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 |  27-Dec-2007 | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Economic News | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| USD | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Yesterday most of the global financial markets were still closed for the observance of the Boxing Day holiday. Therefore there was very low liquidity in the Forex market, as many key market players were unavailable to trade. Nevertheless, there was some sharp volatility mainly involving the greenback versus the EUR and JPY. The main news yesterday was the release of the National Home Price Index Composite-20, which measures the annual change in the average price of a single-family home in 20 metropolitan areas. This Index was expected to release at -5.6%, but it surprised on the downside coming in at -6.1%. Therefore the deterioration of U.S home prices has now accelerated to record levels. This negative data once again raised investors concerns over the fledgling housing sector. At the moment U.S consumers are struggling to finance their mortgages and so the number of unsold homes is increasing. Therefore the negative housing data should continue in the months to come, until the oversupply in the housing market is balanced out. With this in mind, many analysts believe that the greenback will continue to broadly depreciate in 2008 as credit woes resurface and signs of a U.S. economic slowdown increase. On the back of this renewed negative dollar sentiment, the EUR gained over a hundred pips against the greenback, rising above the 1.4500 level for the first time in over two weeks. On the other hand, the greenback gained some ground against the JPY on Monday as stocks were higher in thin pre- holiday trading in the U.S, resulting in an increased risk appetite among investors which drove carry trades. However the greenback did slip slightly against the JPY yesterday before recouping its lost ground and resuming its bullish trend Looking ahead to today, we are expecting a string of key U.S data releases kicking off with the Durable Goods figures. This will be followed by the Unemployment Claims and Consumer Confidence figures. Traders will be closely following these figures, as due to the lack of liquidity if these figures spring a surprise then we could see some sharp volatility. The greenback should continue its bearish path against the EUR today, as it seems that the late holiday season purchasing spree by U.S consumers was not enough to boost this year's Retail Sales figures and there are also renewed concerns regarding the housing sector. Therefore there is still a lot of negative sentiment surrounding the greenback heading into the New Year. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EUR | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The EUR traded strongly yesterday, particularly against the greenback and the GBP. Although trading resumed yesterday after the Christmas Holiday, many European markets were still closed and therefore void of any significant news releases. The EUR's gains against the greenback were mainly as a result of surprisingly weaker housing data coupled with negative dollar sentiment. Also the EUR's strength against the GBP can be attributed to the continued problems in the UK housing sector, which is collapsing and it could cause UK growth to suffer in 2008. Therefore many analysts expect the EUR to continue its bullish path against the GBP in the New Year as investors are not prepared to buy the Sterling at the moment. Looking ahead, there are no significant Eurozone news releases for the rest of the week. On Friday there will be the release of the German Retail PMI and CPI figures, but they are not expected to cause any market movement. Therefore the EUR is expected to continue its bullish path against the greenback and the GBP into the New Year, as its strength against these pairs will mainly be driven by the negative sentiment surrounding these two currencies which stem primarily from growth concerns. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JPY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Since last week U.S stocks have been on a sharp rally and this has been fuelling carry trades. Therefore the JPY and the CHF have slipped noticeably while the high yielding currencies, including emerging market currencies, have been on a constant upward path. There was more positive news for U.S equities yesterday as Singapore announced a $4.4 B investment into Merrill Lynch. This gave investors another reason to pursue the risky carry trade strategy as firmer equities coupled with a drop in volatility helped to boost market risk sentiment. Earlier in the week there was the release of the Japanese Corporate Services Price Index (CSPI), which measures the rate of inflation experienced by corporations when purchasing services. This figure released inline with expectations at 1.4% and did not cause any market volatility. Also on Tuesday the BoJ released its Monetary Policy Meeting Minutes which reaffirmed that the Japanese interest rates are unlikely to be changed in the near future. Looking ahead to today, the JPY is likely to continue on its bearish path as carry trades are back in action. However investors will be closely watching the performance of equities as it seems that is one of the key factors in determination the direction of the JPY, which has been moving in very close correlation to the DJIA. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Technical News | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| EUR/USD | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The 4 hours chart is implying on an upcoming bearish trend as the Slow Stochastic was crossed at 94 and have a negative slope, heading to neutral territory.
We expect this pair to test the 1.4477 (Fibonacci 38.2% level) and if a breakout would not occur, it's more likely that we will see the 1.4500 level been breached. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GBP/USD | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Daily studies show that the GBP strengthening move against the USD might continue as the Slow Stochastic crossed at 6 and have a positive slope. This might keep the Momentum at high levels and cause the pair to break the 1.9888 resistance level. It appears that going long might be preferable today. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| USD/JPY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| There is a very strong bearish signal forming on the daily chart, as the slow stochastic now make the forth cross in a row above the 80 level. The pair is floating at the 114.10 level which is the 61.8% Fibonacci of the 117.90/107.85 move. It appears that a reversal is quite imminent, and that a target price of 113.20 is valid. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| USD/CHF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The pair started a moderate bearish correction that appears to be gaining momentum, as shown clearly by the RSI and slow stochastic. There is still much more room to run, as the hourly studies support the bearish notion with a target price of 1.1400 at first step, and maybe 1.1300 if the move's momentum escalate. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The Wild Card | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Gold | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| A bullish widening channel structure is forming on the 4 hour chart, indicates on an upcoming bearish trend which might bring Gold to test the first target at 817.09 (Fibonacci 76.4%). This is a great opportunity for Forex traders to enjoy a very strong signal that might deliver a relatively high profit potential. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Demo Account
24-Dec-2007
