InvestMacro FX

Source: FOREXYARD

It appears that actions taken by the new administration of President Barack Obama might help to restore confidence among investors in the United Sates economy. U.S. Treasury officials said on Saturday that the U.S. dollar is likely to emerge from recession sooner than expected following massive fiscal stimulus.

Economic News

USD – U.S. Dollar Sees Strong Recovery after Economic Stimulus Bill is Approved

The U.S. Dollar opened this week with a dramatic jump in the right direction. Gaining strength against every major currency, except the JPY, the greenback has been benefiting heavily from the passage of last week’s economic stimulus bill, which is due to be signed by President Obama this Tuesday. Closing last week against the EUR at 1.2870, and against the Pound at 1.4358, the USD saw lows this morning around 1.2783 and 1.4251 respectively after market open.

The $787 billion economic stimulus bill passed by both the U.S. Senate and House of Representatives marked a great success for the early period of Barack Obama’s administration. The market jumped in excitement from the optimism this legislation brings to the American economy. While not a clear indication that the economy will start to recover immediately, it nevertheless places a degree of confidence behind the notion that it may indeed recover at a later time.

For now, the market focuses its attention to the signing of this bill on Tuesday, followed by the discussion of another bank bailout program to be detailed by various FOMC Chairmen later this week. The important economic figures to watch this week, outside of the layout of various stimulus and bailout plans, is this month’s housing data. On Wednesday, the U.S. government will release data on building permits and housing starts during the month of January, and may likely show a continuation to the recent downtrend these figures have seen since last year. Balanced against the stimulus euphoria, these negative figures may not carry as large an impact as usual.

EUR – European GDP Weaker; ECB Remains Conservative on Interest Rates

As Europe’s GDP slumps even further, the Euro-Zone currency begins to slide lower against most of the other major currencies. After dropping as low as 1.2720 against the USD late last week, the EUR later rebounded towards levels of 1.2870 by end of trading Friday. However, upon market opening this week, the EUR dropped against the greenback towards a price near 1.2780, signaling a shift back towards general weakness in the Euro-Zone.

Friday’s economic data releases on regional GDP indicated a decrease of roughly 1.5% for the combined total economies making up the European Monetary Union (EMU). The European Central Bank (ECB) commented on Saturday that they will remain conservative with interest rate decisions as they would like to maintain a level of flexibility when it comes to a plan of attack which utilizes monetary policy. The trouble comes as analysts begin to forecast that without an aggressive rate cut, the Euro-Zone could enter a severe period of downward-spiraling negative economic output; further weakening the EUR.

Looking ahead, the Euro-Zone is preparing for a quiet news week as Tuesday will see one of the only indicators to be released until Friday’s various reports on manufacturing and service sector output. The ZEW Economic Sentiment report from Germany has been inching towards a positive number steadily since July of last year. While expected to remain a negative figure, this report may show that confidence in the German economy has gained lately and may spark a short correction to the EUR’s pairs early in the week.

JPY – JPY Largely Unaffected by Largest GDP Drop Seen Since 1974

The Yen saw some relatively moderate appreciation against its currency rivals as this weekend’s G7 Summit reaffirmed very little which wasn’t already known by world financial chiefs. Failing to comment on the recent strength of the JPY led some to believe that it was a normal turn of events, even expected by the Bank of Japan (BoJ) despite growing concerns over a slouching GDP. The Yen ended last week down against the USD near the 91.90 price level, but has strengthened back towards 91.50 during this week’s early trading hours.

Slowing down the pace at which the Japanese economy recovered, however, was the recent release of its preliminary GDP figures which showed a 3.3% decline in the island economy’s output, the largest decline since 1974. With a number of economic indicators being released this week, including another round of interest rate talks, the JPY may see a higher-than-normal amount of volatility, especially considering that most indicators are forecast to show further negative levels of economic output. Traders may look for a further weakening of the Yen in the coming days.

OIL – Crude Oil Trades Below $38 on Slowing Global Demand

The price of Crude Oil broke through a number of significant barriers last Friday. Starting the day just above $36 a barrel, the price then cut through the $35 and $34 price barriers before climbing back up $3 higher by market close. This week, the price of Crude appears to be back on the downward slide as the price has already fallen over $0.40 towards the $37 a barrel price range.

