Forexyard Daily Analysis thread - updated daily!

[forexyard]

Forexyard, a Cyprus based forex brokerage, will be posting it's daily analysis reports here each morning during the trading week. Please feel free to comment and give feedback on the analysis, but we kindly ask you to refrain from posting your own articles in this thread.

Thank you and enjoy.

[forexyard]

24/01/'08 - Will The Fed Cut Again?

Economic News

USD

The greenback is floating in relatively quite waters, after the storm caused by the fed's surprise cut of 75 basis points two days ago. When taking a deeper a look at the USD behavior post cut we can see that the reaction of the USD was in fact softer than one would expect from such a radical move that was not seen since 9/11. This could partly be explained by the fact that the cut was partly priced in, as the crisis was quite strong and traders were expecting a massive cut. Now there is a certain argument amongst some traders about whether the Fed will again lower its rates by at least a quarter of a percentage point next week. Others said it would depend on how Wall Street would perform for the rest of the week until their meeting on Tuesday.

These extreme policy changes are aimed at boosting liquidity and easing the credit crunch, restoring confidence and encouraging consumers and businesses to start borrowing, investing and spending again to keep the world's largest economy from slipping into a recession, although many predict that a recession might be inevitable.

As for today there are two major economical events expected to come from the US, the first is Unemployment Claims which is widely expected to be released at 320K after a previous figure of 301K, and the second is Existing Home Sales that is expected to remain at the 5 Million level, and will probably not generate strong volatility that is usually expected from housing data at this poor economical period.

US Treasury Secretary Henry Paulson will speak today about risk and the financial system at the World Economic Forum, in Switzerland. The speech might generate some choppy price movements, as those speeches often do. It appears that if no other surprises will be pulled from the fed's sleeve, we should see the Greenback continue to drop as a part of the ongoing attempts to initiate the healing process for the American economy.

EUR

There are many opinions as to what the ECB can do in order to help the situation in the US to cause a bigger global turmoil that could eventually lead to a world crisis. A very vivid example was given a few days ago where most of the world markets fell in an average of 5-6%. The ECB's part in all this is very important, as a rate cut on their side might ease the pressure from the US, and cause the EUR/USD to return to normal level. It could be interesting to see how fast the ECB will comply with the need to cut the rates.

However, Trichet said yesterday that a rate cut was not to be expected, which will keep the EUR afloat for now. But as rates remain at 4% in Europe as rates drop in the US, the stock market crashes may cause a reversal of fortune for the EUR by way of a correction in the coming week.

As for today, the European calendar contains several interesting events such as the German Ifo Business Climate Index at 9:00 GMT which is expected to drop a bit from 103.00 to 102.3. slightly later at 9:30 GMT we should be expecting new from the UK housing sector in the form of the British Bankers' Association (BBA) Mortgage Approvals which measures the number of home loans issued by the BBA during the previous month, and might have some impact on the ongoing weakening GBP. European Central Bank (ECB) President Jean-Claude Trichet will also speak at the World Economic Forum, in Switzerland shortly after US Treasury Secretary Paulson, and strong price movement is expected in that time frame, especially in the EUR/USD.

It looks like the EUR will continue its path of strengthening today, as it will probably do until the end of this month when the feds will indeed make a very important decision whether the US rate will be cut again or not.



JPY

The credit crunch in the U.S. and the slow growth are causing the JPY to surge, clouding the outlook for the nation's exporters. The JPY gained 5% against the dollar this year, cutting the value of overseas sales. Half of Japan's shipments overseas are settled in U.S. dollars even though the country is relying more on China and other emerging markets for trade. Gains in the currency are already hurting exporters' earnings. Toyota Motor's annual operating profit falls about 33 billion yen for every yen that the currency gains against the dollar past 115, according to Credit Suisse Group. Toyota's shares have fallen 16% this year.

It looks as if the JPY is approaching a point where companies won't be profitable. Exporters say they can make money as long as the USD/JPY is weaker than 106.06. Japan's currency is already 8% higher than the level the nation's largest exporters based their profit forecasts on for the year ending March. Today, there are two Derivatives of the Consumer Price Index (CPI) expected to be released from Japan. The first is the Core CPI y/y which is expected to rise a bit from 0.4% to 0.6%, and the second is the Core Tokyo CPI y/y which is expected to remain unchanged at 0.3%. Both releases are due at 23:30, and will probably push the JPY further up, as we have grown accustomed to in recent times.


Technical News

EUR/USD

The pair is floating around 1.4600 which is a 76.4% Fibonacci level of the 1.3388/1.4960 move. A breach through that level will validate the next bullish move into the 1.4700 zone. It looks like going long might be the better choice today.

GBP/USD

The bearish channel formation is getting tighter and appears to be approaching the melting point. The cable is floating at the top barrier of the channel, and if a break above 1.9600 will not occur on the next attempt, it appears that the bearish channel will continue with strong momentum.

