[B]Economic News
USD [/B]
The greenback came into Tuesday’s trading day reeling from a string of unsupportive economic data. Information coming from the housing and credit markets continued to disappoint as Tuesday’s Pending Home Sales numbers once again came back worse than the initial meager expectations. Pending Home Sales, which measures the signed real estate contracts for existing single-family homes, co-ops and condominiums, released down the previous 6 percentage points down from 3.7% to -2.6%, as expectations had the figure as low as at -0.7%.
If that wasn’t enough to offset any dollar appreciation, Fed Presidents from both Boston and Philadelphia once again remained unclear regarding expected intervention by the Fed into the failing US economy as investors suspect interest rate cuts are still to come. Philly Fed Chair Prosser said he is “expecting slow economic growth for several quarters” and pointed out that “since monetary policy’s effects on the economy occur with a lag, there is little monetary policy can do today to change economic activity in the first half of 2008.”
The dollar suffered to establish any sort of rally as the Dow Jones returned another day of abysmal numbers as it fell 238 points to end NY trading. With a combination of negative data from most relevant economic sectors the “recessionary” jargon is slowly being revived once again. A lion’s share of investors are still positive that the Fed will cut rates by anywhere between 50 and 125bp. Such failure by important markets leaves a burden on US consumers to hopefully revive the dollar and allow the Fed to cut by only 25bp.
As we look forward to the rest of today trading day, the economic calendar in the US will be rather empty as the only relevant event will be a speech by St. Louis Fed President William Poole, who will likely echo the same uncertainty as his Boston and Philadelphia colleagues. Look for the dollar to continue to struggle against its major currency counterparts.
[B]EUR [/B]
The Euro traded on Tuesday to relatively static results, spending the day hovering above and below 1.47 against the dollar. Mixed results from a set of minor economic data kept the currency stable throughout the day.
Retail sales dropped 1.4% from the 2006 figure, which was the steepest decline in over 11 years. The lag from the 13-Nation currency did not last long as German factory orders came back considerably strong as it saw a generous November increase. The Euro has continuously avoided any real bearish activity as a combination of stable Eurozone data and disastrous US and Asian market data has proved that the European Central Bank’s hawkish stance on monetary policy will likely continue.
Looking ahead, today, the Eurozone will produce economic data that should not have a very big affect on its movement. The day will see German trade balance, industrial production and retail sales, as well as general Euro GDP and the French trade balance. All should remain quiet at least until Thursday, as we await the ECB monetary policy meeting, coupled with ECB President Trichet’s remarks. Look for the EUR to continue to prove its strength against its rivals.
[B]JPY [/B]
The JPY finished Tuesday trading down against all 16 major currencies, amidst rising foreign investment by Japanese investors. These investors continue to look for more high-yielding assets as the Dow continues to fall.
With the record gold bullion numbers reached yesterday, as well as the easing of Crude Oil prices, many investors borrowed from the low-yielding Asian currency to purchase lucrative commodities.
The currency should continue to weaken against its Western counterpart’s as there looks to be no change ahead, regarding Japan’s benchmark interest rate. The JPY found itself trading at just under 260.50 versus the Euro, as well as 109 versus the dollar. Any thought of an interest rate hike, will likely be thwarted by rising concern in the overall health of the Japanese economy.
The JPY continues to be absent from this week’s economic calendar. Look toward the Dow as well as commodity prices to define the direction of the Asian powerhouse.
[B]Technical News [/B]
[B]EUR/USD [/B]
The pair has been trading in a tight range for more than a week and is now showing some consolidation at 1.4717. The daily chart is quite neutral and shows no strong signal of a break direction. The hourlies support the neutral sentiment. Traders should wait for a clear signal before entering the market.
[B]GBP/USD [/B]
The bearish channel on the daily chart continues at full strength. The cable is now floating at the upper level of the channel, and together with the slow stochastic and RSI creates a very strong bearish momentum that might take the cable to beyond the 1.9600 level by the end of this week. Being on the short side might be preferable today.
[B]USD/JPY [/B]
The bullish correction the pair initiated at 108.00 continues with moderate momentum. The slow stochastic on the daily chart shows that there is still more room to run and that the pair might breach the 110.50 soon. Hourly studies confirm the bullish sentiment, and it appears that going long might be preferable today.
[B]USD/CHF [/B]
The pair appears to be heading back to the 1.0900 with a relatively strong momentum, as clearly shown by the oscillators on the daily chart. The hourlies are showing a small bullish cross on the 4 hour chart that might take the pair to a correction before resuming the bearish move. Selling on highs might be a wise move today.
[B]The Wild Card
Gold
[/B]
Gold has been making an unbelievably strong bullish move to record highs, and shows no indication of a stop. It has been correcting a bit locally but the general direction is quite clearly up. This could be a great opportunity for Forex traders to join a very distinct bullish trend with great profit potential.