daily forex analysis and pivot line updated daily

[freesignal]

daily forex analysis and pivot line updated daily

[freesignal]

Economic News

USD

Reduced expectations of a USD interest rate cut will continue to provide some near term USD protection. This could be seen from the Fed's Lacker hawkish comment yesterday suggesting that inflation risks remain high. While the market expects the Federal Reserve to lower interest rates at the beginning of next year, Lacker considers these expectations to be untrue and different from the Fed's state of mind. However, in the long term, the USD may face some selling pressures as global central banks are reducing their USD assets and buying EUR and GBP for their reserve. Moreover, last month the Russian central bank also claimed to have bought JPY for the reserve. Meanwhile, as widely expected, the Democrat party won the House while the Republicans won the Senate in the US mid election results. The fact that these results came in line with market expectations should only lead to a mild extension of the current USD sell-off. On the one hand, the Democratic majority in the house may be negative for the USD as the party will most likely approve less trade deals weakening the USD. Moreover, with the Republicans on the other side of the range, it will be hard to move the US economy further ahead as confrontation regarding passing economic reforms will most likely occur due to the different points of view between the two parties. However, on the other hand, the Democratic party will support an increase in the minimum wage which will increase inflationary pressures and urge the Fed to hold on to higher interest rates supporting the USD. With no US data coming out today, traders should pay attention to President Moscow's speech (14:10 GMT) who will most likely deliver further hawkish comments supporting the USD in the short term.

EUR

The Euro was testing the 1.2820 levels against the US dollar yesterday (Technically retraced to the 1.2770 levels), supported by few issues; first, better than expected PMI figures both to the Euro-zone and Germany. Second, some hawkish statements by European ministers, and last by Technical trading.

Our focus for the day will be the Germen Trade Balance as well as the account deficit and the Export/Import Prices for September. We believe that soft commodities prices will finally affect the Trade balance and the import prices and might support the Euro especially against the JPY as the pair might consolidate with the overall trend of a Bullish Euro. The EUR/JPY has been under the spotlight for the last 48 hours as European ministers said yesterday that the Yen cannot reflect the Japan's economic performance and unsatisfied with the EUR/JPY went up to 150 levels.

The uncertainty regarding another rate hike in Japan, and the security that the ECB will most likely to raise rate next month and next year first quarter, make us believe that the 150 levels is not the last stop.

JPY

The JPY was supported by comments from Bank of Japan (BOJ) governor Fukui who stated that the BOJ would not wait until inflationary pressures occur in order to hike the interest rates. This comment will strengthen the speculation over a rise in interest rates by January and will offer the JPY short term protection. However, with Fukui's last week's comment stating that there is no rush to hike the rates, the monetary future policy in Japan is still uncertain. Meanwhile, EU official Juncker expressed his concerns over the JPY weakness while Fukui stated that Japan's currency is at a 21 year low in real terms. These verbal interventions together with the Russian central bank JPY buying, should also strengthen the JPY in the short term.

[freesignal]

Technical News

EUR/USD

The pair attempted to break 1.2815 in Asian session, but couldn't. establishing a firm support at 1.2777 Daily studies are signeling a bearish alert, but there is still some momentum to reach the next resistance at 1.2833.

GBP/USD

Daily studies shows a fourth attempt to break majore resistance level key at 1.9120 in the last two months. hourly studies suggest firm support at 1.9060 levels for the last hours signaling for a possible downward break.

USD/JPY

Hourly studies show that the pair is establishing a position at 117.70 due to a 119.70 to 116.60 Fibonacci 61.8% point. so then expect a move back to 118.45 and then to 119.87. Any earlier break below 116.99 would provide a bearish structure and will drive to 116.54 area with a continues towards 116.07 keys and even lower.

USD/CHF

The pair has fallen on overall dollar weakness seen across the board to find support at 1.2435. Initial resistance is seen at 1.2500 followed by 1.2525.
The Wild Card

EUR/JPY

The pair is stuck in a tiny range below the all-time high at 150.80. We feel like the next breach higher soon to happen, meanwhile, daily indicators showing some mixed signals, noting that momentum is bullish as the pair is overbought and implied volatility is at record lows.

