11/10/'07 - Japanese Interest Rate, US Trade Balance, Import Price Index & Unemployment Claims
Economic News
USD
Despite appreciation which the dollar experimented over the last days it changed its direction after the publication of the Meeting Minutes of the FOMC, from September 9. Yesterday, there were no important news events in the US ,however today we expect the Trade Balance, which measures the difference in value between imported and exported goods and services, and the forecast is a little down from the last figure of -59.3B .Thus ,we foresee an anxious trading day brewing . At the same time, The Import Price Index is due to be published, which is supposed to come up at 1.0% leaving negative territory of -0.3% that may have a positive influence on the USD ,and also at 12:30 GMT The Unemployment Claims is expected to released at 315K with a previous figure of 317K as traders hope to get a "message" from the US economy regarding jobs employment which may have implications on a possible recovery of the economy after the last strong NFP which some analysts translated as a signal of the USD recovery that will start the appreciation of the Greenback against the majors and especially against the EUR .
Later on, we have the Crude Oil Inventories and after all the data traders will expect to hear an implications on the future monetary policy from the Fed Governor Kroszner .
EUR
Despite weakening economic data ,ECB President Trichet which has been pressured to initiate actions for restraining the EUR level for Euro zone exporters, has not changed his monetary policy stance or expressed any concern about the level of the EUR. Instead, in his speech this past weekend, he simply credited the central bank for their decisive and active response to the recent market turmoil. Now that the earning season is beginning however, the central bank head may not have any choice but to recognize the damage that the EUR is having on corporate profitability. Last week, European Aeronautic Defense and Space Company said they stand to lose 1 billion EUR for each 10 cent drop in the USD against the EUR and we are sure that they are not the only ones feeling the pain. Over the past few years, European companies have become more adept at hedging currency risk, but most of these companies probably did not expect the EUR to break 1.40 and head towards 1.50. Many companies will be blaming their losses on exchange rate fluctuations. In terms of economic data, even though Euro zone manufacturing PMI remained unchanged, activity slowed in both France and Germany. Switzerland has been experiencing a more material slowdown even though the central bank remains optimistic. Despite a weakening
currency, the country has been hit hard by the global financial turmoil. Swiss consumer prices are due for release tomorrow and forecasted to be weak comparing the last figure which may start a decline of the CHF and should boost inflationary pressures that with no doubt will effect the EUR as well .
JPY
Normally it is difficult to get surprises from the BOJ and today proved to be a normal day with the BOJ committee voting 8:1 to retain an unchanged policy for the ninth consecutive month, keeping the interest rate at 0.75% causing the current JPY reduction against major currencies . The decision will enable the Bank to observe the recovery in the credit markets and also that of the U.S. economy on which Japanese exports have a sizeable exposure. Fukui is likely to maintain the same statement in his press conference later today, confirming a gradually improving economy and that inflation will soon re-emerge. However, his argument is wearing thin. As given his desperate wish to normalize rates, this is consecutive ninth month of no change and that in itself emphasizes the fact that not all is well, and certainly the central expectations of the BOJ have not developed. Seven of these meetings were before the market turmoil which resulted in credit tightening and since then global conditions have worsened and therefore cast significant doubts over whether the Japanese economy can break out of its 17 year doldrums. The Japanese market has started to show impatience as no action is been taken in favor of handling the current turmoil and the credit crisis. Unadjusted Current Account Surplus which registered a solid 42.1% YoY gain in August. While it is below forecasts of 49.8% it still marks a large gain over the earthquake depressed July numbers at +4.5% YoY. Further moderation was seen in Japan's money supply with M2+CD in line with forecasts at +1.7% and down from August's 1.8%. Only Trade Balance which came in at JPY 892.2 bn and above forecasts of 854 bn was positive in the last figures however this tends to reflect the resumption of shipments following the delays caused by the Niigata earthquake in July. Broad Liquidity rose by 4.1% ,which actually is a good sign however, the shrinking in money supply is consistent with the recent slowing in the economy and the major apprehension is a delay reaction which may cause a serious damage to the Japanese economy. Bottom line ,it is clearly reflected in the market reactions that carry trades are back on track and a consistent appreciation of the high yielding currencies among the JPY is expected.
Technical News
EUR/USD
On the 4 Hour chart we notice that the bullish trend is running ahead. The volatility has increased and the EUR/USD is in a consolidation after it has broken the 1.4160 resistance level. The price should continue to move upwards in a range of 1.4180 to 1.4210. As it seems, the bullish pressure will continue to gather momentum as well today.
GBP/USD
The GBP/USD is in a bearish configuration, as the volatility decreased. The pair moves without a trend and swings around exponential moving averages (EMA 50 and 100). Bollinger bands are tightened and the 4 Hour Elliott pattern implies a continuation of the bearish pressure.
USD/JPY
The massive uptrend continues with full steam, as clearly demonstrated by the slow stochastic and RSI on the daily chart. The momentum is still very high and shows no signs of a stop. Next target price would be 117.50 and if it will be breached than it will probably validate the moves' length towards 118.50 levels.
USD/CHF
The pair is heading down and is now at 1.1798. The next key level is 1.1750. If a break through that level will occur, we might see a much bigger move been validated. If the pair will be shy of a breach it will constitute a great entry point for a long position.
The Wild Card
Crude Oil
Over the past two weeks there has been an extremely accurate upwards channel on the daily chart, although for the last few days the Gold is floating around 730 - 740 levels. The next significant resistance level is around 745.50 which provide
Forex traders with a great opportunity to jump in to this massive uptrend with large momentum still steaming.