Daily Market Update by Daily FX (24th April 2008)

Source: Daily FX

USD
After hitting a record low against the Euro on Tuesday, there has been little follow through selling in the US dollar, leaving many traders wondering whether this may be a pause before further losses or a potential bottom. Although we are long term dollar bears, the break of 1.60 is far from impressive. This indicates that there isn't much speculative interest in taking the Euro higher in the near term, especially as economic data and official comments start to turn against the Euro and in favor of the US dollar. Earlier this week we had better than expected US housing market numbers. We would not be surprised to also see a recovery in new home sales. Even though US durable goods will be pressured by the sales of furniture and electronics, Boeing's incredibly solid end of quarter earnings and their expectations of another strong year suggests that sales of non-defense aircraft could be firm. As for the Eurozone, we expect German business confidence to deteriorate materially (discussed in Euro section). Fed fund futures are currently pricing in an 82 percent chance of a quarter point rate cut next week with the remaining 18 percent probability in favor of no rate cut at all. This is a sharp departure from just a week ago when the market was pricing in a 76 percent chance of a 25bp cut and a 24 percent chance of a 50bp cut. The only reason for this dramatic shift in expectations is the increased inflationary pressures. A week ago, oil prices were trading at $113 a barrel and yesterday it hit an intraday high of $119.90 a barrel. The dollar should continue to recover for the rest of the week, but the party may end the following week when we have the Federal Reserve interest rate decision and non-farm payrolls due for release. We believe that the market may be under pricing the degree of Fed rate cuts because the problems in the US economy are far from over. Non-farm payrolls should continue to drop while consumer spending will probably slow, leaving the Federal Reserve with a lot of work ahead of them.

EUR
The Euro has failed to extend its gains beyond 1.60 and we believe that another day of losses may be in store for the single currency. More signs of weakness in the Eurozone economy are beginning to reveal themselves. Even though service sector PMI improved in the month of April, manufacturing sector PMI deteriorated. This suggests that German business confidence could have also decreased this month as indicated by the ZEW survey. A little watched report called the Belgium Business Sentiment Index also tends to have a strong correlation with German IFO (chart). The index fell to a 2.5 year low in the month of April with the drop being the steepest on record. A large decline in German business confidence would be exactly what the Euro needs for a more meaningful turn. Meanwhile ECB member Noyer backtracked the comments that he made yesterday, which drove the EUR/USD to a record high. He said that the market misinterpreted his words and that the ECB is not looking to hike interest rates. For the time being, don't expect them to lower rates either.

GBP
Over the next 2 trading days, the big action should be in the British pound. We are expecting retail sales tomorrow followed by the first quarter GDP report on Friday. The deterioration in the UK housing market and the UK economy in general will weigh on consumer spending, while the GDP numbers may be partially dependent upon how bad retail sales fared in March. Unfortunately the minutes from the latest monetary policy meeting failed to provide any clarity on how the central bank may vote at the next meeting because the committee was split 3 ways. Six of the nine members voted in favor of the 25bp rate cut, 2 members voted for no cut at all while 1 member voted for a 50bp cut. As a group, they were concerned about everything from growth to credit markets to inflation. Looking ahead, the only things that will shed more light on where the BoE stands would be tomorrow's retail sales report.

JPY
The Japanese Yen crosses were mixed today with USD/JPY rallying but many of the other yen crosses dipping despite a 42 point rally in the Dow. After breaking higher last Friday, there has not been much follow through in US equities, which leaves many traders nervous about whether risk appetite is really here to stay. The latest merchandise trade balance report was weaker than expected, but the surplus still increased last month. The strength of the Japanese Yen is beginning to take a toll on exports, particularly in the electronic components and machinery sector. Imports on the other hand rose 11 percent, mainly due to the rise in oil prices.

Daily Market Update by Daily FX (23rd April 2008)