USD/JPY

The attempt to break the 105.00 level has failed and the pair now consolidates around 106.00. The 4 hour chart is showing a bearish slow stochastic, and the daily RSI indicates that another attempt to break the support level is quite imminent. Target price of 105.40 appears to be a valid target for the next move

USD/CHF

The pair is in the middle of a strong bearish move, as the 4 hour slow stochastic clearly indicates. The pair has established a strong support level at 1.0850, which means that a breach through this level might unleash a much stronger downtrend that could take the pair beyond the 1.0800 level quite quickly.


The Wild Card

Crude Oil

The bearish channel on the 4 hour chart continues with no exceptional breaks. Oil is floating at the upper level of it which could be a great opportunity for forex traders to get in a short position at a very early stage, before the touch at the upper barrier may send the Oil down again.

[forexyard]

29/01/'08 - Market awaits tomorrow's rate cut

Economic News

USD

The greenback continued to take a hit as yesterday's New Home sales figure spurred speculation that the Federal Reserve will cut its benchmark lending rate by 0.5% this week to prop up the economy. The Fed will announce its rate decision tomorrow at the end of a two-day policy meeting. Interest Rate Futures reflect a roughly 90% chance of a 0.5% rate cut by the Fed this week.

Short-term U.S. interest rates are already among the lowest in the developed world, encouraging investors to borrow in dollars and buy another currency to profit on the difference in yields, which would put pressure on the dollar.

Data showing sales of new U.S. homes declined in December, stoking fears of an imminent economic recession. Purchases of new homes in the U.S. unexpectedly fell yesterday to a 12-year low in December, ending the worst sales year since 1963. Sales decreased 4.7% to an annual pace of 604K, according to Washington Commerce Department.

By now, markets show little willingness to force a dollar bounce ahead of a critical week of U.S. economic developments. We may see the greenback remain in a relatively narrow range against the EUR ahead of the highly anticipated U.S. Federal Reserve rate decision due Wednesday, while similarly critical Non Farm Payrolls data will be due Friday.

Today, the release of the U.S. economic data will likely highlight some of the reasons why traders are ramping up speculation that the country is in midst of a recession. Durable Goods Orders are forecasted to rise 0.1% after falling 0.8 % during the month prior. On the other hand, the U.S. Consumer Confidence is forecasted to fall to a 2 year low.

EUR

The Federal Reserve's emergency rate cut helped propel the EUR/USD up towards the level of 1.4900. However, with Fed Futures pricing in another round of rate cuts on Wednesday and the ECB maintaining a hawkish tone, it may only be a matter of time before the pair takes its rally towards the psychologically important 1.50 level.

Meanwhile, yesterday's European M3 Money Supply contracted for the first time in 4 months suggesting that the slowdown in lending and business activity is spreading across the Atlantic. The M3 indicator, which measures the value of all currency and liquid cash assets held by the public, printed at 11.5% which was considerably lower than the 12.3% forecast. The news took traders by surprise and EUR/USD immediately plummeted 30 points before stabilizing and recovering back to the 1.4700 level.

In the following days, there are only a bits pieces of potentially market moving European economic data, namely Euro zone retail PMI, German unemployment, German Retail sales and manufacturing PMI. The lack of big events on the European calendar suggests that the movements of the EUR will be largely driven by the U.S. economic data.

JPY

Fears of a U.S. recession have now spread to Japan as slowing global activity and dropping foreign demand have led to speculations of Japan also entering a recession.

As expected, the Bank of Japan kept its leading interest rate unchanged at this past week's monetary policy meeting. The central message from the BoJ remains that it believes that the current weakness in the Japanese economy is temporary, and that the next move in interest rates will probably be up.

Today there is no economic data expected to be released from the Japanese markets apart from the Industrial Production, which is expected to finally move into positive territory. The JPY may still continue to drop further downwards against the USD during the day, although it appears that the pair has apparently stabilized in the 106.00-108.00 area.

Trading the USD/JPY pair this week is likely to be dominated almost exclusively by the U.S. news flow. Therefore, traders will be looking ahead to the 2 key events on the U.S. calendar this week- the FOMC and NFP.


Technical News

EUR/USD

The pair is in the middle of an uptrend initiated at 1.4350, and appears to be having some more room to run on the daily level. On the 4 hour chart there is a bearish cross forming indicating that there might be a bearish correction before the uptrend resumes.

GBP/USD

After bottoming at 1.9360 the cable is continuing the corrective move at full momentum and is now floating around 1.9840. All oscillators show that the correction move still holds some fuel in it, and if the 1.9900 level will be breached, a new uptrend will be validated and might push the cable above the 2.0000 level once again.

USD/JPY

The pair is trading in a range for almost two weeks now, and has formed a very strong support at 105.20. The local momentum appears to be bullish but the daily trend is a very strong bearish one. Traders must look for a key break on the bearish side before considering an entry position, as the range might continue before one occurs.

USD/CHF

After several failed attempts to breach through the 1.0850 level, it appears that the pair might make an additional attempt of a break. If and when a breach of that level occurs, it will most probably unleash an intensive follow-up bearish trend that might be targeted at 1.0750 at its lowest point. Going short appears to be preferable today.


