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Forex Daily Analysis

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All eyes are on the BOJ Rate Decision tonight.

Mon, Mar 19 2007, 09:00 GMT
by Lee More

ForexYard

Economic News
 
USD

The relatively positive news flow from the American market didn't stop the USD from weakening during the Friday session. It looked as if traders were truly ignoring the results and trading strong with a bullish notion on the EUR. The US CPI came in at a higher than expected 0.4% with the core CPI coming inline at 0.2%. Industrial Production released at a much higher than expected 1.0% after coming in last month at -0.3%. The only relatively negative piece of information came in the form of the Consumer Sentiment which released at a slightly lower than expected 88.8.

As for today no real major data is expected from the US market except for the NAHB Housing market Index which combines several factors including present sales of new homes, sales of new homes expected in the next six months, and traffic of prospective buyers in new homes. The NAHB produces the index through a survey in which respondents are asked to rate the general economy and housing market conditions. We should not expect the Index to generate a lot of price movement as it is expected at 38 after coming in at 40 last month.

This week we should be expecting major data from the US such as the Housing Starts and Building Permits tomorrow, and the biggest news of this week the US interest rate on Wednesday. No major surprises are expected from the US markets this week, and we should most probably see the USD weakening trend continue from last week. 

EUR

 
 It has been a very positive week for the EUR all across the board, and especially against the USD. The Euro-Zone CPI coming inline at 0.3%, and the speech by Trichet last week gave a more robust image for the European economy and traders reacted with intensive bullishness.

As for this week, plenty of major news is expected from the Euro-Zone, especially from the United Kingdom. We have the German PPI, the UK CPI, the BOE Minutes, the Euro-Zone Trade Balance, and Industrial New Orders. It looks as if most of the price movement this week will be coming from Europe, with an emphasis on the GBP. If most of the news will be inline with expectations, we see further positive momentum for the EUR. 

  JPY

  Last week's trading was relatively choppy for the JPY, and was characterized by volatile range trading, without a specific direction. Many traders chose to stay out of the JPY trading until all the smoke cleared.

The biggest event in the Japanese market this week is the monthly meeting held by the Bank of Japan today. Although no big surprises are expected to come from the meeting, traders will pay close attention to its outcome as the Japanese interest rate is expected to be released. The rates are widely expected to remain unchanged at 0.5%, and if indeed expectations will correlate with reality, we should see a further move down for the JPY, as carry trades will return to the picture, and we might see the USD/JPY going back to the 121.00 region. 

Technical News
 
EUR/USD

The pair peaked at 1.3340 on Friday but could not break further and is now consolidating around 1.3300. The daily charts are bullish, and the hourlies are unwinding from overbought territories. Buying on dips might be preferable today. 

GBP/USD

After last week's 400 pip rally down, the pair seems to be back on a positive track, as the daily charts are giving bullish signals, and are supported by mildly bullish hourlies. Oscillators show that the up trend still has much steam in it. 

USD/JPY

The pair went through high volatility sessions last week, as traders were unsure as to where the pair was going. The picture looks a bit clearer today as the dailies are slowly getting into bullish territories. The trend appears to be up, although traders are advised to let the trend accumulate some more steam before swinging into it again. 

USD/CHF

The pair is consolidating around 1.2100, after a three week downtrend. The hourlies are moderately bullish, contradicted by extremely bearish dailies. That indicates a possible correction up before the downtrend reinitiates.

The Wild Card
 
AUDUSD

The pair has started to correct back down after touching the upper side of the very distinct channel down. This gives forex traders a great opportunity to enter the market with a short position, and ride the correction until the lower part of the channel. This pattern is supported by bearish dailies and hourlies, and the target price stands at 0.7750. 

Published on  Mon, Mar 19 2007, 09:05 GMT