Source: Daily FX

USD
It has been a record breaking day in the financial markets with the US dollar falling to a new all-time low and oil prices hitting a record high above $119 a barrel. When it comes to oil and the US dollar, it is difficult to determine which is the primary driver because the dollar's weakness pushes oil prices higher while oil prices hurts the outlook for the US economy. Although it can be argued that higher crude prices are inflationary, it is not that simple because the Federal Reserve cannot raise interest rates to combat inflation. With the market already pricing in only a quarter point rate cut, to forgo a rate cut completely would send a message to the markets that the Federal Reserve is not quite ready for. At this time, the Fed's bigger problem is the pressure that $5 gas prices may have on consumer spending and corporate profitability. The pocketbooks of US consumers are getting pinched by the day as prices rise globally. This morning, there have been reports that Mattel is raising toy prices and even the MTA (Metropolitan Transportation Authority) here in NY is planning to raise the price of alcohol, soda and snacks for the first the first time in 4 years; the price hike of 25 percent is by no means shallow. Housing market numbers were released this morning and they were not as bad as analysts had feared. The absolute number of existing homes sold was slightly more than expected even though the drop on a percentage basis was greater. House prices actually ticked higher which is a relief for the housing market even though that relief will probably be temporary. California just reported the highest level of mortgage defaults in 15 years, reflecting the severity of the problems in the US real estate market. Expect the US economy to get worse before it gets better.

EUR
The fourth time is the charm for the Euro as it finally pierces the 1.60 level against the US dollar. Despite slightly better than expected existing home sales in the US, a rebound in house prices, and news that the German Banking Association bailed out Duesseldorfer Hypothekenbank AG after a string of mortgage losses, the market refuses to give up its voracious appetite for Euros. This continual rise in inflationary pressures raises the risk of a rate hike from the European Central Bank. This morning, ECB member Noyer said that the central bank will do what is needed to control inflation, including raising interest rates. Although he tried to temper that comment by saying that rates are currently appropriate, the seed has been planted. Tomorrow's service and manufacturing PMI numbers will shed more light on how well the Eurozone economy is holding up given current market conditions. Interestingly enough, there are not as many option barriers according to the volatility smile at 1.60 as there was at 1.50. This suggests that extension may not be as high. When the Euro broke 1.50 it rallied another 144 pips on the very same day and then added 300 pips over the next few weeks with virtually no retracement. Therefore the power of the move above 1.60 will not be as strong as the move above 1.50. In fact, 1.60 could even be a near term top.

GBP
Fresh from yesterday's trading loss, on the back of rising criticism about BoE's GBP50 billion swap, the British Pound regained posture against the US Dollar, rallying by 150 pips. In light of the Royal Bank of Scotland's $24 billion sell of shares and the BoE's attempt to increase liquidity in order to boost the ailing housing market, speculations run rampant that the worst is yet to come for the once resilient UK economy. Today, Finance Minister Alistair Darling is set to meet with key mortgage lenders, in hopes of convincing them to cut costs of home loans and find ways of helping people refinance their mortgages. Investors eagerly await this month's central bank minutes set to release on Wednesday, in hopes of finding a silver lining, in terms of a future rate cut. As the economy trudges along, it remains to be seen what sorts of surprises the government pulls out of its black hat, but it can be assumed that it will be awhile before the UK economy start chugging smoothly.

JPY
Fresh from yesterday's trading loss, on the back of rising criticism about BoE's The Japanese Yen continued its lead against the US Dollar, as investors ushered in positive economic release from the world's second largest economy. Supermarket sales figures rose for the second month in a row, due to rising food costs, causing investors to remain optimistic about future growth prospects. With Democratic Party Japan pushing for higher minimum wages, and the retention of the gasoline tax cut beyond April, expect consumer spending to recover, which could help Japan revive at a quicker pace than expected. Looking ahead, Merchandise Trade Balance and CPI figures should help the Yen gain against major currencies.

Last minute addition to the Global Events Calendar...

Hello everyone,

[21-04-2008], at 4:00pm (Singapore Time). This is a last minute addition to the Global Events Calendar.

GBP - [BOE Special Liquidity Announced]
*Description - The Bank of England (BOE) will issue a statement regarding their "Special Liquidity Scheme" designed to allow banks to swap temporarily their high quality mortgage-backed and other securities for UK Treasury Bills.

Peace and trade safely everyone...

Analysis on 4 Majors

I had done the weekly analysis on the 4 majors based on my basic knowledge about Forex.
If you made money for the week based on my analysis, no need to thank me cos you are skilled.
However if you lost because of me, so be it, you are suay, furthermore I am not bothered with your loss.
Remember to look out for major news releases.
Trade with care and criteria.

GBPUSD

GBPUSD is moving in a closing wedge in weekly, daily, hourly.
the pair made a upward move last week and showed a loss of momentum last fri.