[freesignal]

EUR/USD

Resistance levels: 1.2810/1.2830/1.2875
Support levels: 1.2750/1.2725/1.2680

EUR/USD has risen to 1.2800 after London Opening earlier today. The bias remains positive for retest of 1.2830 at least later today. Today focus will be on US Trade Balance at 13:30 GMTin few minutes. If the number come out at minus 70 bln or more negative we may see price surging beyond 1.2830 to 1.2850 later today On the other side, if US Trade Deficit number come out at -63 or less negative, price may retest 1.2750-40 Support area again later today. Look to buy on negative data for retest of 1.2830 ,giving scope for further rise towards 1.2875 over today and tomorrow..

Strategy-neutral.
GBP/USD

Resistance levels: 1.9100/1.9142
Support levels: 1.9020/1.9000/1.8950

GBP/USD has fallen back below 1.9025 Asia bottom in the last trading hour after Bank of England expected interest rate hike to 5.00% earlier today. Now the next direction will depends on US Trade Deficit Numbers at 13:30 GMT. Weak data may boost price again for retest of 1.9120 and even 1.9138-46 area later today. On the other side, sharp drop down towards 1.8950 bottom also is possible on stronger than expected numbers. Look to sell a break below 1.9020 on strong data from USA for test of 1.8950.

Strategy-neutral.
USD/JPY

Resistance levels: 118.20/118.50/118.75
Support levels: 117.80/117.35/117.00

USD/JPY has tested 118.20 first minor Resistance earlier today ahead of US Trade Balance numbers today. Now the next directions in short term will depends on that event. Strong data from USA may boost price towards 118.50 at least in short term and even 118.75. On the other side, a break below 118.00 again may turn price down to 117.35 in the next trading sessions.

Strategy-neutral.
USD/CHF

Resistance levels: 1.2545/1.2580/1.2625
Support levels: 1.2470/1.2440/1.2403

USD/CHF has fallen slightly below 1.2490 previous immedaite Support ahead of US Trade Balance Numbers at 13:30 GMT. Soft data from USA may push price lower to 1.2403 bottom in the next trading sessions. On the other side, a break above 1.2500 again on strong US Data may reverse price for test of 1.2545-50 area. Trade from short side for test of 1.2403 bottom.

Sell USD/CHF at 1.2468,Stop-loss-1.2500,Take profit-1.2415(1.2370)
EUR/JPY

Resistance levels: 151.30/151.70
Support levels: 150.70/150.15/149.80

The Cross has surged sharply for test of 151.30 target after London Opening earlier today. The bias remains bullish and further rally is likely to be seen over the next trading days with next target at 151.70. On downside, first Support comes in the 150.70-65 previous record high area ahead of 150.15 down range limit. Look to buy again on pullback for test of 151.30 and 151.70.

Strategy-neutral.

[forexer]

updated 10/11/2006




Economic News

USD

The dollar hit a two-month low against the Euro on Friday, sliding for a second day after China's central bank chief said it has a clear plan to diversify its trillion in foreign exchange reserves. On late Asian session the pair touched the 1.2868 level quickly to retrace 15-18 pips for profit taking.

Yesterdays move (Bearish USD) actually started with better then expected Trade Balance. The September figures narrowed from 69 billion USD in August to 64.3 billion, the largest drop in nearly 2 years giving the US dollar a boost against the Yen to 118.55 and Euro to 1.2750.

The Funny thing was that the Trade Balance was the reversal point for the day. A 100 pip decline came straight after comments from China's central bank governor, Zhou Xiaochuan, stirred worries that Beijing may start to shift some of its massive dollar holdings into other currencies and assets. In addition, the Michigan Consumer Sentiment index fell from 93.6 to 92.3 increasing the sell-off on the US Dollar.

If that wasn't enough, referring to the US election, Fed chief Bernanke said later on Thursday that it may now be harder to establish an inflation target given the Democrats have control of congress, triggering an aggressive USD pullback late in NY.

As for today, the markets will be looking forward to tonight's speeches by Bernanke and Trichet in Frankfurt for further direction.

** US economic calendar is empty**

EUR

The EU did not have any important economic data released yesterday. However, the European government bond yield curve inverted yesterday which was the first time since 2000 which indicted that the Euro interest rate still have room to increase. Due to the speech from the China central bank, Euro strengthened across the broad. The EUR/JPY rose to 151.20, EUR/CAD rose to 1.4480; EUR/AUD rose to 1.6670 in late Australian session. Technically, EUR/USD would be likely to gain the strength to breach the 1.2868 resistance and retest the 1.29 level.

