Daily Forex Analysis - By FOREXYARD

Headlines

US New Home Sales on Tap.

Market Trend


 EUR/USD GBP/USD USD/JPY USD/CHF AUD/USD EUR/GBP
Daily Trend
Weekly Trend
Resistance 1.5830 1.9835 104.65 1.0380 0.9680 0.8060
1.5800 1.9800 104.30 1.0340 0.9660 0.8025
1.5770 1.9760 104.00 1.0300 0.9620 0.8000
Support 1.5700 1.9760 103.40 1.0235 0.9550 0.7950
1.5680 1.9660 103.00 1.0200 0.9515 0.7920
1.5640 1.9630 102.70 1.0180 0.9475 0.7880

Economic News

USD

Yesterday was a relatively volatile session for greenback pairs. Because of Memorial Day in the US, banks remained closed during the day, and as a result an extremely low volume was observed within USD trading. The EUR\USD saw volatile behavior from the beginning of the trading week until the end of the day yesterday, as well as the USD\JPY. The GBP\USD started the day with bearish momentum, dropping as low as 1.9768, but than made a reversal and rose back up to 1.9825. In observance of Memorial Day no data was released yesterday from the US regarding the USD. As for today, a basket of data is scheduled for the USD. At 12:15 (GMT) Federal Reserve Governor Kroszner will deliver a speech titled 'prospects for recovery and repair of mortgage markets', in Sao Paolo. In his speech, clues regarding future monetary policy might be scattered. Later on, the National Home Price Index Composite-20 will be published, and it's predicted to decrease by 14.3%. The main event for today will take place at 14:00 (GMT), when the U.S New Home Sales is due. This survey measures the new residential buildings that were sold during the previous month, and analysts forecast it to come in at 522K, lower than last month's 526K. The previous month's figure was the lowest figure since October 1991, and further descending trends will demonstrate six consecutive months of deterioration. At the same time, the Consumer Confidence is scheduled. It measures the mood of consumers in regard to economic conditions. It is also expected to reflect a lower reading point than the previous month - 60.0, as opposed to 62.3.

If analysts' expectations of negative results for all U.S data will occur, a bearish trend is likely for the greenback. More importantly, the combination of bad results from these two events can very easily contribute to the EUR/USD testing 1.60 once again. However, traders should follow carefully over today's developments as unpredicted figures might take place.

EUR

Yesterday, the EUR underwent volatile sessions against its major currency counterparts. The main reason for the high volatility was the low volume that was experienced in the market yesterday, which occurred due to the holidays in the U.S and the U.K, as well as the lack of data from the Euro-zone.

Looking forward to today, some vital news is expected for the EUR as several German market events are scheduled to be released. Early this morning at 06:00 (GMT), the German Consumer confidence was published. This survey, which measures the mood of consumers about the economic conditions, was forecasted by analysts to decline by 0.2 reading point, from 5.9 marks on the previous month, to 5.7. Instead it saw a steeper decline as it registered at 4.9. It contributed to depreciation in EUR bullishness, as the EUR/USD pair saw an immediate 50+ pip reduction. Meanwhile, the German Final Gross Domestic Product survey, which measures the change in the value of all goods and services produced by the economy was scheduled for this morning, and hit its forecasted increase by 1.5%. It is likely that the EUR/USD pair will bounce back from early morning bearishness.

Traders should note that today the EUR will be greatly influenced by USD developments, as traders should also be advised to watch carefully over U.S data.

JPY

Yesterday was a volatile day for JPY pairs. Just like all the other major currencies, it was mainly affected by the holidays in the U.S and the U.K, and the lack of significant news for the other major currencies, which led to a very low volume in the market. As a result, the JPY kept a steady rate against the USD, the EUR and the GBP throughout the trading day.

The only data that came for the JPY yesterday was the Corporate Services Price Index, which rose by 0.5%, reflecting 17 straight month's of positive gains. The index indicates that transportation costs in Japan rose by 3.0%, and that real estate service fees rose by 1.5%. Later on this week, a bundle of data is due from the Japanese economy. The yearly retail sales report will be published on Wednesday. The Core Consumer Price Index and the Industrial Production will see results on Thursday. Today, the JPY is absent from the economic calendar, and the USD should be the main catalyst for JPY developments. Therefore, traders should look over U.S data with extra caution today.

Technical News

EUR/USD

The 4 hour chart shows that the bullish channel continues with strong momentum as the pair now floats around 1.5807. Oscillators show that the momentum is still bullish and a breach through 1.5830 will validate a bigger bullish move into the 1.5900 levels. The RSI is also forming back into bullish formation and supports the general notion.

GBP/USD

The Hourlies indicate that local bullish momentum is still healthy. However the daily chart is showing a strong bearish cross and the 4 hour chart is also slowly joining the bearish notion. Forex traders are advised to wait for a clearer bearish sign on the hourlies before entering the market.

USD/JPY

The hourlies are still bullish as the Slow Stochastic shows no crosses and is floating at the 50 level. The daily chart has been giving mixed signals with no distinct market direction for the past 5 trading days. Going long with tight stops appears to be the preferable strategy.

USD/CHF

The Bollinger Bands are tightening up on the daily chart, indicating the upcoming increased volatility. RSI and Momentum are still negatively sloped indicating some bearish movement today. Both daily and 4 hour chart are showing plenty of room for the bearish trend and a breach through 1.0200 will validate a bigger bearish move into the 1.0150 levels.

