managed its biggest rally against the EUR since 2005 as investors began to ponder whether or not a turn was in place.
US Treasury Secretary Henry Paulson will speak to today (12:30 GMT) at the US-China Relations Conference in Washington D.C. The speech will focus on economic relations with China and should not have a significant effect on the greenback's movement. As the only scheduled US news event on the calendar today, it will be intriguing to see if the greenback continues to strengthen after yesterday's push.
EUR
The EUR had a volatile day yesterday, having to cope with movement from the US and JPY. It managed to hit all-time highs against the greenback at 1.4348 before tailing off at the day's end to as low as 1.4133. Monday's economic calendar was empty regarding Eurozone news and left the EUR in the hands of global news events. G-7 participants avoided statements that would touch upon the appreciating EUR. The undeniable strength of the EUR has kept European finance ministers and the ECB quiet about changes in economic policy.
ECB President Trichet has tried to echo sentiment that the greenback will find its way back to normal ground, which is proving difficult amidst rising suspicions of the problems in the US economy. However the resilient EUR is now beginning to come under pressure after the recent string of negative Eurozone economic data coupled with a slight shift of investor sentiment. It seems that the EUR bullish rampage is beginning to lose steam and may setup a sharp reversal.
JPY
The JPY has been in the middle of a whirlwind of news events regarding the volatile movement of the greenback. After trading at six week highs against the greenback, the JPY slowly dropped as was assumed it would. Due to unchanged interest rates it was only a matter of time before a sell-off of the JPY occurred. Agreeing with that sentiment, the G-7 gave the go ahead on selling the JPY to ease its demand within the currencies market. Carry trades tailed off especially, due to growing concern in the currency's volatility versus the greenback. The JPY was trading around the 113.50 against the greenback before the G7 meeting and then it slipped to the 114.48 level. The JPY has been on a strong uptrend of late as a result of the risk averse sentiment among investors which has caused a carry trade unwind. However it seems that the negative greenback sentiment may be on the brink of reversing, so this may halt the bullish JPY momentum.
Technical News
EUR/USD
A rising wedge is establishing on the 4 hour chart imply on a bearish trend which may occur tomorrow . Today , Slow stochastic and RSI have a positive slope suggesting the uptrend has much room left to go. The upcoming bullish trend is expected to test the 1.4250 level, and in case of a breach we expect this pair to test the 1.4300 resistance level. Today going long seems to be preferable.
GBP/USD
An upcoming bullish trend is expected when daily indicators (Slow Stochastic ,Momentum and RSI ) have a positive slope . First target price is at 2.0400, if a breakout will take place, next barrier is located at 2.0473. Going long seems to be preferable.
USD/JPY
A 5 Eliot waves structure is establishing on the 1 hour chart offering this pair to consolidate at 114.00 - 114.20 later today. However in the next 3 hours we may see a slight strengthening of the greenback before the reversal will take place.
USD/CHF
The volatility has decreased and the USD\CHF is in a bearish configuration. Dovish moves without trend, and swings around exponential moving averages (EMA 50 and 100). Bollinger bands have tightened. 1H, 4H Elliott pattern implies a continuation of the bearish pressure.The target is expected at 1.1650 so going short seems to be preferable today.
The Wild Card
GOLD
Gold broke the 657.90 resistance level. Gold is in an uptrend supported by 1H exponential moving averages. The volatility is low. Bollinger bands have tightened. Today, we should expect to see a bullish configuration. 1H, 4H Elliott pattern implies that the Gold should gather momentum also today. The target is expected at 659.00 and forex traders may find several opportunities for taking profits today.
24/10/'07 - Existing Home Sales, Kroszner and Trichet due to speak today.
Economic News
USD
The USD slipped yesterday, one day after its strongest rally against the EUR in more than a year, as investors braced for September data on the U.S. housing market that is expected to push interest rates lower. The dollar traded at $1.4263 per EUR after falling 0.6%. Today, the USD may decline against the EUR for a second consecutive day ahead of the U.S. industrial report that is expected to show Existing Home Sales sank to its lowest point in 6 years. The Existing Home Sales reports has sparked fears that the data will point to a further deterioration in the housing market and increase the chances of more Federal Reserve interest rate cuts this year. U.S. interest rate futures are priced at roughly 85%, implying that there is a chance of a 0.25 point cut in the federal funds target rate to 4.50% at the end of the Oct. 30-31 policy meeting. In addition to the Existing Home Sales, the U.S Crude Oil Inventories are also on tap today. There are no expectations for that indicator, while the previous month's figure stood at 1.8M. The USD is expected to trade at the $1.4240 to $1.4300 range today.