The Pound weakened yesterday. Although BoE raise rate 0.25% to 5%, the market had already priced the rate hike and the after policy statement was somehow not hawkish enough to convince the market more rate hike was coming. However, we believe that BoE will raise rate again next year because the M4 money supply growth is still in the high level of 14.5% at the annual rate, the house price kept going up this year and the GDP rose 2.8% recently. Investors should aware of next week's central bank inflation report to get more view about the UK inflation expectation. We expected that the GBP/USD will trade between 1.8950 - 1.9150.

The European calendar is packed for today with medium level importance events. Data from Italy, France and Germany will precede ECB's Trichet speak about Monetarism.

JPY

The dollar and other major currencies took a hit against the yen after Bank of Japan Governor Toshihiko Fukui said he was concerned about a sharp unwinding of carry trades in which investors borrow the low-yielding Japanese currency. It seems like the commends made by Fukui were likely a warning to investors not to get too complacent about holding risky carry trades since the BOJ has said it plans to keep raising rates. With short-term Japanese rates at just 0.25 percent, a variety of investors have borrowed in yen and used the money to purchase higher-yielding currencies in the carry trade. Such trades helped to push the Euro to an all-time high against the yen on Thursday and the pound to an eight-year peak

Early today, Japanese machinery orders unexpectedly fell 7.4 percent in September, casting more doubts on a Bank of Japan interest rate increase before year end.
Technical News

EUR/USD

The strong support of 1.2750 held strong yesterday and the pair went up towards 1.2870 during Asian session, bringing the recent uptrend back into play. Daily studies are a bit overbought, but the stochastic shows some more unused momentum. Hourlies suggest that buying on dips could be the preferred strategy for today.

GBP/USD

The GBP/USD plummeted to 1.8975 overnight, stopping on the trend line support drawn from the 1.8525 low on October 16. The price has been floating in a wide range of 1.8950/1.9135 for almost two weeks, leaving the daily studies static at mildly overbought level. The primary up-trend still remains in place.

USD/JPY

Long trade taken overnight on the breach beyond 118.50 was stopped in Asia. Daily studies are mixed and show no specific direction, but the oversold hourlies signal that selling on breaks is not wise. The next support comes in at 117.20 and resistance is at this morning's 118.00 high. The market does not show stability for this afternoon and it could be smart to keep out.

USD/CHF

A medium range downtrend is forming as we reach the Nov 1 low of 1.2400, as 1.2290 appears to be a new test level. Daily studies are aiming lower, with plenty of room to go on, but the oversold hourlies present a certain concern, so selling on dip could be a good strategy for today.
The Wild Card

AUD/USD

The pair has probably started a long range downtrend when it hit 0.7760 last week. Daily studies show that there is still plenty of momentum for the trend to continue, supported by bearish hourlies it seems that the pair might continue the 5 days negative direction.

[freesignal]

Daily Forex Analysis

Will the EUR/USD break the 1.29 level ?
Trichet and Bernanke to Speak in Frankfort on Monetarism.


Economic News

USD

Last week, we witnessed the USD weakening all across the board, closing at 1.2848 against the EUR, 1.9139 against the GBP and 117.26 against the JPY. There were several reasons for the currency's decline, though the main reason did not come from the US at all, but rather the utterances made by the Bank of China governor who said that although the Bank is currently not selling dollars, he might do so in the future. This has caused a wide dollar sell off, as the BoC holds in its reserves more dollars than any other country. In case the Bank indeed fulfills its intentions, a large amount of dollar supply is expected to flow into the markets, taking its prices down.

Today we are expecting the US budget figure for October. The budget deficit is expected to decline slightly to $-45bln from a previous $-47.45bln. While this release is not expected to move the markets significantly, the data due to be released later this week may very well be the catalyst for a further USD sell off. As we believe markets are expected to stay on hold ahead of the PPI, CPI, Empire State survey and more, we do not see a strong probability for a continuation of dollar declines today. We rather believe that the USD will continue trading at its current levels against its major counterparts, or even gain a little of its previous losses ahead of the major releases of the week.

EUR

The Euro was most probably the biggest winner last week, edging higher against most of its counterparts on the back remarks made by the governor of the Bank of China. While there are no releases scheduled for today from the Euro Zone, the upcoming days are loaded with important economic indicators which may fuel the currency's appreciation. Markets are looking forward to tomorrow's German ZEW economic sentiment survey, as well as major inflationary figures later this week. We are expecting the currency to base at its current levels today, providing better long opportunities.

