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Tuesday, 1 Jul 2008
With the ISM Manufacturing Index on Tap will EUR/USD Test 1.60?
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
| Daily Trend |  |  | | | | |
| Weekly Trend | | | | |  | |
| Resistance | 1.5830 | 2.0080 | 106.95 | 1.0320 | 0.9640 | 0.7960 |
| 1.5800 | 2.0050 | 106.65 | 1.0290 | 0.9610 | 0.7930 | |
| 1.5780 | 2.0020 | 106.35 | 1.0260 | 0.9580 | 0.7900 | |
| Support | 1.5700 | 1.9940 | 105.60 | 1.0180 | 0.9500 | 0.7840 |
| 1.5670 | 1.9900 | 105.30 | 1.0150 | 0.9470 | 0.7810 | |
| 1.5640 | 1.9870 | 105.00 | 1.0120 | 0.9430 | 0.7780 |
Economic News
USD -
The USD saw bullish momentum against its major currency rivals yesterday. The greenback saw positive trends throughout the trading day as the Chicago PMI rose and beat forecasts and even more importantly, the Crude Oil lost some grounds and was traded at around $140 a barrel. The USD was on a bearish trend last week and traders were looking for some positive news to help the USD rally back. After trading at above 1.58 versus the EUR, the USD regained some grounds and the cross was traded at the mid 1.57 zone.
Yesterday's bullish trading by the USD was sparked by the economic release of the Chicago PMI. This indicator showed that business activity in the US midwest increased unexpectedly in June and is a sign of future economic growth. In an interview yesterday, U.S. Treasury Secretary Henry Paulson said that a strong dollar is in the U.S. interest and added that he believes "the long-term economic fundamentals of the United States are solid". Last but not least, the USD gained further momentum with the decline of the Crude Oil price to around $140 a barrel after reaching a record high during the beginning of the trading day yesterday.
Looking ahead to today, there are a few economic releases expected. The most important economic data from the U.S. will be the ISM Manufacturing Index, which is expected to be lower than the previous value and might be a negative sign for the American growth. Simultaneously, there will also be releases of the ISM Manufacturing Prices and Construction Spending, which are both expected to stay around the same rates as their previous measuring. With lots of attention to the housing market, it might be interesting to see the Domestic Vehicle Sales, which is most Americans' second biggest purchase and is expected to fall compared to its previous measuring. Overall, it seems like today will not be a good trading day for the USD and traders might see bearish trends for the greenback.
EUR -
Yesterday was an intersting trading day for the EUR as positive economic figures were released, but the EUR saw bearish trends against its currency counterparts. The releases of the CPI Flash Estimate and Italian Prelim CPI both beat forecasts with positive figures, however the EUR was hurt but some hawkish speeches by EU members. The EUR/USD cross fall during the day and was traded around the mid 1.57 range during the end of the day. The EUR was hurt dramatically by European Union Commissioner for Economic and Monetary Affairs' Joaquin Almunia note in which he said that the EUR's hovering near $1.58, is overvalued.
June's inflation rate marks the highest level since Eurostat started collecting data in 1997. It is also well above the European Central Bank's target of around 2% and the ECB has hinted that it will raise interest rates Thursday to fight inflation.
There will be a batch of economic data releases today, with two releases surrounding the German economy. As the biggest economy in the Euro-Zone, the two releases from Germany, German Retail Sales should rise and the German Unemployment Change is expected to be negative, both positive signs for the EUR. The Manufacturing PMI and Unemployment Rate are both forecasted to stay the same as their previous readings. It seems like today will be a bullish trading day for the EUR and traders might expect the EUR to regain grounds against the USD.
JPY -
The JPY saw mixed results against its currency rivals yesterday. The Yen's momentum was determined mostly by its pairs' trading trends. Although some positive economic data was released in late trading hours, the Yen didn't gain impactful momentum for it and continued to see mixed trading. The trading day started with negative Housing Starts that were lower than forecasted. Later, the better than expected Tankan Large Manufacturers Index and Tankan Large Non-Manufacturers Index were announced. The Tankan is released four times per year and is one of the nation's most respected gauges of economic health because manufacturers play a vital role in the large export industry and the services sector gives a better indication of conditions in the domestic economy; however the JPY couldn't get too much momentum from these releases as the worse than expected Average Cash Earnings was soon to follow.