The strengthening of the USD from last week’s passage of Obama’s economic stimulus bill helped push the value of this commodity lower towards the end of the trading week. With more news on the way regarding the signing and implementation of this bill, the USD is likely to appreciate throughout the coming days, putting further downward pressure on the price of Crude Oil. Traders may in fact see the price of Oil drop to as low as $30 a barrel by week’s end.

Technical News

EUR/USD

After a long period in which the pair has mainly fluctuated, it seems that we are on the verge of a relatively strong move. The pair has crossed the lower border of the 4 hour chart’s Bollinger Bands, indicating that it should enter a downtrend. A breach through the 1.2720 might validate the bearish move with a price target of 1.2690.

GBP/USD

The pair is continuing its bearish development, as the cable dropped almost 300 pips in the past 3 days. All oscillators on the hourly chart are pointing down, indicating that the falling trend has more room to go. Next price target might be 1.4100.

USD/JPY

The bullish momentum continues with full steam as the pair breached the key Fibonacci level of 90.91. Currently, all oscillators on the daily chart are giving bullish signals; hence, going long seems to be preferable.

USD/CHF

It seems that the pair is extending its bullish correction, as it entered an uptrend ever since it tested the 1.1600 level. Currently, all oscillators on the 4 hour chart are pointing up, suggesting further bullish behavior for the pair. Going long might be preferable today.

The Wild Card – EUR/AUD

The 4 hour chart shows both the tightening of the Bollinger Bands, and also a bullish cross on the Slow Stochastic, suggesting that a strong bullish momentum is likely to take place. This might give forex traders an excellent opportunity to enter a promising trend at a very early stage.

Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

GCI Forex Research

€

The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2940 level and was supported around the $1.2820 level. Traders are paying close attention to this weekend’s Group of Seven meeting in Rome where central bankers and finance ministers are discussing the global economic recession. Dealers are curious to see if officials include increased rhetoric about exchange rate misalignment, particularly regarding the yen and sterling. Officials will also discuss the need to prevent protectionist policies. Data released in the U.S. today saw the mid-February University of Michigan consumer sentiment index print at 56.2, up from January’s tally of 61.2. In eurozone news, EMU-15 GDP growth was off 1.5% q/q, the deepest contraction on record. German GDP growth was off 2.1% q/q, the worst decline since 1990, and this represents Germany’s worst post-war recession. French GDP was off 1.2% in Q4 and Italy’s tumbled 1.8%. Germany’s Bundestag approved a €50 billion stimulus package, a follow-up to last year’s €31 billion stimulus. Most traders believe the European Central Bank will ease interest rates by at least 50bps next month, especially following this week’s widespread rhetoric from ECB policymakers. Germany’s Bundestag, the lower house of parliament, approved a 50 billion euro ($65 billion) stimulus package, adding to a first installment last year which the government said was worth some 31 billion euros. The upper house must also approve it. ECB member Bini-Smagi warned “Most likely in Europe as a whole, we will see a V-shaped recovery…but it is possible that some countries could see an ‘L.’” Euro bids are cited around the US$ 1.2475 level.

¥/ CNY

The yen depreciated marginally vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥91.80 level and was supported around the ¥90.55 level. Bank of Japan Governor Shirakawa said the central bank will discuss additional policy steps to ease corporate credit strains and some BoJ-watchers believe this may entail an increase in corporate debt purchases. BoJ will be attentive to funding needs around the end of the fiscal year in six weeks and this should also keep downward pressure on interest rates. BoJ’s Policy Board convenes next week and may announce plans to extend special lending facilities. The Nikkei 225 stock index gained 0.96% to close at ¥7,779.40. U.S. dollar offers are cited around the ¥104.15 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥118.75 level and was supported around the ¥116.55 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥133.00 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥79.45 level. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8392 in the over-the-counter market, up from CNY 6.8345.