Weekly Resistance @ 2.0069, 2.0204, 2.0398
Weekly Support @ 1.9586, 1.9294
Daily Resistance @ 1.9998, 2.0062, 2.0221
Daily Support @ 1.9730, 1.9602
Hourly Resistance@ 1.9962, 1.9998
Hourly Support @ 1.9879, 1.9765

USDCHF

On weekly, USDCHF is moving in a downtrend channel for the past few weeks.
On Daily, the pair is forming a closing wedge.
On hourly, the pair made a bump and run on thursday, and another bump and run of friday.
Weekly Resistance @1.0282, 1.0542
Weekly Support @ 0.9925, 0.9916
Daily Resistance @ 1.0282, 1.0345
Daily Support @ 0.9936, 0.9860
Hourly Resistance @ 1.0245, 1.0282
Hourly Support @ 1.0093, 1.0040

USDJPY

USDJPY has been moving in a downward channel for past weeks.
Last fri, the pair made a strong up move and retraced.
Weekly Resistance @ 104.63, 108.23
Weekly Support @ 100.72, 99.83
Daily Resistance @ 104.63
Daily Support @ 102.25, 100.66
Hourly Resistance @ 104.62
Hourly Support @ 102.83, 102.25

EURUSD Hourly

EURUSD made a strong down move last friday but unable to clear 1.5710 and retraced.
Strong Resistance @ 1.5865, 1.5983
Strong support @ 1.5710, 1.5670

EURUSD Daily

EURUSD set historical height last thurs @1.5983 and came down last friday.
Strong Resistance @1.5955, 1.5983
Strong Support @ 1.5707

EURUSD Weekly

EURUSD is moving within a closing wedge for the past few weeks and set historical high @1.5983
Srong Resistance @1.5983
Support @ 1.5671, 1.5491

Global Events Calendar [21-04-2008] - [25-04-2008]

*Time displayed is based on Singapore Time (GMT+8:00)
**ForexNewsPaper.blogspot.com will not be responsible over the accuracy of information.

A few things to be a little careful of:

1) GBP [MPC Meeting Minutes] - On [23-04-2008] at 4:30pm.

2) USD [Unemployment Claims] - On [24-04-2008] at 08:30pm.

3) AUD [Holiday) - On [25-04-2008], it will be a whole day event, Anzac Day.

Peace and trade safely everyone...

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Global Events Calendar [21-04-2008] - [25-04-2008]
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Monday [21-04-2008]
7:01am---GBP Rightmove House Price Index m/m
7:50am---JPY Tertiary Industry Activity Index m/m
3:15pm---CHF PPI m/m
4:00pm---EUR IMF Press Conference
5:00pm---EUR ECB President Trichet Speaks

Tuesday [22-04-2008]
1:30am---USD Fed Governor Kroszner Speaks
2:15pm---CHF Trade Balance
7:00pm---GBP MPC Member Besley Speaks
10:00pm--USD Existing Home Sales
10:00pm--USD House Price Index q/q
10:00pm--USD Richmond Fed Index

Wednesday [23-04-2008]
7:50am---JPY Trade Balance
2:45pm---EUR French Consumer Spending m/m
3:30pm---EUR German Manufacturing PMI (p)
3:30pm---EUR German Services PMI (p)
4:00pm---EUR Manufacturing PMI (p)
4:00pm---EUR Italian Retail Sales m/m
4:00pm---EUR Services PMI (p)
4:30pm---GBP MPC Meeting Minutes
4:30pm---GBP BBA Mortgage Approvals
5:00pm---EUR Industrial New Orders m/m
10:30pm--USD Crude Oil Inventories

Thursday [24-04-2008]
1:00am---GBP MPC Member Sentance Speaks
7:50am---JPY All Industries Activity Index m/m
7:50am---JPY CSPI y/y
4:00pm---EUR German Ifo Business Climate Index
4:00pm---EUR German Ifo Business Expectations Index
4:00pm---EUR Current Account
4:30pm---GBP Retail Sales m/m
6:00pm---GBP CBI Industrial Trends Orders
8:30pm---EUR ECB President Trichet Speaks
8:30pm---USD Core Durable Goods Orders m/m
8:30pm---USD Durable Goods Orders m/m
8:30pm---USD Unemployment Claims
10:00pm--USD New Home Sales
10:00pm--USD Fed General Counsel Alvarez Speaks

Friday [25-04-2008]
[Whole Day Event]---AUD Holiday: Anzac Day
7:50am--------------JPY Core CPI y/y
7:50am--------------JPY Core Tokyo CPI y/y
2:00pm--------------EUR German Import Price Index m/m
4:00pm--------------CHF SNB Chairman Roth Speaks
4:00pm--------------EUR M3 Money Supply y/y
4:30pm--------------GBP GDP q/q (p)
4:30pm--------------GBP Index of Services 3m/3m
10:00pm-------------USD Consumer Sentiment (r)

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