Daily Analysis Thread

[fxyard]

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.

[fxyard]

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.

[fxyard]

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 economy.

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 today'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 figures.

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.