Daily Forex Analysis - By FOREXYARD

Daily Forex Analysis

Headlines

Nonfarm Employment Change on Tap

Market Trend


 EUR/USD GBP/USD USD/JPY USD/CHF AUD/USD EUR/GBP
Daily Trend
Weekly Trend
Resistance 1.5670 1.9660 107.10 1.0490 0.9690 0.8050
1.5650 1.9640 106.90 1.0470 0.9670 0.8030
1.5620 1.9610 106.60 1.0440 0.9640 0.8000
Support 1.5540 1.9540 105.80 0.0370 0.9550 0.7930
1.5510 1.9510 105.50 1.0340 0.9520 0.7900
1.5490 1.9490 105.30 0.0320 0.9500 0.7880

Economic News

USD

The Greenback experienced a mixed day in the trading market, seeing early day gains against major currencies like the JPY and CHF, and losses against the EUR and GBP. The oft traded EUR/USD cross saw a 200+ pip gain yesterday, on the heels of an apparent change in the outlook of Euro interest rates as well as fears over today's upcoming Non Farm Payroll figures from the US.

Yesterday was a relatively quiet day on the US economic calendar, as Unemployment Claims headlined the Natural Gas Storage and a speech by Philadelphia Fed President Plosser. Unemployment Claims were down by 18,000 from last week to 357K, but speculation over the failing housing markets as well as concerns over a possible 100K drop in Non Farm Payrolls, sent the dollar on a bearish run, most notably against the EUR. Reports of nearly 1 million homes foreclosing in the US have sent a chilling reality to many investors that the US is still ripe with economic issues.

Remarkably the USD had hit a 4 week high in the early hours of trading on Thursday, dipping below 1.54 support levels, before rocketing back over 1.56 towards the evening GMT. The turn around happened in large part to hints given by European Central Bank (ECB) President Jean-Claude Trichet, that the ECB would raise interest rates in June or July.

Looking ahead to today, the USD will be in the forefront of the news, as we expect a batch of significant market making news. Unemployment Rate, Average Hourly Earnings, a speech by Fed Governor Kroszner, Wholesale Inventories and Consumer Credit are all on tap and will be highlighted by the 12:30 GMT release of ADP Nonfarm Payrolls. The all important employment figure is forecasted to drop by anywhere between 30K and 80K more than last months fall of 20K. A drop in payroll figures this month will mark the 5th consecutive month that ADP figures (one of the more important on the US calendar) will fall. History has shown us that the market becomes volatile in and around the time of the ADP release. With the current trend of the USD against the EUR, expect to see the EUR/USD cross continue its bullishness. It is likely that the USD will see bearishness throughout the market on Friday against the rest of its major rivals.

EUR

The EUR was at the headline of the news day yesterday, as it saw steady gains versus a majority of its currency rivals. The bullishness from the 15-Nation currency was brought about by a speech by ECB President Jean-Claude Trichet, where he stated the intention of the ECB to raise interest rates for the EUR. The idea of a EUR rate hike has been swirling around the rumor mill for sometime, however the stoic hawkishness of the ECB and its upper management regarding Euro-Zone (EZ) monetary policy has dulled any real chance of such a hike happening, until now. Trichet touched upon the 'heightened alertness' of the ECB regarding inflationary risks in the EU, as he hinted at a rate hike in the coming months.

The news sent the EUR booming through the market, as it made substantial runs versus its major rivals, including a 200 point swing versus the dollar. Accompanying the ECB Press Conference on yesterdays EZ news calendar, was German Factory Orders, which came back with less than favorable numbers dropping nearly 2% in the month of April.

On tap today from the EZ, we will see French Government Budget Balance, French Trade Balance and German Industrial Production numbers. The results are not expected to change the outlook of the bullish EUR, as most of the days news will come from the US.

Today's market outlook has all the makings for a high liquidity, high volatility day as investors look to capitalize on extended trends.

JPY

Yesterday the JPY saw falling trends against most of its major counterparts. The USD\JPY began the trading day at the rate of 105.26, went up to 106.12, and finished the day at 105.96. The JPY also saw bearish trends against the EUR and the GBP. The JPY's downfall was predominantly observed as a result of a batch of positive data published from the U.S and the Euro-Zone, as opposed to the Japanese economy who failed to deliver any significant data over the last few days. Today, no data releases are scheduled for the JPY, which therefore turns U.S news to be even more relevant. Traders are especially advised to pay attention to the U.S Employment Change surveys that should be the most influential data release today.

Technical News

EUR/USD

The daily Slow Stochastic is confirming that the bearish momentum of the pair which was very strong is now over. There is a strong bullish cross and the RSI is confirming the bullish notion. Going long appears to be preferable.

GBP/USD

The cable is still traded within the bearish channel on the daily chart and is now floating with moderate bullish momentum. There is a cross on the Slow Stochastic which indicates a possible test of the upper level of the channel. It might be smart to go long with very tight stops and wait for the bullish breach.

USD/JPY

The pair has breached the key resistance level of 105.50, and it appears that the bullish momentum is very strong. All oscillators are supporting the bullish notion, and it might be preferable to establish a long run buy position as the bullish potential is quite high.

USD/CHF

Although the pair is showing a violent and choppy session on many occasions, the daily chart is still floating on very neutral territory with no distinct price direction. The 4 hour chart is slightly hinting on a bullish direction yet it is advised to wait for a strong signal and swing in.

The Wild Card

Crude Oil

After a very long period that oil was soaring on a very consistent basis, there seem to be a bearish breach though the daily bullish channel which indicates a possible bearish corrective move. Forex traders have a good shot at what might be a strong bearish trend and need to be protected with tight stops to maximize the position's potential.

Indicators

Date Time (GMT) Country Event Period Previous Forecast Importance
2008-06-06 06:45:00 EUR French Government Budget Balance
-22.5B -40.0B **
2008-06-06 06:45:00 EUR French Trade Balance
-4.8B -4.0B **
2008-06-06 09:00:00 CHF SNB Board Member Jordan Speaks
* * ***
2008-06-06 10:00:00 EUR German Industrial Production m/m -0.5% 0.2% **
2008-06-06 11:00:00 CAD Employment Change
19.2K 10.0K ****
2008-06-06 11:00:00 CAD Unemployment Rate
6.1% 6.1% ****
2008-06-06 12:30:00 USD Nonfarm Employment Change
-20K -57K *****
2008-06-06 12:30:00 USD Unemployment Rate
5.0% 5.1% *****
2008-06-06 12:30:00 USD Average Hourly Earnings m/m 0.1% 0.2% ****
2008-06-06 12:45:00 USD Fed Governor Kroszner Speaks
* * ****
2008-06-06 14:00:00 USD Wholesale Inventories m/m -0.1% 0.4% **
2008-06-06 19:00:00 USD Consumer Credit m/m 15.3B 7.3B **

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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