EUR
The Euro resumed its uptrend, despite the fact that Industrial New Orders from the Euro-zone were released slightly below estimates at 5.1%. Yesterday, the EUR was up 0.4% against the USD and traded at $1.4240 level. The EUR was also up about 0.6% against the JPY, trading at 163.22 Yen, the biggest one-day percentage gain in a month. Meanwhile, the high value of the European currency continues to be a burden on the European economy. European officials are concerned about the EUR rise against the USD, since it raises the price of exports to the United States and to China, as the Chinese have been managing their currency to keep it from appreciating quickly.
Looking ahead, Manufacturing PMI is anticipated to fall back slightly, while Services PMI is forecasted to be a bit more resilient. The ECB President Trichet will speak at 16:00 GMT, and any hawkish commentary will help maintain the Euro's bid tone.
JPY
The Japanese yen dropped against all 16 of the most-actively traded currencies yesterday as risk appetite led to higher equity markets around the world, thus dragging down the JPY. A rekindling of risk appetite put the JPY under pressure yesterday as firmer equity markets prompted some investors to move back into carry trades, where they buy securities in a high-yielding currency funded by borrowing in a low-yielding currency such as the JPY. The Japanese currency lost 0.76% against the EUR and 0.3% vs. the USD yesterday. The JPY traded at 163.70 per EUR and 114.78 per USD. Today's relatively empty Japanese economic calendar left currency traders to react to movements in other financial markets. The movements in the U.S equity markets will continue to be a predominant driver of the Japanese Yen.
Technical News
EUR/USD
A 1,2,3 wave structure is being established on the 4 Hour chart which suggests that this pair will test the 1.4178 Fibonacci level. If this level will breach than next target price is 1.4141, if not this pair is expected to test the 1.4264 resistance level.
GBP/USD
There is a mild bearish channel on the 4 Hour chart that may imply an upcoming bullish trend; however this trend might take place later this week when the first target price is located at 2.0575. In case of a breakout, the next barrier will be located at 2.0620.
USD/JPY
An upcoming bearish trend is expected when the 4 Hour MACD is crossing and the Slow Stochastic has a negative slope. First support levels are located at 114.00 and second at 113.68. Going short seems preferable.
USD/CHF
A bullish flag structure is being established on the 4 Hour chart, however the Slow Stochastic, Momentum and RSI are not supporting the trend. Traders need to look for signs of future positions however there are no signs for today's direction.
The Wild Card
Crude Oil
An upcoming bullish trend is expected as a reversal took place after it failed to break the 84.63 support level. There is a falling wedge structure on the 4 H chart which only strengthens the assumption that a bullish trend will take place. Forex traders have a good entry point to get into the the market and to leverage their profits.
25/10/'07 - Will key US data provide some light at the end of the USD tunnel?
Economic News
USD
Although yesterdays tremendously dull housing data in the US market declined by 8 percent and the total existing home sales figure dropped to $211,700 from $224,400, the greenback concluded its trading day without almost any significant change. In addition, yesterday the Bank of America announced that it plans to get rid of 3,000 jobs, and that the head of corporate and investment banking will leave after a depressing quarter that led to a 32 percent drop in overall profit. A significant percentage of the job cuts will be in corporate and investment banking; these cutbacks were widely expected after a $1.46 billion trading loss.
Also reported yesterday was the fact that U.S. mortgage requests hardly advanced last week even as interest rates went down to their lowest levels since the month of May. Today at 14:30 GMT three important indexes are going to be published starting off with Durable Goods Orders m/m, which will be followed by Core Durable Goods Orders m/m and the Unemployment Claims figures. These indexes have a significant weight over the market and it seems that they will play a significant role in determining the Fed's decision on whether to cut the interest rate by 0.25% or more.
The US stock market was also relatively stable yesterday with the Dow crossing into positive territory by late afternoon and finishing less than a point lower. The NASDAQ, down 3% earlier in the day, lost less than 1% or 24 points, and the S&P 500 was down just 3.71 points. After trading relatively stable yesterday, the greenback may experience some sharp movements on the back of today's news releases. An upside surprise could drive the dollar on another temporary rally, as was experienced earlier in the week.
