Daily Forex Analysis - By FOREXYARD

Daily Forex Analysis

Headlines

USD EUR JPY Cheif's on Tap

Market Trend


 EUR/USD GBP/USD USD/JPY USD/CHF AUD/USD EUR/GBP
Daily Trend
Weekly Trend
Resistance 1.5590 1.9730 105.50 1.0480 0.9660 0.7960
1.5560 1.9700 105.20 1.0450 0.9630 0.7930
1.5570 1.9670 104.90 1.0420 0.9600 0.7900
Support 1.5500 1.9600 104.20 1.0340 0.9530 0.7830
1.5470 1.9570 103.90 1.0310 0.9500 0.7800
1.5440 1.9540 103.60 1.0290 0.9470 0.7770

Economic News

USD

Yesterday the greenback experimented with high volatility as it opened the trading day with a bullish trend against the Euro after the release of the ISM Manufacturing Index saw a positive improvement of 49.6 in May. The Manufacturing indices sent the EUR/USD pair down to as low as 1.5487 from 1.5513. However the USD rally didn't last much longer as several hours later the Euro experienced some relief and eventually saw full recovery from it losses against the greenback. The EUR/USD hit a session high of 1.5590 when rating agency Standard & Poor's downgraded the credit ratings of three of the fours biggest securities firms in the US sparking fears of consumer bankruptcies. Also released yesterday, Construction Spending in the United States fell 0.4% in April, following a decline of 0.6% for March as reports showed from the U.S. Department of Commerce. For manufacturers the high prices and rising costs are having great impact on production, the only thing which is balancing the manufacturing numbers out is the weakness of the USD which made exports cheaper for overseas buyers by 2.8% in the first quarter, driving more business into the economy.

Today, the highlight of the US news calendar will be a speech by Federal Reserve Chairman Ben Bernanke. Bernanke will address the audience at the International Monetary Conference in Barcelona and should give some hints as to any news regarding possible interest rate cuts on the horizon, even as rising inflationary risk still haunts the US economy. His comments should give a boost to the USD. Also on the docket today, we will see the release of Factory Orders, and Domestic Vehicle Sales as well as the publishing of the TAF Summary. Factory Orders are expected to show little change this month, but if the numbers return in negative territory expect the USD to feel the effects.

EUR

Yesterday the EUR saw some losses against most of its currencies rivals during the early trading session. The Euro was traded down nearly 180 pips to162.28 against the JPY, and slipped against the USD, but gained back some territory after the Standard & Poor's accreditation of U.S. securities firms. Also significant about yesterday's events was the release of the purchasing manager's indices for the most powerful economies from the Euro-Zone. The figures showed a slight decrease to 50.6, the lowest result since for nearly 3 years. The low readings were a result of weak demand, a strong Euro and high Oil and commodity prices, as investors still have worries over the apparent E-Z economic slowdown. Looking ahead to today, we can expect Euro-Zone Producer Price Index, as well as the revised GDP estimate for the first quarter of 2008. Traders should keep an eye on the release of the PPI, as it is forecasted to rise 0.1% from its last reading on May 6th. The big event of the day from the EZ, will be a speech by ECB President Trichet at the International Monetary Conference, in Barcelona where he is expected to maintain his hawkish stance in regards to EZ monetary policy.

JPY

The JPY yesterday gained against most of its rival currencies, encouraged mostly by an increase in risk aversion and weak Euro-zone PMI data. The USD fell 0.8% against the JPY to 104.70, while the Euro fell more than 1% to 162.61. It has been demonstrated that the JPY is more demanded by buyers when risk aversion occurs as investors can borrow the JPY at a lower interest rate. This behavior is generally known as Carry Trading. In addition to the host of outside events that effected the JPY, Japan's yearly Average Cash Earnings grew 0.6% from an estimated 1.3%, while the Monetary Base returned according to predictions dropping to 0.9% in May continuing a declining trend and forcing the BOJ to contemplate reforms. Today, we await a speech by Ban of Japan (BOJ) Governor Shirakawa at the International Monetary Conference meeting in Barcelona. High volatility is expected to take place. Traders should pay attention to his speech to get a sense of the direction of the currency for the near future. We also expect readings from the Capital Spending in the first quarter of the year, estimated at -9.6% from the previous mark of -7.7% in the last quarter of 2007.

The JPY, will likely be effected greatly by the outcome of the speeches from the International Monetary Conference in Barcelona. The JPY should see volatility throughout the day.

Technical News

EUR/USD

After bottoming out at 1.5450 the pair seems to be picking up fresh bullish steam and is now traded at around 1.5600. The Slow Stochastic on the daily chart is showing a bullish cross which indicates a possible target price 1.5700 on the current move. Going long appears to be preferable.

GBP/USD

There is a bearish channel forming on the daily chart, as the cable now floats in the middle of it with moderate bearish momentum. The daily Slow Stochastic is showing that the bearish cross still carries enough momentum to take the pair to 1.9550. Going short with tight spreads might be a good choice today.

USD/JPY

The daily chart is showing that the pair is trading in a tight range and is now heading to the bottom section of the range. All oscillators are floating on neutral territory without a distinct price direction. Forex traders should wait for a clearer signal before entering the market on the USD/JPY.

USD/CHF

There is a very strong bearish cross forming on the daily Slow Stochastic which indicates a possible violent bearish move. The 4 hour chart is supporting the bearish notion and it appears that the fresh bearish momentum is growing. Going short might be a preferable strategy today.

The Wild Card

Gold

After a sharp drop in gold prices in the last 3 days oscillators are showing fresh bullish momentum. The 4 hour Slow Stochastic is showing a triple top formation with a positive slope which indicates that there is still much more room for improvement. Forex traders have a great opportunity to join the bullish trend at a very early stage and with a great entry price.

Indicators

Date Time (GMT) Country Event Period Previous Forecast Importance
2008-06-03
USD Halifax House Price Index m/m -1.3% -1.1% *****
2008-06-03
USD Domestic Vehicle Sales
10.6M 10.8M *
2008-06-03 01:30:00 AUD Building Approvals m/m -5.5% -0.9% ****
2008-06-03 01:30:00 AUD Current Account
-18.7B -20.4B *
2008-06-03 04:30:00 AUD RBA Rate Statement
* * ****
2008-06-03 04:30:00 AUD Cash Rate
7.25% 7.25% ***
2008-06-03 05:45:00 CHF CPI m/m 0.8% 0.4% ****
2008-06-03 08:30:00 GBP Construction PMI
46.1 45.7 ***
2008-06-03 09:00:00 EUR PPI m/m 0.7% 0.8% **
2008-06-03 09:00:00 EUR Revised GDP q/q 0.7% 0.7% **
2008-06-03 13:00:00 EUR ECB President Trichet Speaks
* * ***
2008-06-03 13:00:00 JPY BOJ Governor Shirakawa Speaks
* * ***
2008-06-03 13:00:00 USD Fed Chairman Bernanke Speaks
* * *****
2008-06-03 14:00:00 USD Factory Orders m/m 1.3% 0.0% ****
2008-06-03 14:00:00 USD Fed Publishes TAF Summary
* * ***
2008-06-03 23:01:00 GBP Consumer Confidence Index
70 68 ***
2008-06-03 23:30:00 AUD Services PMI
47.3 * *
2008-06-03 23:50:00 JPY Capital Spending q/q -7.7% -9.6% ***

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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