15/01/'08 - U.S. Core Retail Sales & PPI On Tap.

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Economic News

USD

The greenback continued to see significant decline yesterday, as it posted close to record lows against several major currency pairs. Concerns over the state of the US economy are still dismal, as the dovish stance taken by the Feds has done nothing to change current trends. Investors are gearing up for what most feel will be another interest rate cut from the Fed, by as much as 0.5%. With the EUR/USD already traded well within the range of its all-time high of 1.4960, speculation that it will break the 1.50 support level is gaining steam.

One of the main issues for the Feds is whether or not the problems from the failing credit and housing markets will spill over into other economic sectors, such as retail and consumer confidence. With the mostly disappointing figures that have been released in 2008 so far, there is little that can be expected in the way of drastically changing the dollar's downward pile.

Today is expected to produce a host of key economic data from the US. Events from the US start at 13:30 GMT, as the release Retails Sales, Core PPI, PPI, and the Empire State Business Conditions Index are on tap. The aforementioned events will be followed by the 14:00 GMT of Business Inventories for the month of December. The real standout figure of the bunch should be Retail Sales, which could single-handedly drive the dollar down, if already poor expectations return even worse. If US economic data returns with negative results, it could very well be the day that the EUR/USD makes a serious push toward 1.50 and even further as the market approaches the rate statement. It appears that from all points of view the greenback's near future looks extremely gloomy.

EUR

The strength of the EUR has become a point of regularity, as the 15-nation currency continues to perform well against all of its major counterparts. As the EUR/USD slowly closes in on the 1.50 level, speculation is rising as to the behavior of the ECB after such levels are achieved. Investors must question whether or not President Jean-Claude Trichet's hawkish stance toward monetary policy in the EU could continue if the Euro keeps rising toward "inflationary" levels against its counterparts. A considerable rise in the Euro could directly contribute to the slowing of Euro-zone growth, especially in industries in direct competition with the US and Asia.

As we enter the second day of what has been the busiest economic event week in 2008, we are due to hear back about two low-volatility news events today. Today at 10:00 GMT will see the release of ZEW Economic figures from Germany and the whole of Europe. Figures are expected to be positive and could help push any negative US data toward the 1.50 break point for EUR/USD. The EUR will likely take a backseat to investor's focus on the dollar today; however it will be intriguing to see if the ECB hint to any change in their current monetary policy if the Euro-zone currency continues to strengthen.

JPY

The Yen was rewarded with positive gains against all 16 major currencies, as a combination of foreign economic data and the recovery in the Dow helped instill more investor confidence. The Dow rallied yesterday to finish 171 points up, and was critical in resurrection carry trading for the day. Though the recovery did not initially affect the Yens big pairs (USD/JPY, GBP/JPY, and EUR/JPY), a string of unexpected data from the US helped the Yen sufficiently increase their gains for the day.

In addition to outside factors, news that Japan will exchange roughly sixty million dollars of coupons and principal payments to Euro, (which will be claimed by a handful of European nations this week) sparked a local growth in the Japanese currency as well. The Japanese economic calendar was empty yesterday, as the country celebrated the coming of age holiday. Today we expect to see the release of Core Machinery Orders as well as current account information. Expectations show a significant drop in Core Machinery orders as the month December failed to produce expected growth. Those news events are expected to generate relatively small interest amongst traders, as most of the focus will be on USD related events. This situation will probably be quite common in the near future, as the fate of the greenback will have much more effect on global economic events.


Technical News

EUR/USD

The pair is in the middle of a bullish trend which was initiated in the end of December. The 4 hour chart is showing a bearish cross on the slow stochastic, and a breach of the 80 level on the RSI. It looks as if there might be a bearish correction before the pair resumes the journey to 1.50.

GBP/USD

The intensive bearish trend is calming on the hourly charts, yet shows no real indication of a halt or a correction move. The cable is now at the lowest level it has been since mid August, and will probably continue its road south even further. Being on the sell side still appears to be the right move.

USD/JPY

The key level of 107.80 was breached, as this level was the last support on the daily chart which the pair touched in the middle of November. This break validates the next bearish move and might take the pair beyond the 106.50 even before the weekend.

USD/CHF

The pair is floating at a very strong support level of 1.0920 which is the bottom of the recent downtrend the pair had. A violent breach beyond that level would indicate that the bearish momentum might continue at a higher strength. Next target price appears to be around 1.0860.


The Wild Card

Gold

Gold is trading at records levels with incredible momentum, as yesterday's all time high touch strengthens the notion that we might see gold hit the 920.00 level soon. This is a great opportunity for Forex traders to enjoy the very high profit potential and enter the market on a very healthy trend.