EUR
Yesterday, several significant indexes were published from the Eurozone. The most noteworthy were Manufacturing PMI and the Services PMI data. On the basis of these results we could notice that the Eurozone services growth increased much more than was estimated this month, but on the other hand, the manufacturing expansion data showed signs of weakness. Eurozone Manufacturing Purchasing Managers index declined to 51.5 in October from 53.2 in September, it's lowest since August 2005. As it stands the manufacturing sector is losing momentum, and the Eurozone industrial production is beginning to cool a little bit, a situation which may influence the level of employment during the mid-term. In addition, slower growth of manufacturing industrial production and the sharp appreciation of the EUR against the US dollar are additional threatening elements which may bound European exports, and at the same time demand.
The European Central Bank put on hold a planned rate increase in September and left its key rate at 4 percent this month to assess the economic impact of the chaos on credit markets. It will consider cutting interest rates in the short run, and at the same time it must stand ready to stiffen policy in case growth increases.
The release of the German IFO surveys today will provide additional information regarding investor sentiment and many different analysts believe that on the basis of the recent weak US data that the EUR should be able to maintain its bullish momentum against the greenback. However the EUR may experience some temporary dips against the greenback, if US data springs an upside surprise.
JPY
Yesterday the JPY advanced to 114.42 per USD and against the EUR, it gained to 162.75 from 163.70. The JPY increased the most versus the New Zealand dollar, Norwegian krone and Swedish krona, which are carry trade favorites. The JPY got stronger against the world's 16 most-active currencies after the New York Times reported Merrill Lynch losses which stirred some concern, as the investment company's third-quarter losses exceeding initial projections. Merrill Lynch & Co. report $7.5 billion of write-down, selling riskier assets bought with loans in Japan.
In addition yesterday, the Finance Ministry said in Tokyo that Exports rose by 6.5 percent from a year earlier and Imports declined for the first time in more than three years, assisting the trade surplus widen to a record.
Japan's economy is still very dependent on exports and because of this fact, it is very important that demand for emerging markets makes up for U.S. weakness. Exports to the U.S. fell for the first time in more than three years in this period as Japanese companies shipped less automobiles and factory equipment. Overall shipments rose to a record 41.8 trillion yen ($365 billion) as demand in Asia and Europe run forward. Looking ahead, the JPY should continue to steadily rise but much depends on the correlation between US stocks and carry trades.
Technical News
EUR/USD
After this pair dropped to the 1.4186 level, it rallied strongly yesterday breaking well beyond the 1.4200 level. This rally now seems to be losing steam and there are strong indications of another dip. This pair has been whipsaw trading between the 1.4100 and the1.4300 levels over the last two weeks, so the preferred strategy is to sell on highs and buy on dips.
GBP/USD
The 4H chart is indicating that we are deep in overbought territory as the stochastic slow is crossing well above 60 and the RSI and momentum are both negative. However the daily charts are bullish giving a strong indication for further upward movement and if this pair breaches the key 2.0500 level, we could see another sustained bullish run. Nevertheless, caution should be exercised when placing intraday trades as the 4H chart does give a bearish signal.
USD/JPY
This pair has been on a sharp bullish rally over the last 24 hours and all indications are still bullish. Both the 4H and the daily charts are very bullish as the stochastic slow is crossing deep in oversold territory, while the RSI and momentum are positive. Target today will be to breach the 114.00 level.
USD/CHF
Bollinger bands are widened so we can expect increased volatility. This pair is forming a flag configuration on the 4 H. So if we see a breach beyond the 1.1700 level, there should be at least another 50 pip downward. However at the moment it is still too early for this pair to be heading south as all charts are giving a bullish signal. If the 117.00 level is not breached today, this pair will give a push upwards.
The Wild Card
Crude Oil
Crude oil is once again heading purposefully towards $90 mark, looking to once again break its all time high. Bollinger bands are widened indicating increased volatility. The upward momentum is still strong providing Forex traders with a good opportunity for profit taking. However charts are indicating that the bullish run is nearing its peak so we may see a sustained reversal soon.
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29/10/'07 - USD Hits All-Time Lows Again.