JPY

Last week, the Japanese currency continued trading in a mixed fashion, demonstrating resilience against the USD while selling off against the EUR. The uncertainty is expected to prevail until markets receive a clear impression that the Japanese economy is on a sustainable growth path and that the Bank of Japan is really intending to raise its overnight landing rates. BoJ governor Fukui continues to reiterate that the bank will not hesitate to take action in advance and will not wait for inflation risks to reappear, yet he neither provides forecasts as for the timing of such rate hikes nor the probability of such a hike to take place in the upcoming months. Overnight, the September Current Account figure was released, indicating the CA surplus has risen by 9.4% MoM, better than the 8.5% increase expected. The figure indicates that Japanese exports continue to expand. Following the release the JPY edged about 50 pips against the USD to set a day's low of 117.12, but gave back most of its gains later during the night. It is important to note that any increase in the JPY will strike a cord in traders' minds seeing as how the surplus was generated almost exclusively by the weak yen. Any increase will place a stranglehold on the export sector of Japan thus causing even greater pressure on the JPY to decline.

Also released was the October Consumer Confidence, edging higher to 48.2 from a previous 45.6. This is clearly a yen positive, indicating the costumers are optimistic, and optimistic costumers usually spend more. As for today specifically, we believe the upside potential in the JPY continues to be strong, and after a brief basing at current levels it should continue trending higher against the USD and probably gain back some of its losses against the EUR.
Technical News

EUR/USD

After breaking 1.2830, the six months trend line resistance, on Thursday and closing the week above it, bullish momentum is still strong. Oscillators are in a bullish configuration, with the daily MACD at 0.0088 and RSI at 66 is bullish, yet not overbought. We expect the pair to continue to trend higher, though a 5 wave price pattern, with the 5th wave already about the same size as the 1st, suggest there might be a correction preceding any new higher high.

GBP/USD

Trending higher, the pair closed the previous week above August's 1.9114 high, and a continuation of the uptrend is most likely. The daily MACD is positive at 0.0088, RSI and Stochastics are bullish yet not overbought.

USD/JPY

The downtrend continues, with the daily MACD turning negative last week and oscillators at the bearish territory. On the hourly charts, however, a bullish divergence develops, indicating we should expect a correction later this week.

USD/CHF

The negative dollar momentum is well recognized in this pair as well with all daily oscillators on the bearish side. Hourly MACD is negative at -0.0010 and RSI below the 50 bearish/bullish boundary. Expect a continuation of the downtrend
The Wild Card

USD/CAD

A two week horizontal channel is eyed on the hourly USD/CAD chart, with the pair currently hovering near the upper boundary of the channel at 1.1318. The MACD is on the positive but intersects bearishly. The slow Stochastic is overbought, and we think it's a great chance to sell the top, placing the stop-loss close with a potential profit of 50 pips.

[freesignal]

Daily Forex Analysis
Will the EUR/USD break the 1.29 level ?

Economic News

USD

The EUR/USD dropped 90 points off a 1.2880 early session touch. Looking beyond the boarders of yesterday's session, the real price action is likely to begin today with two major USD statements. The first one is US Produce Price Index (OCT) on 13:30 GMT Previous for the MoM were -1.3 and for the YoY were 0.9%, the consensus for both is -0.5. Producer prices look to continue their recent downtrend, as PPI will probably shrink by 0.5 percent through the month of October. The negative headline figure will likely reflect the swift drop in energy prices, but the core PPI figure looks to move modestly higher within the same period. Markets will likely pay closer attention to these core figures, as prominent central bankers have continued to cite their importance over headline price growth. It will likely affect the USD elasticity and price volatility significantly for USD-denominated currency pairs. The second major statement is the US Advanced Retail Sales (OCT) on 13:30 GMT. Retail sales are expected to contract 0.4 percent for a second month in October, suggesting rising confidence and cheaper energy prices will not translate into more liberal spending habits. For the month of October, sentiment surveys were mixed as the University of Michigan's final read of optimism grew to its highest level since July of 2005 on the combination of cheaper gas prices and continued job growth . As both statements appear to be on the negative side of things it looks as if the USD is about to weaken today against the major currencies and might sent the EUR/USD into the 1.30 zone.

