Daily Forex Analysis - By FOREXYARD

Daily Forex Analysis

Headlines

Lower Oil Prices Continue to Push the USD Up.

Market Trend


 EUR/USD GBP/USD USD/JPY USD/CHF AUD/USD EUR/GBP
Daily Trend
Weekly Trend
Resistance 1.5610 1.9840 106.50 1.0580 0.9640 0.7950
1.5580 1.9810 106.20 1.0550 0.9610 0.7920
1.5550 1.9780 105.90 1.0530 0.9580 0.7890
Support 1.5470 1.9720 105.20 1.0460 0.9510 0.7810
1.5440 1.9690 104.80 1.0430 0.9480 0.7780
1.5410 1.9660 104.50 1.0400 0.9450 0.7750

Economic News

USD

Yesterday the Greenback was in a rally against its rival currencies after the release of Prelim GDP q/q data and the hawkish comments by members of the Federal Reserve regarding a possible increase in the interest rate this year. The greenback's rally was also supported by weakness in oil prices. Around 15:54 GMT, the USD was traded as low as 1.5484 at the New York Market from its 1.5586 open rate, reaching its highest value since May 20. The GBPUSD also fell from 1.9803 to 1.9724 with its lowest value at 1.9672 after the announcement of the UK House Prices, whom fell 2.5%, the biggest fall since 1991 in the UK house price survey.

The slight growth of 0.9% in the GDP this first quarter from the previous result of 0.6% was based on a 1.1% increment in business construction compared with a 6.2% fall estimated last month and a reduction on imports, which fell 3.6% from an estimated increase of 2.5%. For many specialists this figure provides certain relief and sets a basis for opportunity growth, in their opinion, new sales will be supported by new production replacing old items on existence and clearing the fear that the American economy is close to recession. It seems like the GDP has given USD buyers a certain confidence boost. Also yesterday Crude Oil prices fell over $4 after the signal of a strong economy and the Government announcement of an investigation into oil trading following the inventories fall of a unexpected 8.8 million barrels last week.

As for today there are several economic data releases expected from the US, among them we await the monthly reading of the Core PCE Price Index with an estimated 0.1% price increase for all domestic personal consumption, and the Personal Spending rate which is expected to be reduced by 0.2%. Traders should follow those two releases they will define the nation's currency tend for the day.

EUR

Yesterday was not a good trading day for the Euro. The 15 Nation currency fell against most of it counterparts following the release of the negative German unemployment data and the hawkish comments from the American Fed about inflation expectations that should increase in the US.

The increase of unemployed residents it the major country in the Euro-Zone with a 4K increase compared to a previous fall of 4K last month pushed the EUR down to a session low of 1.5545 against the USD. The EUR's bearishness was further caused by Consumer Confidence that fell by 3 points more than forecasted to -15, reinforcing fear over sharp slowdown in the economy.

Looking ahead, the most important economic news to be released today will be the German Retails Sales, a strong sign for domestic behavior. If the predictions will be correct, this datum should cause the Euro to recover some of it losses. The other release that will be followed closely is the CPI Flash Estimate, which is expected to reach a 3.5% from a previous 3.3% in the last month. This result might add to a major difference between the Euro-zone and US interest rates. This in return could strengthen of the Euro against the U.S. Dollar.

JPY

The JPY fell sharply against the USD yesterday, reaching its lowest price in the last three month after the American GDP data was released and helped by higher returns on bonds as traders keep seeking riskier assets. During late trading, the Yen was traded against the USD at 105.55, moving close to its three peak month of 105.87. From the Japanese economy yesterday, Japan's disappointing inflation reading was released with a value of 0.9% compared to 1.2% in March. This resulted mostly due to temporary suspension of subsidies in the gasoline sector and a hike in retail prices that was caused in order to deal with rising material and energy costs. Also the unemployment rate rose to 4.0% in April mainly caused by job cuts in the construction, wholesale and retail sales sectors added to a higher cost of basic materials. There was also positive news for the JPY as Industrial Production did fall by 0.3% in April due to reduction in the Japanese factories' production, but this was less than forecasted as there a little more demand for goods from the U.S. and certain areas in Europe

As for today the only indicator coming from Asian Market is the Housing Starts that came in at a reduction of 8.7%. It is expected that the JPY will experiment another volatile session against most of its counterparts, based on economic data that will come from the Yen's counterparts

Technical News

EUR/USD

The pair is in the middle of a strong bearish corrective move which seems to have some more steam in it. It looks as if there isn't any bullish sentiment to indicate even the slightest corrective move, and the bearish steam appears to be blowing at full strength. It appears that going short still looks like the right choice today.

GBP/USD

The Hourlies and the daily chart are showing that the pair does not have a distinct direction. 4 hour chart indicates that the moderate bearish price movement continues within the wide bearish channel which still has yet to be breached. The 4 hour chart RSI is floating near the 50 level and the Slow Stochastic also does not deliver any specific signs. Forex traders are advised to wait for a clearer signs on the hourlies before entering the market.

USD/JPY

The pair has been quite choppy in the past two days yet no clear direction was seen. The daily chart is showing bullish signals as the 4 hour chart is still quite bearish. The very wide doji formation on the daily chart indicates that a break might be imminent, so traders are advised to wait for the breach and swing.

USD/CHF

This pair is in the midst of a strong uptrend however it is slowly appearing to be leveling out. The hourlies are showing mixed signals. The 4 hour chart is showing that a bearish correction is imminent, while the dailies are showing that there is still some more room for the uptrend. Traders advised to wait for a clearer signal on the hourlies before entering the market.

The Wild Card

Crude Oil

This commodity is giving a strong bearish signal on the 4 H and daily chart. The negatively sloped RSI and Momentum support this bearish notion. The Slow Stochastic is also giving a strong signal that this pair's next move will probably be bearish. Therefore this gives forex traders the perfect opportunity to catch an early downward correction on an early stage.

Indicators

Date Time (GMT) Country Event Period Previous Forecast Importance
2008-05-30 01:30:00 USD Private Sector Credit m/m 0.8% 0.8% *
2008-05-30 05:00:00 JPY Housing Starts y/y -15.6% -11.8% *
2008-05-30 06:00:00 EUR German Retail Sales m/m -1.9% 0.6% *
2008-05-30 09:00:00 EUR CPI Flash Estimate y/y 3.3% 3.5% ***
2008-05-30 09:00:00 EUR Italian CPI m/m 0.2% 0.3% **
2008-05-30 09:00:00 EUR Unemployment Rate
7.1% 7.1% **
2008-05-30 09:30:00 CHF Leading Index m/m 1.20 1.09 ***
2008-05-30 12:30:00 CAD GDP m/m -0.2% 0.0% *****
2008-05-30 12:30:00 CAD IPPI m/m 1.7% 1.0% **
2008-05-30 12:30:00 CAD RMPI m/m 6.6% 2.8% ***
2008-05-30 12:30:00 USD Core PCE Price Index m/m 0.2% 0.1% ****
2008-05-30 12:30:00 USD Personal Spending m/m 0.4% 0.2% ****
2008-05-30 12:30:00 USD Personal Income m/m 0.3% 0.2% **
2008-05-30 13:45:00 USD Chicago PMI
48.3 48.5 ***
2008-05-30 13:55:00 USD Revised Michigan Sentiment
59.5 59.5 ***

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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