[B]Economic News
USD [/B]
After, a relatively intense price action for an empty US calendar yesterday, the Greenback floats around 1.4710 against the EUR and 109.40 against the JPY. There seems to be a certain consolidation for the USD after the massive drop it had after Friday’s very low release of the Nonfarm payrolls, and it seems that it is now swimming in calm water before the next key event which may push the greenback further down.
As for today, there are two key events expected to come from the US, the first one will be the Philadelphia Federal Reserve President and FOMC voting member Charles Plosser’s Speech about risks to the economy, inflation, and labor markets at the Main Line Chamber of Commerce, in Philadelphia. FOMC voting members are responsible for setting the nation’s short term interest rate, so traders scrutinize their speeches closely for clues regarding future monetary policy. The speech might cause choppy price movement and some abnormality in the volatility.
A bit later at 15:00 GMT, Pending Home Sales is expected to be released, as most analysts are very pessimistic about that figure and it now has a consensus release of about -0.7% which is a relatively huge drop from last month’s 0.6%, and might cause the Greenback to continue dropping on the local level, and might spike the next long run drop that might take the EUR/USD into the 1.4900 levels again.
As for the rest of the week the US calendar is quite light on important events except for Friday which will have the US Trade balance. Other than that, traders will focus their attention a bit more on the Euro-Zone which has the ECB and BOE rates statements, which might contribute to the USD crisis.
[B]EUR [/B]
Yesterday, France became the latest major European economy to warn of a period of sluggish growth and high inflation. Soaring energy prices and fresh signs that the United States may suffer a sharp slowdown are threatening to drag down European expansion.
Echoing concerns are voiced by various leaders in Germany and Britain, such as the French finance minister, Christine Lagarde, who said in an interview that the outlook for Europe had eroded rapidly as oil prices breached the symbolic $100 and with pessimistic analysts marking the $200 a barrel as the next target price for 2008. Credit markets remained nervous and the outlook for the U.S. economy darkened.
The world’s top central bankers are gathered in Switzerland this week to discuss the global economy, as voices called for the European Central Bank to make growth a priority over inflation-fighting in the euro area. It is shown that everybody prefers high inflation and high growth, as opposed to stable inflation and lower growth, and expected from the economic leaders and the ECB to be adjusted to the new situation and to act accordingly.
In the euro zone, November retail sales are due, but they are not market movers. German factory orders are more interesting and following the stellar 4.0% monthly rise in October; a partial correction in November is forecasted. In the UK, the BOE interest rate announcement is expected this week, as the board will take note of the British Retail figures for the crucial month of December, released overnight. The BRC said that sales growth rose just 0.3%, compared with 1.2% in November, despite early price discounts to boost sales. The figures may give the doves on the MPC some ammunition to vote for another rate cut on Thursday.
[B]JPY
[/B]
Most Asian shares edged up today as oil prices recovered from steep falls the prior day; however Japan’s Nikkei earlier hit an 18-month low as investor worries about a recession in the United States persisted. It seems that the Japanese economy is shaky as a possible US recession is possible, and investors are seeking for less risky investment alternative to put their money in. This Thursday the Leading Index is due to be out as this indicator forecasted to decrease to 10.0% compared to last month 18.2% which reflects the slowdown in the local economy. This indicator measures overall economic health by combining ten leading indicators including average weekly hours, new orders, consumer expectations, housing permits, stock prices, and interest rate spreads.
The weak USD is hurting the Japanese economy as world importers prefer US goods instead of the Japanese goods thanks to the low cost which are caused by the weak greenback.
[B]Technical News
EUR/USD [/B]
The bullish trend is expected to maintain its Momentum as the Slow Stochastic (41) and RSI (44) on the 4 Hour have a positive slope which supports the bullish trend as the first target price is located at 1.4738 (Fibonacci 76.4%). The daily momentum is showing that there might be a correction before the uptrend resumes at full strength. Buying on lows might be a good choice today.
[B]GBP/USD [/B]
The cable is showing its first signs of a correction as implied by the Slow Stochastic, RSI and Momentum which have a positive slope. The 1.9780 (Fibonacci 23.6%) was breached which validates the bullishness and it seems that the cable is steadily going to the 1.9850 as the next step.
[B]USD/JPY [/B]
A reverse Head & Shoulders structure is forming on the 4 Hour chart offering the 109.85 (Fibonacci 23.6%) as the next target price. This structure is supported by the Slow Stochastic, RSI and Momentum which all have a positive slope. It looks as if the bullish trend has been validated and that the pair will move north with a possibility of a touch at the 110.80 level.
[B]USD/CHF [/B]
The bearish trend is expected to continue as Slow Stochastic crossed the 82 which is clearly in the overbought territory, the RSI 89 and Momentum have a negative slope offering next target price at 1.1125 (Fibonacci 23.6%). Going short might be preferable today.
[B]The Wild Card
Gold [/B]
A tight bullish channel is establishing on the 4 Hour chart supported by the Slow Stochastic, RSI and Momentum which all have a positive slope. The top barrier is located at 863.61 and in case of a breakout next target price is located at 868.18. Forex traders should wait for the break in order to catch the profit potential from the momentum which will be created from the breach.