EUR

On Friday's speech The European central bank has continued taking a tough stance on rates in the short term and the member Weber hinted on a "strong vigilance" which means that the bank signaled it intends to raise the benchmark rate to 3.5 percent next month and will implement accommodative policy. The ZEW Center for European Economic Research index of investor and analyst expectations of economic growth in six months is expected to rise later on today to minus 24.5 from previously minus 27.4 and will support the EUR with a little backwind. The European Commission said last week it's optimistic growth in Germany will accelerate to 2 percent in 2008 from 1.2 percent next year, the German economy is on course for its best performance this year since 2000. Gross domestic product came 0.6% in the third quarter, after growing 0.9 percent the previous three months and 2.3% in the yearly reports. A Bloomberg survey of economists shows that German exports jumped the most in more than four years in September and even business confidence unexpectedly rose last month. Today is full of events for the Euro-zone where Gross domestic product, consumer price index and ZEW survey numbers are being released where positive high numbers would most probably push the EUR to new highs.

JPY

The Yen weakened yesterday and the USD/JPY rose back to 118 level. Japan Oct import price index fell 1.3%, below the Sept 1.0% growth. Besides, the Oct CGPI also fell 0.3%, first time since 2005 Jun. The data showed that the inflation in Japan is still moderate and the rate hike expectation was uncertain at this moment. However, this morning the Q3 GDP data showed the strength for the Japan economy which rose 0.5% and 2.0% at the annual rate. The Q2 data also revised up to 1.5% and the capital spending surged 2.9% as well, stating that the market renewed the rate hike expectation for next month. The positive data means the Bank of Japan is likely to start persuading the market more aggressively to cause the JPY to strengthen against the majors.
Technical News

EUR/USD

Hourlies for early European session appear to be moderately neutral, meaning that range trade could be a good strategy until US data comes out later today. Mid range studies show that as a whole the pair's momentum is positive, with target price at 1.2870.

GBP/USD

The 24 hours downtrend seems to have some more momentum in it as shown by hourly studies, and will most likely move further down before reaching oversold levels that will reset the pair for reversal with expected weak US data.

USD/JPY

Choppy range trading between 117.00 and 118.50 persists in the last 36 hours. Yesterday's 117.20 break reversed overnight, producing a bullish engulfing pattern on the candlesticks, but as it is within the range we do not attach too much significance to the signal. Short range trading between 117.00 and 118.00 might be a good call for today.

USD/CHF

The failure to follow-through with Friday's trend low on the dailies created an oversold bullish divergence bottom signal, reinforced by the strong close overnight. Hourlies are coming off overbought levels, so we may see a pullback to prior key support at 1.2405, This could represent a good buy on dip position.
The Wild Card

USD/CAD

Shorts set overnight on the break of the recent range lows at 0.7640. The 1% envelope now at 0.7620 provides strong support, but daily studies continue to head lower, with plenty of room to run. Resistance is at 0.7660. Target is the Oct 24 low at 0.7560.

[freesignal]

Daily Forex Analysis

Traders are waiting for the FOMC minutes later today.
CPI follows CPI. After Europe, the US CPI will due on Thursday.
GBP/USD - A reversal or just a 38.2 retracement ?

Economic News

USD

The Federal Reserve's primary objective is to fighting inflation. Its weapon in this battle is the interest rate. Higher interest rates and low inflation, on their turn, make the dollar more attractive for investors seeking higher yields. With that said, the sharp sell-off the dollar experienced yesterday, upon the release of a significantly lower than expected Producer Price Index and Retail Sales, can be easily understood.

The PPI is an inflation gauge, and is considered to be a leading indicator because it measures inflationary pressures from the costs perspective, before it is rolled on the consumers. While it was expected to fall by 0.5% MoM on October due to the falling energy prices, it actually fell by 1.6%, bringing the YoY figure to drop at the same rate, 1.6%. The significantly lower figure prompted a dollar decline all across the board as markets realize that the two years' monetary tightening finally shows the expected results and further tightening might not be necessary. The US Retail sales data for October, which was released at the same time, only fueled the dollar's declines as it fell 0.2% MoM, indicating that consumers buckle. A hour and half later however, the USD won back all the previous losses on the back of a strong BDI Consumer Confidence Report, lower Business Inventories and more hawkish comments made by Fed officials.

