Daily Forex Analysis - By FOREXYARD

Daily Forex Analysis

Headlines

USD Is Up Ahead Of The GDP Data.

Market Trend


 EUR/USD GBP/USD USD/JPY USD/CHF AUD/USD EUR/GBP
Daily Trend
Weekly Trend
Resistance 1.5680 1.9800 105.90 1.0520 0.9690 0.7990
1.5660 1.9780 105.70 1.0500 0.9670 0.7970
1.5630 1.9750 105.40 1.0470 0.9640 0.7940
Support 1.5550 1.9670 104.60 1.0390 0.9560 0.7870
1.5520 1.9640 104.30 1.0360 0.9630 0.7840
1.5500 1.9620 104.10 1.0340 0.9610 0.7820

Economic News

USD

Yesterday, the greenback saw bullish trends against most of its major counterparts following positive economic news from the U.S. The EUR\USD was traded as low as 1.5620. The USD was also bullish against the rest of the major currencies. The greenback's daily momentum was driven by the better than forecasted Core Durable Goods Orders and general Durable Goods Orders, as both beat forecasts by at least 1%.

The USD's bullish trend yesterday quickly developed after the news announcements regarding the Durable Goods Orders. Experts predicted the results to be worse than last month, but in both cases the actual results beat forecasts and in the Durable Goods Orders, the result was actually better than last month's result. The other main factor that led to the incline in the greenback's value was the fall of the Crude Oil's price, which breached under the $127 range. As the American economy is greatly affected by the Crude Oil's price, the latest decline in the price of Crude Oil has finally taken some pressure off the USD.

Today will be a very active trading day for the USD, as there are a lot of news announcements expected from the U.S. The first major economic news event will be the Preliminary Quarterly GDP for the 1st quarter, which is expected to rise by 0.3% from last quarter's result. Traders should be aware of the increase in Unemployment Claims expected to be announced as well. Crude Oil Inventories and the Natural Gas Storage announcements are not expected to cause a major impact on the USD as there are both inflationary and growth implications to the results. In the evening the greenback's volatility should increase even more as both Fed Chairman Bernanke and Fed Vice Chairman Kohn will hold speeches in different events and times.

As there are many news announcements expected today, the USD's trading will be very active and volatile. Results are expected to be mixed, as it seems that the main positive announcements will be the Preliminary Quarterly GDP which should give the USD momentum. The wild card will be Bernanke and Kohn's speeches which will determine the USD's trend.

EUR

The Euro finished yesterday's trading session with mixed results. The EUR lost to the USD and GBP, but it seems like this occurred mostly because of those currencies' bullishness and not the EUR's bearishness. On the other hand, the EUR gained versus the JPY and the CHF. The EUR's success versus some of its rivals resulted from the better than expected German CPI and German Import Price. Not only were both German results forecasted to be better than before, they actually beat the positive expectations by 0.3%. However, it seems like lately the EUR has been the Crude Oil's biggest ally and as the Crude Oil's price dropped yesterday, the EUR was negatively affected as well. The main news announcements expected today from the Euro-Zone are the German Unemployment Change and the M3 Money Supply. As Germany's economy affects the EUR greatly, the Unemployment Change forecasted seems positive and should cause the EUR to see some bullish momentum; The M3 Money Supply is not expected to change from the previous result and shouldn't cause much change in the EUR value. There will be many news releases from the Japanese, American and British economies and the EUR's trends against those currency rivals should be affected mostly by those respective currencies. It might seem like a good trading day for the EUR based on forecasts for news results from the Euro-Zone; however, positive news releases are also expected from other currencies and some of those rival news releases might have a major impact on the final trends of the EUR.

JPY

The Japanese Yen fell yesterday versus the major currencies. The JPY saw bearish momentum because of its rivals' positive news releases and its own worse than expected news releases. The Retail Sales and Large Retailers' Sales actual results were lower than the previous results and were even lower than the negative forecasts

Today, the JPY's value versus other currency pairs will be affected by their respective trends until 11:15 GMT. During this hour, there will be many news announcements that should affect the Yen. The major releases will be the Core CPI, Industrial Production and Unemployment Rate. Forecasts of these releases are expecting mixed results and it is unclear how the Yen will react.