The Wild Card

Silver

There is still a bullish configuration on the 4 Hour chart, indicating that the momentum is still up. The RSI is floating above 60, which supports the notion that there is still room to run. This provides forex traders with a great opportunity to go long on a relatively solid uptrend.

Indicators

Date Time (GMT) Country Event Period Previous Forecast Importance
2008-05-27 01:00:00 NZD Business Confidence
-54.8 - ***
2008-05-27 02:00:00 NZD RBNZ Inflation Expectations q/q q/q 2.7% 2.8% *****
2008-05-27 06:00:00 EUR German Consumer Confidence
5.9 5.7 **
2008-05-27 06:00:00 EUR German Final GDP q/q 1.5% 1.5% **
2008-05-27 06:15:00 CHF Trade Balance
1.27B 1.19B *
2008-05-27 08:00:00 CHF Consumption Indicator
2.289 - ***
2008-05-27 08:30:00 GBP BBA Mortgage Approvals
35.4K - *
2008-05-27 12:15:00 USD Fed Governor Kroszner Speaks
- - ***
2008-05-27 13:00:00 USD National HPI Composite-20 y/y -12.7% -14.3% ****
2008-05-27 14:00:00 USD New Home Sales
526K 522K *****
2008-05-27 14:00:00 USD Consumer Confidence
62.3 60.0 ****
2008-05-27 14:00:00 USD Richmond Fed Index
0 1 *

FOREXYARD

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Disclaimer: Content in the Forex Forecast and Analysis section is for informational purposes only. Contributors submitted Forex Forecast, Forex Commentary, Forex Analysis, and Forex Articles and articles on other markets are based upon information gathered from various sources believed to be reliable, complete, and accurate. However, no guarantee can be made as to the validity of the believed sources. All statements and expressions in the Forex Forecast and Analysis section are opinions, and not meant as investment advice or solicitation. Forex Markets can be volatile and opinions may change without notice.

FOREX : Foreign Exchange Market

FOREX is a word play on the term Foreign Exchange Market. It is a market for buying and selling of currencies from all over the world. Certainly, such transactions are bound to be voluminous. It is just an estimate that there are about transactions of $1.5 trillion USD on a daily basis in the FOREX. Now just compare this with the paltry $300 billion USD a day transactions for the US Treasury Bond and the $100 billion a day transactions for the US Stock Exchange.

The FOREX came into existence in 1971 when the fixed currency exchanges were abolished. Currencies no longer had fixed values after that; on the contrary, their rates (mostly taken in comparison with the USD) were fluctuating, and changed on a daily basis. Throughout the seventies and the eighties the FOREX grew steadily, showing more advancement in the later years. The market has stupendously grown from $70 billion USD a day to the staggering amount that it transacts today on a daily basis.

There are actually about five thousand trading institutions in the FOREX. These include international banks, central government banks such as the US Federal Reserve, and commercial companies and brokers for all types of foreign currency exchange. The best thing that shows the unbiased nature of the FOREX market is that it has no fixed headquarters anywhere – it operates primarily from all major cities like New York, Tokyo, London, Hong Kong, Singapore, Paris, Frankfurt, etc. One can even use the telephone or the internet to make the transactions. The major businesses at the FOREX are the buying and selling of products in other countries. Several transactions are also conducted from the currency brokers or traders who stand to make small profits with the daily fluctuations in the market.

Most of the FOREX business is centered on big banks and financial institutions, but it doesn’t mean that the FOREX is inaccessible to small investors. The recent changes in the financial regulations have effectuated this accessibility. Earlier, a minimum transaction size was required to conduct business with the FOREX. But the current rules have made it possible to break large inter-bank units into smaller bits. Each bit is worth as less as $100,000. This makes it possible to each individual investor through loans that are extended for trading, known as leverage. The ratio to control the lots is 100:1. This means, every $1000 USD will allow one to control $100,000 on the FOREX.

The benefits of trading with the FOREX are mentioned below:-

(1) Liquidity of Investments – As the FOREX is a huge market, the funds have a very high degree of liquidity. This is because of the presence of the international banks who provide their bids and carry out a large number of transactions on a daily basis. Therefore, there is always a buyer or seller for any type of currency.

(2) Highest Degree of Accessibility – The FOREX is open 24 hours a day for 5 days a week. Every Monday morning the exchange opens at Australian Standard Time and closes on Friday afternoon at New York time. Greater accessibility is provided because the transactions can be conducted from the person’s home or office.

(3) Open Market – At the FOREX, there are no secrets. All the fluctuations that occur in the market are made accessible to everyone at the same time. There is no insider trading in the FOREX.

(4) No Commission – There is no hassle of paying commission to the brokers in the FOREX. Here the brokers earn by setting up a difference between the buying price and the selling price of a currency, which is known as a spread.

It must be understood by now that for the FOREX to work effectively, the currencies must always be traded in pairs. For instance, the Japanese yen must be traded against the euro. When one kind of currency is sold, there should be another to be bought in its stead.

The profit happens because there is always mobility between the different currencies. Even if there is a miniscule change in the exchange rate, then it could mean substantial changes in the profits due to the large amount of money involved in the transactions. People are thronging to the FOREX and not any other institution due to the trust that they have in it. To add to the advantage, the market is absolutely well-advanced and uses sophisticated software for dealing out its transactions.

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