On the US calendar today we are expecting the Empire State survey, which is expected to fall to 17.2, vs. 22.9 the previous month. A lower figure would confirm the impression we got from yesterday's figures, and would probably prompt another dollar sell off, but losses are expected to remain capped as markets wait for the Fed Minutes at 19:00GMT and tomorrow's CPI data.

EUR

The European calendar was very busy yesterday. The German CPI rose by 1.1% YoY, slightly above the 1.0% expectation while the EU Q3 GDP rose by only 0.5% - almost half the pace from the Q2 showing that the rate hikes by the European Central Bank has effected the growth of EU economy. The intraday trend was very mixed afterwards, especially after the ZEW survey for November, showing a strong decline in the investor's future overall sentiment for the EU economy. The survey showed that there is a diversification between the future sentiment and the current sentiment. The figures for the current sentiment came out stronger then expected with a new high of 53 points comparing 42.9 in October. We would like to point-out yesterday's volatile market as the EUR/USD reached 1.2870 at 13:30 GMT quickly to loose 80 pips in less then 2 hours to 1.2790.

Today's focus will be on the Euro-Zone September Industrial Production due at 10:00 GMT, expected to decline by 0.3% MoM. The GBP came under massive selling pressure yesterday, after the UK CPI for October rose by 2.4% YoY below market expectation for 2.6%. This data was some kind of excuse for traders to take profit and for others to establish short positions as the chances for 2 rate hikes are decreasing. I addition to yesterdays CPI, the market will pay close attention to the inflation report from the Bank OF England which will indicate the UK inflation and should have a great impact over the EUR/GBP and GBP/USD.

JPY

There were no releases due from Japan overnight, and so there won't be any until Thursday's Bank of Japan Monetary Policy meeting. The JPY strengthened all across the board yesterday, on the back of a significantly higher than expected 2Q Gross Domestic Product growth, coming at 0.5% against expectations for a 0.2% growth. The better than expected growth figure might be one of the indicators that BoJ governor Fukui was waiting for in order to start raising interest rates. If so, and we will probably know that on Friday, we are expecting a further appreciation of the yen.
Technical News

EUR/USD

The pair continues basing above 1.28, although it tested this level twice in the last 24 hours. Hourly oscillators are in a bullish configuration, and while the MACD is still on the negative (-0.0004) it is about to intersect upwards. A bullish divergence is also eyed on all major oscillators.

GBP/USD

The 38.2% fib retracement of the 1.8500-1.9171 wave, at held firm both yesterday and this morning, and with the bullish divergence on all oscillators seen here as well, we are expecting the pair to go back up. Interim resistance will be met at 1.9000.

USD/JPY

The pair is ranging trend-less over the past two weeks, bouncing between support and resistance. The hourly oscillators are on the positive territory, signaling we might be visiting above 118.00 level today. Considering the tight range and the near resistance levels, this would be a great opportunity to sell the top with a s/l not far behind.

USD/CHF

Trending lower over the past few weeks, the short term downtrend is expected to continue today as well. Hourly MACD is flat at 0.0004, and although RSI is on the positive, a negative divergence is eyed, signaling a retest of 1.2367
The Wild Card

EUR/GBP

Shorts set overnight on the break of the recent range lows at 0.7640. The 1% envelope now at 0.7620 provides strong support, but daily studies continue to head lower, with plenty of room to run. Resistance is at 0.7660. Target is the Oct 24 low at 0.7560.

[BRODIN]

Daily Forex Analysis

A CPI dual - EZ vs. US, which one comes higher?
GBP down on the back of a weak inflation report.
BoJ keeps target rate at 0.25%.

Economic News

USD

The USD edged higher over yesterday's sessions, and although positive economic data was released from the US, the appreciation of the dollar was mainly a result of its counterpart's weakness rather than dollar strength, as most of its gains were made earlier to NY opening. Nevertheless, a stronger than expected Empire State Manufacturing Index, which measures the manufacturing sector' activity in the state of New York, contributed to the positive sentiment the dollar was traded with. The index rose to 26.7 from a previous 22.9, against analysts' expectations for a drop to 15.1. The Empire State survey is the first regional Purchase Managers Index to be released each month, and following last month's low regional PMI readings, this is good news for the USD, because it somewhat contradicts the opinion held by some that the US economy is on its way to recession.