₤

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.4605 level and was supported around the $1.4250 level. Bank of England launched a scheme today to purchase short-term corporate debt, its latest attempt to ease credit market strains and the deep recession. This plan is the first component of the BoE’s Asset Purchase Facility, a program with a ₤50 billion initial budget. Many traders believe BoE will ease rates again in March. Cable bids are cited around the US$ 1.3965 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8830 level and was capped around the ₤0.9025 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1560 level and was capped around the CHF 1.1660 level. Data released in Switzerland today saw January producer and import prices fall 0.8% and 0.9% y/y. Some traders believe Swiss National Bank will be forced to adopt unconventional monetary policy this year. U.S. dollar offers are cited around the CHF 1.1830 level. The euro came off vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4905 level while the British pound moved higher vis-à-vis the Swiss franc and tested offers around the CHF 1.6950 level.

Daily Market Commentary provided by GCI Financial Ltd

GCI Financial Ltd (“GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (“Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (“CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Source: FOREXYARD

The G-7’s finance ministers and central bankers meet tonight and tomorrow before releasing a statement and talking to reporters at about 2:30 p.m. local time. On the agenda: How to thwart protectionism, overhaul financial oversight and end what the International Monetary Fund calls a depression in advanced economies.

Economic News

USD – First Good Sign from the U.S Economy

The Dollar continues to safely strengthen against the major currencies, and yesterday the greenback reached a 10-day high against the EUR. For now, it seems that the ongoing reports claiming the U.S government is combating recession, and the wide acceptance of the steps it’s taking by financial experts around the world are enough to set free the bullish trend we’re witnessing for the past couple of weeks.

As for yesterday, a batch of relatively positive data was delivered, supporting the Dollar’s upward trend. The monthly U.S Core Retail Sales rose 0.9% in January, beating forecasts for a 0.5% decline. That piece of information is extremely significant, as this is the first time in 6 months that the monthly value of sales at the retail level (excluding automobiles) was greater than the one in the previous month. In a few months, we all might look back and say that this was the first sign of the rehabilitated U.S economy.

Another important indicator that was released yesterday was the Unemployment Claims. The published figure showed that 623K individuals filed for unemployment insurance for the first time during the past week, and if we said that the Core Retail Sales might be a good sign, this is a very disturbing sign, for sure. It is now the second week in a row that over 600K people are losing there jobs in the U.S, pointing out the well-known fact that the U.S economy is continuously contracting.

As for today, the Preliminary University of Michigan Sentiment survey will be released at 14:55 GMT. This survey is considered to be a primary indicator of consumers’ financial confidence, and thus tends to have a large impact on the market. Currently, a 60.6 mark is expected, which is considered to be a positive result, however traders should keep their eyes focus, and look for a possibly change of trend during this time.

EUR – Low Oil Price to Help Euro-Zone Economy – Says Trichet

Yesterday the EUR saw a volatile trading session against the major currency pairs. The EUR climbed against the JPY; however it continued its downtrend against the USD.

The main news from the Euro-Zone yesterday came from Jean-Claude Trichet’s speech, in which the European Central Bank President said that that the expansionary impact of relatively low oil prices, and technological progress should come to aid of the Euro-Zone economy. In his speech Trichet expressed his optimism despite of the challenges the economies will face in 2009.

Trichet’s speech was probably the leading factor to halt the slide of the EUR/USD at midday, as it was his first hawkish speech in quite a while now. It is safe to say that investors have an endless thirst for such words from the economic leaders, especially in times like now.
Also yesterday, the European Monthly Industrial Production indicator was released. The indicator showed that the total inflation-adjusted value of output has dropped by 2.6% in December as opposed to the previous month. This publication reflected 4 straight months in which this economic indicator is deteriorating, demonstrating how unhealthy the Euro-zone industrial production is currently.

Looking ahead to today, the European Flash Gross Domestic Product (GDP) is expected at 10:00 GMT. This indicator measures the change in the value of all goods and services. Forecasts for this indicator are suggesting that the Euro-zone’s GDP has dropped by 1.3% in December, painting quite a gloomy picture of the current financial status. Traders should also stay informed of news released from the G7 Meeting that will be held during the next to days, as any information from that meeting could change the course of the local currencies before the trading week reaches its end.

JPY – Japanese Yen Seems to Be the Best Financial Investment

The JPY underwent an extremely volatile session against all the major currencies. During early trading the JPY dropped against the USD and the EUR, however, later on the trend reversed, and the JPY returned to its previous rates.