Economic News
USD
Yesterday, the USD dropped to record lows against the EUR due to speculation that the Federal Reserve will cut interest rates later this week as the U.S. housing slump reverberates throughout the economy. Interest-rate futures show around a 90% chance that the Fed will lower its 4.75% overnight lending rate between banks by at least a 0.25% point on Wednesday. In addition, the greenback will find little support given the sharp rally in Crude Oil that has already reached the 92.60 level. Upcoming U.S economic data does not look to help the greenback either. The currency faces major risk this coming week with the release of the Consumer Confidence report, the GDP, the Manufacturing Index and the Non-Farm Payrolls. The aforementioned are expected to show relatively weak figures in comparison to previous months, thus dragging the USD further down. Facing a run of weak U.S. economic data, the USD may drop as low as $1.4500 against the EUR this week.
There could be some movement when former Fed Chairman Alan Greenspan speaks today at a hedge-fund summit in Bermuda. Short of that, there is no real market moving news to be released from the U.S markets. Volatility is soaring, and while the greenback is likely to remain weak and oil strong in coming days, all of this wild price action creates the potential for steep corrections throughout the market.
EUR
The EUR hit another record high of 1.4420 against the greenback yesterday, and it may simply be a matter of time before the currency jumps above the 1.4500 barrier, ahead of the possible U.S interest rate cuts on Wednesday. Analysts estimate that this could add to the European Central Bank's dilemma over the next move for Euro zone interest rates as well. The European currency's gains came despite the weaker-than-expected German Consumer Confidence survey, which dropped to a seven month low of 4.9 last week. The decline in Consumer Confidence is not very surprising, as energy and food prices have soared and left Europeans with less retained income for arbitrary spending. The ECB is unlikely to raise interest rates before year end - barring a major increase in inflation figures - which provides far less fundamental support for the Euro at current levels. The Euro Zone economic event risk will pick up this week with German CPI and German Employment Change data due on Monday and Tuesday, respectively. Traders should watch for any particularly surprising results in either measure. Later, markets will be left to trade off of relatively non-market moving Euro Zone Consumer Confidence and CPI figures, while Friday PMI manufacturing data is unlikely to force volatile moves in the EUR.
JPY
The market has recently shown trends of a rise in trading in high-yielding commodity currencies. This, coupled with gains in Asian equity markets, helped boost risk appetite and encourage investors to put on carry trade bets funded by cheap borrowing in the Japanese yen. The JPY was little changed against the USD and traded at 114.17 level yesterday. Today, we will see the release of Overall Housing Spending. This should have an effect on trading with the JPY as consumer spending in Japan accounts for roughly half of the overall GDP.
Technical News
EUR/USD
The pair has breached a fresh all time high and is now floating at 1.4420. Both the 4 Hour and daily charts are showing a bearish cross on the slow stochastic, which indicates that there might be a correction back to the 1.4360 level before the next peak will be tested.
GBP/USD
The cable is going through a very strong up trend, and we can see new momentum on the hourly charts growing stronger. The daily chart indicates that the next target price might be around 2.0620.
USD/JPY
The pair is in the middle of a flat channel on the daily chart. The two consecutive doji bars indicate that a move is quite imminent, as the RSI is well below the 20 level. It appears that if the 114.00 level will not be breached, than a bullish move will be initiated that might take the pair above 115.00 again.
USD/CHF
The pair is floating around a major support level of 1.1600. At the moment the pair is failing the break, and is trading at a 30 pip range. If a breach through the 1.1600 level will occur, than we will probably see a very strong downtrend continue to the 1.1500/1.1550 levels.
The Wild Card
Crude Oil
After peaking at an all time of 93.15, Crude Oil seems to be calming down a bit, and is now at a correction move. There is a bearish cross forming on the daily chart indicating that it might be a great opportunity for forex traders to go short on a very strong potential correction move. Next target price appears to be around 92.00.
30/10/'07 - National Home Price Index & Consumer Confidence On Tap
Economic News
USD
The fate of the greenback will continue to be questioned today, as the decision to cut interest rates by the Fed is imminent. Halloween (Wednesday October 31st) of all days looks to be the one that will see the US Federal Reserve make, what has become nothing short of an obvious move regarding the US economy. Though the dollar remained relatively unchanged yesterday, forex investors continue to expect the fall of the greenback.