Also released yesterday was the FOMC (Federal Open Market Committee) Minutes, the protocol of the last FOMC's rate decision meeting. The protocol just reiterated what markets already knew - that the Fed Governors are a lot more concerned with inflation than they are with the economic growth outlook. Although the meeting took place before the dismal PPI figure two days ago, we believe that the CPI (consumer Price Index) data which is due to be released in the US today will have greater weight on the way they perceive inflation risks. The CPI data is expected to be the biggest market mover today, and is expected to decline by 0.3% MoM, bringing the YoY rise to 1.6%. A lower figure might reduce Fed's concern over continuing inflationary pressures and might start building the infrastructure for a rate cut early 2007. In such case, we expect the dollar to sell off all across, relinquishing al the gains it made yesterday.

Although CPI is the most important economic indicator due today, we have a lot more coming today, as the Net Foreign Security Purchases (TICS), Industrial Production, Capacity utilization, Jobless claims, and the Philadelphia Fed regional survey. There are also several Fed governors' speeches scheduled for today which would be carefully scrutinized by markets in light of the latest inflation readings, so expect markets to become very volatile

EUR

The Euro showed impressive resilience yesterday, despite the weak Industrial Production figures released yesterday. Although it once again tested the 1.2780 area against the USD, it strengthened against its other major counterparts. The breakdown below 1.28 was not the result of the Industrial Production release (which came at -1.0% vs. f/c -0.3%), but rather by utterance made by the French Finance Minister, calling for "collaboration on dealing with current EUR levels". The sell off did not last long, as the German Government expressed its reluctance of interfering the European Central Bank's independence. As for today, we are expecting an interesting trade upon the release of the Euro Zone CPI data. The monthly figure is expected to rise of 0.1% MoM, bringing the annual rate to 1.6%. We believe this release to be highly important for the Euro, as it might call the shots regarding whether the EUR is going to break the 1.30 level, or at least retest it, or just bounce back down. A higher than expected CPI reading might be the trigger for the first scenario to realize. Worth mentioning is the GBP continuing decline yesterday. A worse than expected unemployment data coming from England, and a dovish inflation report from the Bank of England sent the GBP lower all across the board. A 6 years' high unemployment rate, 5.6%, signaled that the BoE would not be able to continue with its monetary tightening much further, nor would it have to, according to the inflation report that was released afterwards.

JPY

This morning, the BOJ kept rates at 0.25 percent, as widely expected, and maintained its view in a monthly report that Japan's economy is expanding moderately, and that consumption is in a rising trend. The market forecast is that the BOJ will hike rates again in the first quarter of 2007, though some holdouts say the central bank could move as early as the next policy meeting in December.

Meanwhile, the yen rose against the US dollar and the Euro on Thursday after a top Chinese central bank official was quoted as saying the bank has been buying the Japanese currency in the sum of trillion in foreign exchange reserves.

Today, Bank of Japan (BOJ) Governor Toshihiko Fukui will speak at a press conference following the Monetary Policy Committee meeting in Tokyo. Traders usually focus on Fukui's post-release press conference for clues about future rate decisions
Technical News

EUR/USD

An up sloping channel is eyed on the 4 hours chart, with the pair currently hovering around its bottom which lies at 1.2800. Although oscillators are bullish on the daily, they are unpredective on the intraday charts. We believe risk/reward ratio is to low to take a side right now, though the upside seems more likely.

GBP/USD

Trading in a bearish sentiment, the GBP tested the 50% Fibo retracement of the 1.8514-1.9177 move, at 1.8844 and bounced back. This level serves as a significant support, as the 4h 200 SMA lies at this level, as well as the daily 55 EMA. A break below this level exposes 1.8766 and probably 1.8671.

USD/JPY

The pair remains range bound, with the 118.30 region serving as the upper boundary of the range. Oscillators are bullish though, and a break above118.27 will expose 118.60 resistances

USD/CHF

The pair couldn't break the 1.2522 levels yesterday giving way for 70 pips loss to find solid support at 1.2450. Hourly indicators (MACD) are at natural levels while the daily (RSI) are slightly pointing towards overbought. We would sell a failure around yesterday's high (1.2520).
The Wild Card

EUR/JPY

The failure to break lower yesterday, once again shows that the chances for another wave (number 4) are increasing. Our daily target is the 152.10-152.20 levels as we expect a bigger wave this time. Only a loss under 150.90 will stop our target and might cause a stronger move lower towards 150.27.
Indicators

[BRODIN]

Daily Forex Analysis

Lack of Data Until Thanksgiving Keeps Carry Trades in Play
US Housing Data On Tap.