The Wild Card

Crude Oil

Oil has been traded in a very distinct bearish channel on the 4 hour chart since the beginning of January. The first breach through the upper barrier of the channel has occurred and a very strong bullish trend is expected to take Oil back into the 95.00 levels towards the beginning of next week. This is a great opportunity for forex traders to join a very strong potential trend that might yield high profits.

[forexyard]

30/01/'08 - US Interest Rate Statement On Tap.

Economic News

USD

Today at 19:15 GMT, we are scheduled to see the release of the US interest rate statement. The greenback was steady against its major crosses yesterday, as investors waited to see how big an interest rate cut the Federal Reserve will deliver today in its fight against the threat of a U.S. recession. With the Dow rising as well yesterday, investors look towards bullish behavior of the dollar ahead of the expected 50bp rate cut, which will likely drive the dollar's value down. Federal Reserve fund futures were pricing in a roughly 75% chance that the rate cut will come in at 50bp, with the other quarter allocated to the much more conservative and unlikely 25bp cut. A hefty cut from the current interest rate of 3.5 % could send the dollar in either direction, as lately it has slipped back towards record lows hit last year against a basket of currencies. A rate drop any bigger than 50bp would deteriorate the dollar's yield appeal for investors. A rate cut of 25bp would service as a medium between keeping with market expectations and servicing the real needs of the economy.

During yesterday's trading news events from the US came back with mixed results, nonetheless far better than what was originally expected, giving investors even more incentive to push the dollar up. Durable goods returned roughly 3% higher than initially forecasted, as the 5.2% mark, coupled with solid core durable goods figures gave a much needed boost to the dollar in afternoon trading. National HPI Composite and Consumer Confidence figures were released as well yesterday to predicted negative results, preventing any real significant gains in the greenback.

Before the evening release of the US interest rate, we will see several key US figures. The 15:30 GMT release of ADP Non Farm Employment Change is expected to stay put at 40K, ahead of Friday's non farm payroll data. Also, an advanced release of quarterly GDP and the GDP deflator is scheduled to come back with negative results. If today's economic data comes back with better than expected results, the dollar and the US economy as a whole will see some much needed relief.

EUR

The EUR saw a slowdown toward the top of its week long rise against a basket of currencies, ahead of today's Fed rate cut. As investors turned their attention across the Atlantic, a small set of Eurozone data was released in line with expectations, but saw unexpected responses from investors in the market. Eurozone current account info came back with negative results, which should have resulted in bearish Euro behavior. Instead, the EUR stayed relatively unchanged against the dollar, due in large part to the tight monetary policies issued by the ECB. ECB President Jean Claude Trichets' speech from last week once again reiterated the hawkish stance from the ECB, as no interest rate cut should be expected in the near future. This should keep the EUR in line for steady progress in the future against a basket of currencies including the greenback.

Today there are no events on the European calendar, as all eyes will be focused on news from the US. We should expect a slight strengthening of the 13 nation currency today, unless news from the US comes back better than expected.

JPY

Japan's industrial production rose less than expected in December, as the Japanese government downgraded its assessment on industrial production. Initial reports showed a moderate rise in output trends; however the decline in production numbers resulted in a flattening out of trends. The index for industrial output in December was released at 111.9, Japan's second-highest reading since January '98, also reached briefly in August of last year. Industrial production rose 0.7% in December from a year earlier, as the figure has risen consistently for over 2 years. Manufacturers' output is expected to drop 0.4% in January and a further 2.2% in February, according to the survey.

Yesterday, the JPY made gains on most of its major currency crosses, as Asian stock markets continue to fall ahead of today's Federal Reserve statement. Looking ahead, Japan will release its Manufacturing PMI today at 23:15 GMT; the data is forecasted to stay close to last month's figure of 52.3, and should not affect JPY prices by that much.It is unclear to how the JPY will respond to today's news events as it has range traded for most of January.



Technical News

EUR/USD

The pair is in a consolidation formation on the 4 hour chart, and is accumulating fresh momentum towards the next bullish move. An upcoming bearish cross might be forming on the daily chart indicating that the bullish move might not be very strong and could be subject to a corrective move soon.

GBP/USD

The bullish corrective move continues with strong momentum, as the daily chart indicates no sign of a halt. Hourlies studies support the bullish notion, as RSI and slow stochastic both indicate that the bullish trend might very well continue uninterrupted. Being on the buy side appears to be preferable.

USD/JPY

As the pair continues to be traded in relatively tight range, no distinct direction is being observed on the hourly and daily studies. The pair might continue to linger in neutral territory until a more distinct signal will be formed. It is advised to stay out of this one until the smoke of uncertainty clears.

USD/CHF

The very strong support level of 1.0850 has not yet been breached as the pair shows some mixed price momentum. The overall momentum is bearish, and traders should pay attention to a breach of the key support to enjoy a very strong additional bearish move that might take the pair into the 1.0750 area quite quickly.


The Wild Card

Gold

Gold is in the midst of a very strong uptrend that shows very small will to stop. All oscillators support the bullish bonanza, and it appears that an all time high breach might be quite imminent. This could be a great opportunity for forex traders to enjoy the road to a record high with very strong profit potential.