31/07/'07 - Busy US schedule today - Chicago PMI on tap

[B]Economic News

USD [/B]

The Greenback retreated a bit yesterday, after a strengthening bias appeared amongst traders at the end of last week. The US calendar is full of interesting and important news releases today, after yesterday’s almost empty calendar which produced no major price movements.

The US Core PCE Price Index is expected to be released today at 0.2%, which is a slight increase from last month’s 0.1%. Personal spending is also expected to be released today, and past data shows that personal spending rose by 0.1% during the month of June, compared to a rise of 0.5% during May. As we can expect, the USD may lose some of its strength again due to the fact that the average American consumer’s spending power has decreased. A sharp drop in confidence as well as a widening gap between spending and income will resurrect talk of an end of the year interest rate cut. The most important news release of the day would no doubt be the Chicago PMI, which is expected to go down from 60.2 to 59.0. Although the expected figure indicates growth in the manufacturing sector, it still means the growth level is decreasing. If it comes inline with expectations, it will probably shift the USD down a bit. It appears that the USD will continue to weaken today against the 13-nation currency, on the basis of the diverse data which is going to be published today in the market. The forecast indicates a slowdown in personal spending growth while an inflation gauge closely watched by the Federal Reserve may stay at the same level. The US economy is expected to show additional negative signals especially after the Rising mortgage rates and defaults which have hurt badly the mortgage lenders this year. More than 50 lenders have filed for bankruptcy or have sold out. Traders will be watching the price movement closely today, as it is a direct preparation to Friday’s main event - the release of the Nonfarm Payrolls.

[B]EUR [/B]

The EUR has grown stronger all across the board yesterday, even with the lack of any major news from Europe and the US. Today will be quite different as besides the busy US calendar there are several major events expected to come from Europe, especially from the UK. The first event to open the news session would be the Euro-Zone unemployment rate release (9:00 GMT) which is expected to be released a bit lower than last month at 6.9%. Also expected at the same time is the release of the Euro-Zone Consumer Confidence which is expected to remain unchanged at -2, and is directly indicating that the consumer’s mood in regards to economic conditions is not quite good, yet stable. The most important release that is expected to come from Europe is the Confederation of British Industry (CBI) Distributive Trades Realized which measures the health of the retail sector by asking executives if their firm experienced an increase or decrease in sales compared to a year ago. That is a very important figure because Retail Sales make up a large portion of consumer spending, which is a major driver of the UK economy.

[B]JPY [/B]

Yesterday the JPY jumped to recent local highs and touched 118.05 against the USD and 160.67 against the EUR. The JPY is headed for a second day of losses against the EUR as a rebound in U.S. stocks gave investors confidence to buy higher-yielding assets funded by loans in Japan. Last night, overall Household Spending y/y, and the Unemployment Rate data were published in Japan. Japan’s households increased spending for a sixth month in June, Spending rose by 0.1% from last year, and the jobless rate fell The to 3.7% percent in June from 3.8% in May, which indicates an improvement. At the moment according to these specific results, an August interest rate increase will be difficult to be obtained by the BOJ, and as it seems it will keep the interest rate at 0.5%, the lowest among major economies. This question will be answered on August 22nd by the Bank of Japan policy makers.

[B]Technical News [/B]


The pair is now forming a downwards channel with strong resistance at the 1.3720 level. The daily chart is bearish, and the hourlies support the notion with a bearish cross above the 80 level on the slow stochastic. It appears that the pair is going to the 1.3600 level.


After a short correction, the pair regains the bearish path, and seems to be quite confident to reach the target point of 2.0100. The hourlies are quite bearish, as the dailies produce mixed signals. A preferable strategy would be to keep out until a clear daily sign will emerge.


The pair seems to be having difficulties breaking through the 118.00 level, after several attempts that failed. This sets the support level as a very strong one, that if breached will produce a very strong bearish move. The ongoing sentiment is down so a preferable strategy would be to wait for a break signal before entering with a short position. 177.75 will confirm the move.


The pair is floating at a relatively tight range for several days now, and the daily studies start sending bullish signals. The hourlies are still producing mixed signals, and most of the time is floating at neutral territories. A break through 1.2135 will confirm that the move up is valid, and will probably take the pair back to the 1.2300 levels quite soon.

[B]The Wild Card

Crude Oil [/B]

The upwards channel continues, as we see several attempts to break through the 77.20, with no success. This confirms the fact that Oil is accumulating the bearish energy, and that the correction is imminent. Forex traders might benefit from that, as it might be a great entry point for a short position.