Economic News

USD

The USD strengthened against the EUR, JPY and GBP on Thursday despite the disappointing economic data released from the U.S. The CPI (consumer price index) declined for the second consecutive month by -0.5% after the market had expected a -0.3% fall, causing the annualized rate of growth to drop from 2.1% to 1.3%, which is a 4 year record low. This lower than expected figure on the core CPI will be seen as a relief for market watchers as The Fed will now be able to put more focus on the U.S growth rather than the risks of inflations. This comes as a contrast to the Fed's FOMC meeting on Wednesday when the policy makers stated that they are more concerned about inflation rather than the slow growth forecast. Therefore, combining concerns on the moderate economic growth and still remaining vigilant on inflation, the Feds will probably leave rates on hold next month which will possibly cause a short term USD sell-off. Meanwhile, the industrial production came in at 0.2% for October from a 0.3% estimate helping to slightly lighten the large decline of the ISM figure in this sector. Nevertheless, The USD gained its support yesterday mainly due to the Philadelphia Fed survey of manufacturing which increased from -0.7 to 5.1 and the NAHB housing market index which grew to 33 from 31 the month before. The latter indicator suggests that the real estate market may find some support and that the housing market might not experience such a significant downtrend. The main data coming out from the U.S today will be the US Housing Starts (13:30 GMT) which is expected to fall from 1.772M to 1.680M. This expected decline is mainly due to the weakening U.S economy and the persistently high interest rates. Despite the above mentioned increased NAHB housing market index, traders should be aware that with a 1.6% growth rate over the third quarter, a further weakness in the housing sector could turn this slow growth into a recession which will most likely cause the USD to depreciate

EUR

The only release from the Eurozone on Thursday was the core CPI index which remained unchanged from last month's 1.50% and coming in line with the market expectations. This data had no meaningful impact on the market as the US data significantly dominated the calendar yesterday. However, today we expect the Eurozone trade balance for September (10:00 GMT), French wages (7:45 GMT) and the French Non-Farm payrolls (NFP) for Q3 (7:45 GMT). The Euro trade balance is expected to improve from -5.8Bln to -1.5Bln while the French NFP is expected to remain at 0.3%. These data are not expected to cause a major reaction in the EUR/USD. However, if hiring trends continue to improve in France and with inflation pressures remaining, the European Central Bank may continue raising rates even beyond the priced in December rate hike. Therefore, if today's data from Euro come out stronger than expected we may see the EUR slightly higher.

JPY

Bank of Japan (BoJ) decided to leave its rates on hold at 0.25% at its last monetary policy meeting with the BoJ governor Fukui not giving any clues regarding future policies. Moreover, with the leading indicators revised down to 18.2 from 20.0 the JPY continued to weaken throughout Thursday. No data is expected to come out from Japan today and therefore it is likely that the JPY will be mostly affected by the data coming out from the U.S and the Eurozone.
Technical News

EUR/USD

An overnight downtrend has been broken at 1.2760. Oscillators show that the general direction is down. Overbought daily studies are bearish, with plenty of room to extend. The oversold hourly studies favor buying on dips for short trend profits.

GBP/USD

The daily downtrend has stalled around the 50% retracement of the preceding uptrend. Daily studies continue to edge lower, with room to run. Key resistance is at 1.8970, which is 38.2% of the 1.9180 to 1.8840 slide and support at 1.8770, the 61.8% Fibonacci of the last move higher. Trading this wide range might be favorable today.

USD/JPY

The pairing edged through resistance at 118.25 overnight stalling at 118.45 in Asia. Pullbacks have been shallow, but the market seems to wait for a deeper correction towards 117.75. Daily studies are bullish with some more momentum in it. Hourlies oscillators show an overbought market sentiment.

USD/CHF

Rising daily studies show that there is still some strength left in the uptrend. Hourlies are at mildly overbought levels so it could be wise to let the pair unwind into the 1.2460 levels before going long.
The Wild Card

GBP/NZD

The pair established a firm base at 2.8363 after a berish week trying to reach a major key support at 2.8300, indicating that the pair is setting down for an excelent long position at support levles after a hugh depriciation of 2,200 pips in the past 3 months.