Today will see the release of two key reports that are anticipated to add to the gloomy US economic picture. Firstly, the release of the S&P/ Case-Schiller National Home Price Index is expected to give negative results for the eighth month running. The report measures the changes in prices of single-family homes within 20 major metropolitan cities, and will most probably contribute to the falling trend of the greenback. One hour later at 2PM GMT, we will see the release of the Consumer Confidence report. Expectations are equally as disappointing; as the report is set to hit 11-month lows and solidify the Feds need to cut rates.
The past weeks have been historic, with the greenback hitting all-time lows against its European counterpart. While traders prepare for the Fed's statement we shouldn't expect any drastic changes in recent trends, as the greenback continues to suffer.
EUR
The Euro faced some losses against the greenback yesterday, due in some part to the growing assumption that the European banks are set to report more losses. Mortgage defaults and other credit issues have dulled the European economy's strength and snapped five straight days of gains against the greenback. Speculation surrounding the ECB raising interest rates is gaining steam, as inflation numbers continue to stay strong. Yesterday, German CPI numbers came back stronger than expected, strengthening the idea that rate hikes are still to come. The EUR/USD traded in and around the 1.4400 level yesterday, going no lower than 1.4375 Today the European economic calendar is relatively empty, with the release of the German Unemployment Rate as the only slated event. It is safe to say that most of the day's movement with the EUR will be directly related to the aforementioned news in the US. As the US economy continues to disappoint, we can expect the EUR to stay strong and continue to prosper.
JPY
The JPY fell yesterday as global stocks continued to rise. The JPY found itself being used to finance loans for traders interested in more volatile positions. Using the JPY for loans in such investments saw the Japanese currency fall just over 0.5% against the EUR to 165.40. The JPY saw its prices fall against fifteen of the most regularly traded currencies on the market.
Yesterday, the release of Japanese Household Spending numbers came back higher than excepted. Today, Manufacturing PMI is said to do the same, as the JPY looks to recover from its drop on Monday. Amidst the rise in oil prices and gold trading at a 27 year high, there is a influx of investment in nations with a strong commodity base. If these trends continue we should see the JPY stay on its downward trend.
Technical News
EUR/USD
On the 4 H chart we notice that the bullish trend is running ahead. The volatility is increasing, especially after the pair has broken the 1.4425resistance level. The price should continue to move upwards in a range of 1.4350 to 1.4460. As it stands, the bullish pressure will continue to gather momentum on the EUR USD today as well.
GBP/USD
On the 4 H chart, a rising wedge (bullish) is forming which may imply a continuation of the bullish trend; it's recommended to time the entrance to the market with short term charts, 2.0600 seems like a strong entry point. At the moment GPB USD is being traded around 2.0500 to 2.0700 range. As the volatility today is low; bullish pressure on the GBP should be expected. The uptrend should continue on 2.0680 resistance.
USD/JPY
The pair is floating in a relatively tight range for several days now, as can be seen on the 4 Hour chart. No significant break through the114.50-115 range has occurred, and the hourly continue to deliver mixed signals. The daily chart is giving a moderately bullish sentiment with a bit more room to run.
USD/CHF
The USD CHF is in a bearish configuration. The volatility decreases. USD CHF moves without trend and swings around exponential moving average (EMA 50 and 100). Bollinger bands have tightened. 1H, 4H Elliott pattern implies a continuation of the bearish pressure. The target is expected at 1.1610 .
The Wild Card
Gold
There is a bearish channel forming on the daily chart, as the gold is floating on the upper level of it. The slow stochastic has completed the cross above the 80 level, which validates the move as bearish. This provides forex traders with a great opportunity to enter a short position with great bearish momentum.
31/10/'07 - Interest Rate Statement On Tap
Economic News
USD
Yesterday, the greenback continued to trade on a slippery slope and although it only lost some slight ground against the EUR, it did slip significantly against most of the other majors. Yesterday was relatively light on U.S data with the main event being the Consumer Confidence figure which released well below the expected 99.0 at 95.6. This additional piece of negative data only marginally increased the problems of the fragile greenback, which has been under immense pressure the entire week ahead of today's release of the Fed's Interest Rate Statement. The current widespread market expectation is that the Fed will slash its key interest rate by 0.25%. Therefore if the Fed disappoints investors by holding back a rate cut then it will risk upsetting the still-fragile markets and harming the economy. The rationale behind a rate cut by the Fed is too prevent the rising oil prices and falling home values from driving the U.S economy into a recession. Following the Interest Rate Announcement will be the Fed Statement which will be closely followed by investors who will be on the prowl for any hints on future monetary policy changes. It seems that the Fed would probably come out with an open-ended statement that will shy away from promising any future rate cuts. Since if the Fed hints towards future rate reductions then the greenback will head towards another freefall and it will also revive inflation concerns, which will be problematic for the U.S economy in the long run. In the beginning of October the majority of traders believed that the Fed will cut the interest rate by at least 0.75 % at its next meeting. However they scaled down their expectations to 0.25% on the back of the revised August payroll numbers, which now showed a gain instead of a decline. Nevertheless there has been fresh market turmoil over the last two weeks as there have been further signs of weakness in the housing sector combined with dismal earnings reports of major U.S banks and therefore this has again prompted some investors to believe that the rate cut will be greater than 0.25%.
