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 |  03-Jan-2008 | |
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| | EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP |
| Daily Trend | 
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| Weekly Trend |
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| Resistance | 1.4800 | 2.0015 | 111.00 | 1.1283 | 0.8900 | 0.7529 |
| 1.4758 | 1.9997 | 110.37 | 1.1205 | 0.8849 | 0.7500 |
| 1.4735 | 1.9982 | 110.00 | 1.1173 | 0.8835 | 0.7447 |
| Support | 1.4710 | 1.9775 | 109.00 | 1.1100 | 0.8775 | 0.7367 |
| 1.4630 | 1.9760 | 108.43 | 1.1052 | 0.8754 | 0.7350 |
| 1.4600 | 1.948 | 108.00 | 1.1000 | 0.8741 | 0.7333 |
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| Economic News |
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| USD |
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The greenback continued on its bearish path yesterday as traders returned to their desks after the New Years Holiday. The main reason for the dollar slide yesterday was the weaker-than-expected release of the ISM Manufacturing Index. This figure came in at 47.7, which was well below the expected figure of 50.7. This Index measures the activity level of purchasing managers in the manufacturing sector, with a reading above 50 indicating expansion. Therefore this latest reading indicated to the market that we are beginning to see a contraction in the manufacturing sector, which is another strong sign that the U.S economy is heading towards a recession. This negative news coupled with the fact that Crude Oil is hovering around the $100 a barrel mark raised speculation that the Fed will have to cut rates again in order to stimulate the economy. Also the ISM Manufacturing Prices figure, which measures the monthly inflation experienced by manufacturing organizations when purchasing materials and services, released at a beating expectations figure of 68.0. This upside surprise raised concern among investors as a contraction in the manufacturing sector coupled with rising prices indicates that the economy is steadily heading towards a situation of rising inflation and lack of economic growth, which is known as stagflation. Stagflation is an economic condition defined by rising inflation and falling growth and this would be the worst case scenario for the U.S economy and many analysts believe that is becoming almost impossible for the U.S economy to avoid. The release of the FOMC Minutes also gave further indication that at its next meeting the Fed will slash interest rates by at least 50bps, as it was stated in the minutes that the Fed members believed that a significant interest rate cut is needed to relieve the credit squeeze. However it also mentioned that if the credit crisis is alleviated then a rate cut could be avoided and this caused the greenback to regain some of its sharp losses against the JPY.
Looking ahead, today we are expecting the release of the ADP report which is a leading indicator of the significant Non-Farm Payrolls which will be released on Friday. This will be followed by the Unemployment Claims figure which is expected to release slightly better than last month. If these figures surprise we may see some sharp movement in an already volatile market and it is important to note that at the moment the broader fundamental picture remains heavily bearish for the fledgling greenback. Nevertheless the greenback may still have a positive 2008 as last years major investments into the U.S banking sector will help stabilize the financial sector and provide important capital inflows.
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| EUR |
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The EUR continued its bullish rampage against the greenback yesterday on the back of weak U.S manufacturing figures. The manufacturing sector between the two economies is at a complete contrast at the moment, as while the U.S is experiencing a contraction there is acceleration in Eurozone manufacturing. This was further reiterated yesterday with the release of the German and Eurozone Manufacturing PMI figures. Both these figures released slightly better-than-expected indicating that there is moderate expansion in the European manufacturing sector. Looking ahead to today, the only news to be released from the Eurozone will be the German Unemployment Rate and the M3 Money Supply. Both figures are expected to remain relatively unchanged and no movement is expected as a result of these figures. The EUR movement today should be dollar centric with the release of some key U.S data. Nevertheless, with the current grey cloud still looming over the USD, the EUR is expected to continue bullish surge.
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| JPY |
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There was no news released from the Japanese market yesterday as a result of the banking holiday that will also continue today. Despite the lack of Japanese economic news, the JPY still experienced some sharp movement yesterday. The Japanese currency rallied nearly all across the board yesterday on the back of concerns that global economic growth will experience a slowdown in the near future. These concerns created a risk adverse sentiment among investors, who therefore shied away from carry trades causing the JPY to strengthen sharply - particularly against the high yielders. Nevertheless it is important to note that some of this sharp movement may have been exaggerated as a result of the lack in liquidity due to the New Years Holiday and the current Japanese public holiday. The strong correlation between the Dow Jones Industrial Average (DJIA) and the JPY was once again reiterated yesterday, as the while U.S equities fell sharply the JPU rallied strongly due to the carry trade unwind. The JPY should retrace slightly today after yesterday's sharp gains but much depends on how the equity market reacts to yesterdays collapse.
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| Technical News |
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| EUR/USD |
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After a very choppy session yesterday, the pair appears to be floating around 1.4720. The hourly studies show strong bullish signals, as the dailies are becoming neutral. It appears that in the short run going short might be preferable with tight limits and and a relatively quick exit.
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| GBP/USD |
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The cable is in the midst of a very strong downtrend that doesn't seem to be losing momentum since the beginning of November. The daily chart is very bearish as the hourlies support. It looks as if a breach through the 1.9800 might be very possible today and will probably validate the next bearish move.
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| USD/JPY |
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The bearish momentum is slowing down, and it appears that the sharp drop might halt for a while. The daily chart is showing mixed signals, as the hourlies are still indicating a slight bearish sentiment. Waiting for a clear sign or a violent break to validate the next move might be preferable.
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| USD/CHF |
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There is a very strong bearish cross forming on the daily slow stochastic which indicates that a local reversal is quite imminent. The hourlies are still bearish with diminishing momentum which indicates that buying on lows might be preferable.
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| The Wild Card |
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| Crude Oil |
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There is a very distinct channel forming on the 4 hour chart as Crude Oil now floats on the upper level of it. In case of a breach beyond the 99.50 level, a very strong bullish move might be validated and may provide
forex
traders with great profit potential.
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| Indicators | |
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| Date | Time | Country | Event | Period | Previous | Forecast | Importance |
| 2008-01-03 | | JPY | Holiday: Bank Holiday | | | | *** |
| 2008-01-03 | 08:30:00 | CHF | SVME PMI | | 63.4 | 61.5 | *** |
| 2008-01-03 | 13:15:00 | USD | ADP Nonfarm Employment Change | | 189K | 45K | ***** |
| 2008-01-03 | 13:30:00 | USD | Unemployment Claims | | 349K | 345K | **** |
| 2008-01-03 | 15:00:00 | USD | Factory Orders | m/m | 0.5% | 0.5% | *** |
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© 2006 by FxYard Ltd
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Disclaimer: Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This and any analysis published or received from FOREXYARD is for informational use. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in the analyses. While we try to ensure that all of the information provided is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. FOREXYARD will not be held responsible for the reliability or accuracy of the information available. The content herein is provided in good faith and believed to be accurate; however, there are no explicit or implicit warranties of accuracy or timeliness made FOREXYARD or its affiliates. The reader agrees not to hold FOREXYARD or any of its affiliates liable for decisions that are based on information from this website. FOREXYARD highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.
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