It appears that investors are considering the Japanese economy to be the safest one, or at least the most stabile economy to trust their funds in at the moment, as the JPY is gaining strength in a consistent way, in spite of the fact the all the experts are predicting on a daily basis that the JPY is overvalued and that a downtrend is just a matter of time. It should be said that the best currency to go long on, for a few months now is the JPY, and weather you traded it against the USD, the EUR or the GBP, either way you gained profits, and a lot of profits. As long as no clearer signs are proving that the JPY has limited its bullish trend, it will retain its status as one of the best investments in the current economic turbulence.

As for today, no significant data is expected from the Japanese economy, however, the G7 Meeting that will be held during the weekend, is likely to affect the Yen as well. Traders are advised watch closely after any development from the meeting, especially for announcements regarding the Japanese economy.

OIL – Crude Oil Prices Following Equity Markets

Crude Oil prices continue to slide on a permanent basis, and a barrel of Crude Oil was traded for $33.50 yesterday.

Forecasts are assuming that world oil consumption will drop 1.7% to 84.3 million barrels a day this year, and particularly there is a serious concern that oil demand will drop sharply in the U.S. it seems that as long as the U.S economy continues to deteriorate, oil prices will continue to respond in lowering prices. if oil prices were considered to be attached to the USD in the past, it appears that today oil prices are more attached to the Dow Jones than to anything else, and as long as equity markets in the U.S will deliver bearish signs, a barrel of Crude Oil might be values under $30.

As for today, traders are advised to continue following equity markets in the U.S as they seem to be the best tool in order to predict future developments.

Technical News

EUR/USD

This pair is in the midst of a narrowing upward channel and is now floating in the middle of it. The hourlies are showing mixed signals with its RSI floating in neutral territory. However, the Slow Stochastic of the daily chart is showing quite a strong bullish momentum, and the RSI confirms that the direction is indeed up. All indications are that there is more room for further upward movement and the preferable strategy today will be to go long on dips.

GBP/USD

Despite yesterday’s sharp drop, the bullish channel on the daily chart is still intact. According to a 4 hour chart, the pair is oversold; therefore a fresh bullish momentum may be quite imminent on the 4 hour chart as well. Going long with tight limits might be a preferable strategy today.

USD/JPY

The pair is still in a bullish configuration and is now floating around 91.00. The momentum on the 4 hour chart is very strong and it appears that there might be a testing the level of 91.60. The Bollinger Bands are tightened on the daily chart implying that volatility will increase during the day; meaning that traders may have a good opportunity to make profits during today’s trading session.

USD/CHF

The hourlies are showing that the pair still does not have a distinct direction, as the chart appears to be quite horizontal for the past 2 days. Indicators on the 4 hour and the daily charts are giving mixed signals although there is still a lot of positive momentum. Traders should wait for a clear signal on the hourly level before entering the market today.

The Wild Card – Silver

There is a very accurate bullish channel forming on the daily chart, as the break through the bottom level of it was just validated. Silver now has enough bullish momentum to be carried into the 14.50 zone. This is a great opportunity for forex traders to use this technical break and swing into a high potential upwards move.

Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

The Eurozone Gross Domestic Product fell more than expected in the fourth quarter of 2008 according to a flash estimate released by Eurostat today. The 16-nation eurozone GDP declined by 1.5 percent in the October to December quarter following GDP contraction of 0.2 percent in the third quarter. The eurozone entered into recession after the third quarter GDP contracted for the second quarter in a row following the second quarter 0.2 percent contraction. On an annual basis, the fourth quarter GDP is 1.2 percent lower than the fourth quarter of 2007.

Today’s data surpassed economic forecasts that were expecting the GDP to decline by 1.3 percent and marked the largest GDP contraction on record for the eurozone.

Germany, the eurozone’s largest economy, saw a GDP decline of 2.1 percent in the fourth quarter following a GDP decline of 0.5 percent in the third quarter. Italy’s GDP declined by 1.8 percent in the fourth quarter after declining by 0.6 percent in the third quarter. France, the eurozone’s second largest economy, also saw their economy decline in the fourth quarter as GDP decreased by 1.2 percent after posting economic growth of 0.1 percent in the third quarter.

Today’s flash estimate is followed up by two more revised GDP releases that are scheduled for release on March 5, 2009 and April 7, 2009.

Euro falls in currency trading.

