[B]Economic News
USD [/B]
Although yesterdays tremendously dull housing data in the US market declined by 8 percent and the total existing home sales figure dropped to $211,700 from $224,400, the greenback concluded its trading day without almost any significant change. In addition, yesterday the Bank of America announced that it plans to get rid of 3,000 jobs, and that the head of corporate and investment banking will leave after a depressing quarter that led to a 32 percent drop in overall profit. A significant percentage of the job cuts will be in corporate and investment banking; these cutbacks were widely expected after a $1.46 billion trading loss.
Also reported yesterday was the fact that U.S. mortgage requests hardly advanced last week even as interest rates went down to their lowest levels since the month of May. Today at 14:30 GMT three important indexes are going to be published starting off with Durable Goods Orders m/m, which will be followed by Core Durable Goods Orders m/m and the Unemployment Claims figures. These indexes have a significant weight over the market and it seems that they will play a significant role in determining the Fed’s decision on whether to cut the interest rate by 0.25% or more.
The US stock market was also relatively stable yesterday with the Dow crossing into positive territory by late afternoon and finishing less than a point lower. The NASDAQ, down 3% earlier in the day, lost less than 1% or 24 points, and the S&P 500 was down just 3.71 points. After trading relatively stable yesterday, the greenback may experience some sharp movements on the back of today’s news releases. An upside surprise could drive the dollar on another temporary rally, as was experienced earlier in the week.
[B]EUR[/B]
Yesterday, several significant indexes were published from the Eurozone. The most noteworthy were Manufacturing PMI and the Services PMI data. On the basis of these results we could notice that the Eurozone services growth increased much more than was estimated this month, but on the other hand, the manufacturing expansion data showed signs of weakness. Eurozone Manufacturing Purchasing Managers index declined to 51.5 in October from 53.2 in September, it’s lowest since August 2005. As it stands the manufacturing sector is losing momentum, and the Eurozone industrial production is beginning to cool a little bit, a situation which may influence the level of employment during the mid-term. In addition, slower growth of manufacturing industrial production and the sharp appreciation of the EUR against the US dollar are additional threatening elements which may bound European exports, and at the same time demand.
The European Central Bank put on hold a planned rate increase in September and left its key rate at 4 percent this month to assess the economic impact of the chaos on credit markets. It will consider cutting interest rates in the short run, and at the same time it must stand ready to stiffen policy in case growth increases.
The release of the German IFO surveys today will provide additional information regarding investor sentiment and many different analysts believe that on the basis of the recent weak US data that the EUR should be able to maintain its bullish momentum against the greenback. However the EUR may experience some temporary dips against the greenback, if US data springs an upside surprise.
[B]JPY[/B]
Yesterday the JPY advanced to 114.42 per USD and against the EUR, it gained to 162.75 from 163.70. The JPY increased the most versus the New Zealand dollar, Norwegian krone and Swedish krona, which are carry trade favorites. The JPY got stronger against the world’s 16 most-active currencies after the New York Times reported Merrill Lynch losses which stirred some concern, as the investment company’s third-quarter losses exceeding initial projections. Merrill Lynch & Co. report $7.5 billion of write-down, selling riskier assets bought with loans in Japan.
In addition yesterday, the Finance Ministry said in Tokyo that Exports rose by 6.5 percent from a year earlier and Imports declined for the first time in more than three years, assisting the trade surplus widen to a record.
Japan’s economy is still very dependent on exports and because of this fact, it is very important that demand for emerging markets makes up for U.S. weakness. Exports to the U.S. fell for the first time in more than three years in this period as Japanese companies shipped less automobiles and factory equipment. Overall shipments rose to a record 41.8 trillion yen ($365 billion) as demand in Asia and Europe run forward. Looking ahead, the JPY should continue to steadily rise but much depends on the correlation between US stocks and carry trades.
[B]Technical News
EUR/USD [/B]
After this pair dropped to the 1.4186 level, it rallied strongly yesterday breaking well beyond the 1.4200 level. This rally now seems to be losing steam and there are strong indications of another dip. This pair has been whipsaw trading between the 1.4100 and the1.4300 levels over the last two weeks, so the preferred strategy is to sell on highs and buy on dips.
[B]GBP/USD [/B]
The 4H chart is indicating that we are deep in overbought territory as the stochastic slow is crossing well above 60 and the RSI and momentum are both negative. However the daily charts are bullish giving a strong indication for further upward movement and if this pair breaches the key 2.0500 level, we could see another sustained bullish run. Nevertheless, caution should be exercised when placing intraday trades as the 4H chart does give a bearish signal.
[B]USD/JPY [/B]
This pair has been on a sharp bullish rally over the last 24 hours and all indications are still bullish. Both the 4H and the daily charts are very bullish as the stochastic slow is crossing deep in oversold territory, while the RSI and momentum are positive. Target today will be to breach the 114.00 level.
[B]USD/CHF [/B]
Bollinger bands are widened so we can expect increased volatility. This pair is forming a flag configuration on the 4 H. So if we see a breach beyond the 1.1700 level, there should be at least another 50 pip downward. However at the moment it is still too early for this pair to be heading south as all charts are giving a bullish signal. If the 117.00 level is not breached today, this pair will give a push upwards.
[B]The Wild Card
Crude Oil
[/B]
Crude oil is once again heading purposefully towards $90 mark, looking to once again break its all time high. Bollinger bands are widened indicating increased volatility. The upward momentum is still strong providing Forex traders with a good opportunity for profit taking. However charts are indicating that the bullish run is nearing its peak so we may see a sustained reversal soon.