Looking ahead to today, the only economic release from Japan will be the yearly Monetary Base which is expected to rise from a previous negative rate and become neutral. It seems like the JPY will once again be affected by its counterparts' trading trends and traders should pay attention to economic data from the U.S. and Euro in order to determine the Yen's trends today.
Crude Oil -
Oil prices fluctuated yesterday, surging past $143 a barrel for the first time ever before falling back to $141 as a rising USD rebounded vs. the EUR. A whole bunch of events like a weak dollar and a weak global economy forced to drive the price of Oil to new records, influenced also by threats of strike in Nigeria as well as continued tensions in the Middle East. In addition, 4 leading American analysts have testified recently before the energy committee of the American congress. The four claimed that the current rising Crude Oil prices are unjustified and are not reflecting the real situation on the Oil market. According to their estimation a justified Crude Oil price should have never breach the $60 a barrel.
The analysts claim that should the congress change a few regulations, Oil prices will reduce in half.
Technical News
EUR/USD
The pair is trading in a range for the past three days after the previous sharp bullish correction and is now consolidating around 1.5750. The daily chart is showing the first buds of bearish momentum whereas the 4 hour chart is still bullish. Selling on highs might be preferable today.
GBP/USD
The ongoing tight range continues without a break of any significant importance. The daily chart is maintaining a slightly bearish indication yet with no distinct conclusion. The Bollinger Bands on the hourlies are tightening which indicates that the break might be imminent. Traders are advised to hold for the break and then swing into it.
USD/JPY
The hourlies are showing that the pair still does not have a distinct direction, as the chart appears to be quite horizontal for the past 2 days. Indicators on the 4 hour and the daily charts are giving mixed signals although there is still a lot of positive momentum. Traders should wait for a clear signal on the hourly level before entering the market today.
USD/CHF
We are at the beginning of an upward channel on the 4 H chart. RSI and momentum are positively sloped indicating further potential bullish movement. However the Slow Stochastic is crossing at the 70 mark indicating that this pair may have slightly slipped into overbought territory. Target price today will be the 1.0220 level.
The Wild Card
GBP/JPY
The pair has been moving within an accurate bearish channel with very strong momentum for 4 days now. The RSI flows high indicating that there is still a lot room for the bearish move. The hourlies also support that notion, however according to it; the uptrend is much more restrained Forex traders have a good opportunity to take advantage of an ongoing downtrend with high profit potential.
| Date | Time | $€£¥ | Event | Per. | Prev. | Fore. | Act. | Imp. |
|---|---|---|---|---|---|---|---|---|
| 11/20 | 15:00 | USD |  Philly Fed Manufacturing Index | -37.5 | -35.0 | -39.3 |  | |
| 15:00 | USD | CB Leading Index | m/m | 0.1% | -0.6% | -0.8% |  | |
| 15:30 | CAD | BOC Season Review | * | * | * | | ||
| 15:35 | USD | Natural Gas Storage | 62B | -1B | 16B | | ||
| USD | Treasury Sec Paulson Speaks | * | * | * | | |||
| 21:45 | NZD | Visitor Arrivals | m/m | -6.0% | - | - | | |
| 11/21 | JPY | Monetary Policy Statement | * | * | * | | ||
| JPY | Overnight Call Rate | 0.30% | 0.30% | - | | |||
| JPY | BOJ Press Conference | * | * | * |  | |||
| 02:00 | NZD | Credit Card Spending | y/y | 2.6% | - | - | | |
| 07:45 | EUR | French Consumer Spending | m/m | 0.6% | -0.5% | - | | |
| 08:00 | EUR | French Flash Manufacturing PMI | 40.6 | 40.0 | - | | ||
| 08:00 | EUR | French Flash Services PMI | 47.5 | 46.8 | - | | ||
| 08:30 | EUR | German Flash Manufacturing PMI | 42.9 | 42.0 | - | | ||
| 08:30 | EUR | German Flash Services PMI | 48.3 | 47.6 | - | | ||
| 09:00 | EUR | Flash Manufacturing PMI | 41.1 | 40.5 | - | | ||
| 09:00 | EUR | Flash Services PMI | 46.9 | 45.0 | - | | ||
| 09:00 | EUR | Italian Retail Sales | m/m | -0.5% | -0.2% | - | | |
| 12:00 | CAD | Core CPI | m/m | 0.4% | 0.0% | - |  | |
| 12:00 | CAD | CPI | m/m | 0.1% | -0.6% | - | |
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