Daily Fundementals - US Initial Jobless Claims

[B]Economic News

At the moment one of the most important questions in the Forex market is what can stop the USD from weakening, after underperforming home sales that rose 2.6% 858k units while market expectations were of 888k units. The figure still suggests further price declines. Indeed, the sales for Q1 this year were the lowest since Q3 of 2000 and will maintain the pessimism in the US market. Durable Goods Orders provided a degree of relief with a rise of +3.4% in March. Forecasts had been for just +2.4%. Finally the Fed’s Beige Book reported a moderate level of growth from the end of February to mid April. The report noted the tight labor market, it summarizes exactly what has been apparent in the economic stats coming out of the States over the first 4 months this year and currently, with reduced investment, there seems little hope of any significant rise in growth. Despite the fact that the U.S. data wasn’t negative, it certainly wasn’t positive either and the market was characterized by tight trading ranges. Today, the market might see the EUR push higher through the Dec 2004 high while expecting key numbers from Europe being the German GFK Consumer Confidence survey, the French Business Confidence indicator, and the UK Nationwide house price index possibly providing a lift for the GBP also. Overall, the Fed has no reason to alter interest rates which leaves the GDP as the next major event risk. In the meantime, the lack of any data indicates that we could see more sideways price action in the EURUSD and USDJPY over the next 24 hours.


We are very close to an all time high for the EUR against the USD. On the one hand, this situation may help the US economy but on the other hand, in case that the USD continues to decline, it can create a negative impact on international confidence in US financial assets. As the GBP is above 2$, the UK’s office for national statistics said that the UK’s gross domestic product rose by 0.7% in January - March period, and the EUR is not far away from its all time high. The EUR/USD was at a record high in December 2004 of 1.3666. If the market will get closer to that level, the target will become 1.3800.As it seems like, the European central bank is going to raise interest rates one more time, but the main concern for the ECB will remain inflation pressures and wages in particular. For the moment the Euro zone economy is doing significantly better than people thought and certainly well enough to tolerate a 4% refinancing rate in the Euro zone.The ZEW survey of analyst sentiment and the Belgium survey of business confidence, German business confidence also improved, driving the IFO survey up to 108.6 from 107.7. According to the IFO, robust global growth and strong domestic orders have offset any concerns about high oil prices, a strong Euro or the prospect of further interest rate hikes.


Japan’s trade surplus jumped to a record in March from a year earlier, beating economists’ expectations, and exports which account for 50% of the nations economy, jumped an all time high. The JPY has been moving in lockstep with the Dow as traders sell the JPY to fund their stock purchases. We expect Japanese data to prevail as the primary driver of JPY fluctuations today as 8 pieces of key economic data due for release as follows; Things begin at 23:30 GMT with reports on employment, inflation and domestic spending. Both the jobless rate and national and Tokyo consumer price indices will be overlooked since monetary policy has shifted to hikes despite the lack of support both of these numbers have supplied. Also, household spending is integral to future rate hikes, since it is considered to be disconnected with wage growth and sustainable inflation. 20 min later, industrial production and retail sales are released. Afterwards the BoJ rate decision - and more importantly their semi annual economic outlook report - will control the fate of the markets.

Technical News


Key resistance level is set to 1.3666 as traders seen this pair tips all time high at this level, minor resistance has been spotted at 1.3610. Volatility increased and indicators suggest further bullish behavior for this pair as the next price target is 1.3715 and a new all time high.


Volatility has dropped heavily and the Bollinger bands offer a tight range between 1.9980 and 2.0050 and a break above will hike prices to a new all time high. 4 hour slow stochastic is curving upwards at 30 indicating a slight bullish direction, however momentum is rather neutral at 99.909 and RSI is at 60


This pair has broken the 118.90 resistance level and is trying to reach 119.25. Indicators are mixed as 4 hour slow stochastic is at 75, 4 hour RSI is neutral at 60 and momentum is flat at 100.28. Range trading is more likely to occur until the BOJ rate decision later on today.


A key support level has been set to 1.2000 and resistance has been set to 1.2126, current trend direction is neither bullish nor bearish and most indicators are mixed. 4 hour slow stochastic is at 80 curving downwards suggesting a bearishness and 4 hour RSI is flat at 40 offering a tight range between 1.2085 to 1.2000.

The Wild Card


Forex indicators are bearish with a doji shape emerging on the daily chart offering much more room for a downtrend. Momentum is low at 97.5 and slow stochastic is also low at 20. Bollinger bands are widening showing a rise in the volatility and a continuation of the bearish trend.