There is another host of significant U.S forex data to be released today which includes the ADP Non-Farm Payrolls Report, the Annualized GDP and the Annualized GDP deflator figures. Although the Fed Interest Rate Announcement will be taking centre stage today, it will also be important to watch the ADP report which will give the market an indication of the all important NFP report that we can expect on Friday. The greenback should experience some sharp volatility today and if the interest rate is released inline with expectations then the greenback will continue to plummet before the recovery process can begin.
EUR
The EUR continued its bullish rampage against the greenback yesterday mainly being driven by investor expectations of a U.S rate cut today instead of actual EUR strength, as the European currency traded indifferently against most of the other majors. The widening growth differential and the tightening interest rate differential between Europe and the U.S has caused the EUR to trade in unknown territory against the greenback, breaking all time highs more than once in the last few weeks. Today, there is a string of data to be released from the Eurozone which includes the German Retail Sales, Consumer Confidence, CPI, Italian CPI and ending of with Eurozone Unemployment Rate. However these figures will be insignificant today as all eyes will be on the Interest Rate Announcement by the Fed and therefore most of the EUR volatility today will be pegged to the greenback.
The continuous strengthening of the Eurozone currency has been making it more difficult for European exporters to compete on the global market. This has been particularly felt in Germany which is heavily reliant on exports and since Germany is a key player in the Eurozone economy we should see some drawbacks on overall European growth begin to appear. Therefore the state of future growth and inflationary concerns will be key determinants in the ECB's monetary stance, however for now, with regards to the direction the EUR against the greenback, the ball is in Bernanke's court.
JPY
Earlier today, during the Asian trading session, there was the release of the Japanese Average Cash Earnings. This figure measures the monthly change in the wages paid to jobholders and it released in negative territory at -0.5%, which was well below the expected figure of 0.2%. However the main news event to be released out of Japan earlier today was the BoJ's interest Rate Statement, which remained unchanged at 0.5%. Deflation still remains as a real concern of the BoJ and until it reaches a favorable target level it is unlikely that the BoJ will be in a position to hike rates.
The Japanese interest rate release did not have any significant impact on the JPY as the market seems to be holding its breath ahead of today's U.S interest rate announcement. Therefore the JPY managed to hold on to its recent gains and it may even push further upwards against the USD today if the Fed cuts the interest rate, which could also encourage a future carry trade unwind.
Technical News
EUR/USD
Today, the 4 Hour chart implies on a possible recovery of the USD when both RSI (78) and Slow Stochastic (crossed at 82) are clearly in overbought territory. The 4 Doji bars imply on an upcoming move and it appears that going short might be preferable.
GBP/USD
On the 4 H chart we can see the Slow Stochastic crossed at 88 which is clearly in overbought territory and we expect for an upcoming reversal which will lead to a bearish trend. Meanwhile there is still room left for another strengthening before the reversal will take place.
USD/JPY
The pair is going through a choppy session in the past few days, and gives mixed signals on the hourly level. The daily chart is still showing a light bullish formation and it looks as if the pair is heading 116.00 again. A preferable strategy might be to wait for the hourlies to unwind before going long. Going short seems risky at this point.
USD/CHF
A strong bullish configuration is forming on a 4 hour chart. The volatility has increased. Hourlies are showing that the pair moves without a clear trend and swings around exponential moving average (EMA 50 and 100).
The Wild Card
Crude Oil
Oil is consolidating at 89.50 after it has been going up for more than three weeks from 80.50. The slow stochastic on the daily chart is showing a strong bearish cross, and together with inability of the oil to breach through the strong resistance it delivers a great opportunity for forex traders to go short at a great entry point.