Trader should keep close attention to the JPY during the news filled late night hours. Positive results should help the JPY get out of its recent drought; however negative results will lead to a continuation in its bearish momentum.

Technical News

EUR/USD

The 1 hour chart is showing a stable and consistent downtrend corrective movement that shows no signs of stopping any time soon. The RSI is floating near the 50 level pointing to the continuation of the bearish movement. There is also a very distinct pattern forming on the 4 hour Slow Stochastic chart in the shape of a triple top with negative slope, indicating some bearish movement today. Going short with tight stops might be the right way to go today.

GBP/USD

The bearish price movement continues at full steam within the bearish channel which still has yet to be breached on the hourlies. The Slow Stochastic is showing a negative slope on the daily chart, and it appears that the bearish trend will continue. Going short might be a very wise choice today.

USD/JPY

The 4 hour chart is showing moderate bullish momentum as the Slow Stochastic shows no crosses and is floating around the 50 level. The range trading on the hourlies is forming into a narrowing bullish channel. The pair is approaching the upper level of it, and with the very tight Bollinger Bands, the possible test of the 105.50 appears to be quite imminent. Traders must pay attention for a possible breach which could create a great sell signal.

USD/CHF

The corrective bullish momentum created by the breach through the channel on the 4 hour chart appears to be continuing. The Slow Stochastic of the 4 hour chart is showing a positive slope, and the RSI is floating near the 60 level, which indicates that the pair still has more room to run. The first target price might be 1.0474.

The Wild Card

Gold

Gold broke the 900.00 support level. Gold is in a downtrend supported by the 1 Hour Exponential Moving Average. Bollinger Bands are widened indicating increased volatility. We should expect to see a bearish configuration today. The target is expected to hit 890. This provides forex traders with an opportunity to go short on a relatively healthy downtrend

Indicators

Date Time (GMT) Country Event Period Previous Forecast Importance
2008-05-29 01:00:00 USD Dallas Fed President Fisher Speaks
- - ***
2008-05-29 01:30:00 AUD Private New Capital Expenditure q/q 7.3% 3.1% ***
2008-05-29 06:00:00 GBP Nationwide House Prices m/m -1.1% -0.5% *****
2008-05-29 07:15:00 CHF Employment Level
3.88M 3.89M ***
2008-05-29 07:55:00 EUR German Unemployment Change m/m -7.0K -25.0K ***
2008-05-29 08:00:00 EUR M3 Money Supply y/y 10.3% 10.3% **
2008-05-29 09:00:00 EUR Consumer Confidence
-12 -12 *
2008-05-29 10:00:00 GBP CBI Distributive Trades Realized
-26 -25 ***
2008-05-29 12:30:00 USD Prelim GDP q/q 0.6% 0.9% *****
2008-05-29 12:30:00 USD Prelim GDP Price Index q/q 2.6% 2.6% ****
2008-05-29 12:30:00 USD Unemployment Claims
365K 370K ****
2008-05-29 12:30:00 CAD Current Account
-0.5B 2.8B ***
2008-05-29 14:30:00 USD Crude Oil Inventories
-5.4M -0.3M **
2008-05-29 14:30:00 USD Natural Gas Storage
85B 84B **
2008-05-29 18:30:00 USD Fed Chairman Bernanke Speaks
- - *****
2008-05-29 22:45:00 NZD Building Consents m/m -9.1% -2.3% *****
2008-05-29 23:00:00 USD Fed Vice Chairman Kohn Speaks
- - ***
2008-05-29 23:01:00 GBP Consumer Confidence
-24 -25 ***
2008-05-29 23:15:00 JPY Manufacturing PMI
48.6 - *
2008-05-29 23:30:00 JPY Core CPI y/y 1.2% 1.0% ***
2008-05-29 23:30:00 JPY Core Tokyo CPI y/y 0.7% 0.9% *
2008-05-29 23:30:00 JPY Overall Household Spending y/y -1.6% -0.7% *
2008-05-29 23:30:00 JPY Unemployment Rate
3.8% 3.9% *
2008-05-29 23:50:00 JPY Industrial Production m/m -3.4% -0.5% ***

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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