The currency markets today have seen the euro weaker in trading against most of the other major currencies. The euro has fallen versus the U.S. dollar, British pound, Australian dollar, New Zealand dollar, Swiss franc and Canadian dollar while gaining against the Japanese yen.

The euro has declined against the US dollar as the EUR/USD trades at 1.2891 in the afternoon in the US session at 2:21pm EST after opening the day at 1.2927. The euro has declined versus the Canadian dollar as the EUR/CAD trades at 1.5959 after opening at 1.6042. The euro has also declined versus the Australian and New Zealand dollars as the EUR/AUD trades at 1.9538 from 1.9665 and the EUR/NZD trades at 2.4523 from the 2.4697 opening.

Against the Swiss franc, the euro has declined as the EUR/CHF fell from 1.4972 to trading at 1.4932 while the euro has also fallen against the British pound as the EUR/GBP trades at 0.8971 after opening at 0.8992. The euro has advanced today versus the Japanese yen as the EUR/JPY trades at 118.33 from the 117.63 opening.

EUR/GBP Chart – The Euro falling against the British Pound today in Currency Trading and trading right at the level of the 55-day simple moving average.

U.S. Retail Sales increased by more than expected and reversed six straight months of decline in January according to a report by the U.S. Commerce Department released today. Advance estimates of retail sales increased by 1.0 percent to $344.6 billion in January, handily beating market forecasts that were predicting a 0.8 percent decrease for the month.

January’s increase in sales follows December’s decrease of 3.0 percent which was revised lower from an original decline of 2.7 percent. Despite the sales rise in January, sales compared to January 2008 are down by 9.7 percent.

Sales excluding automobiles registered a 0.9 percent increase for the month after falling by a revised 3.2 percent in December. Sales minus autos also beat market forecasts expecting a fall of approximately 0.4 percent for the month.

Contributing to the increase in retail sales for the month were increases in electronics & appliance store sales which rose by 2.6 percent, food & beverage stores which advanced by 2.1 percent and nonstore retailers which increased by 2.7 percent. Also showing positive gains in January were gasoline station sales with a 2.6 percent increase, auto & other motor vehicle dealers with a 1.8 percent rise, clothing & clothing accessories stores with a 1.6 percent gain and general merchandise stores which increased by 1.1 percent.

Contributing negatively to the retail sales in January were miscellaneous stores retailers, department stores, building material & garden supplies dealers and furniture & home furnishings stores.

U.S. Weekly Jobless Claims decreased by 8,000.

U.S. new jobless claims decreased by 8,000 people in the week ending February 7th to a seasonally adjusted total of 623,000 according to data released by the U.S. Labor Department. The previous week had registered a revised total of 631,000 claims. A four week moving average of initial unemployment claims showed an increase of 24,000 workers to a rate of 607,500 workers.

Workers receiving continuing unemployment benefits for the week ending January 31st increased by 11,000 to 4,810,000 workers from the previous week. A four week moving average of continuing claims increased by 73,750 workers from the previous week to a total of 4,745,250 workers.

U.S. Dollar gains in Forex Trading.

The U.S. dollar has been gaining in forex trading against all of the major currencies so far today. The dollar has gained against the euro, Australian dollar, Swiss franc, Japanese yen, British pound, New Zealand dollar and the Canadian dollar.

The euro has fallen versus the dollar as the EUR/USD has declined from today’s 1.2911 opening(00:00 GMT) to trading at approximately 1.2839 in the afternoon of the US trading session at 12:33pm EST.

The British pound has declined today versus the dollar from 1.4373 dollars per pound to trading at 1.4251 dollars per pound. The dollar is trading higher against the Japanese yen today as the USD/JPY trades at 90.63after opening at 90.03.

The dollar has gained against the Canadian dollar after opening at 1.2413 earlier today to trading later at 1.2469. Against the Swiss franc, the USD has gained ground from the 1.1593 opening to trading at 1.1644.

The New Zealand and Australian dollars are both falling against the US dollar from their opening exchange rates. The NZD/USD currently trades at 0.5216 after opening at 0.5269 while the AUD/USD trades at 0.6516 after opening today at 0.6580.

USD/CHF Chart – The US Dollar gaining against the Swiss Franc today in Forex Trading and trading above the 21-day simple moving average(blue).

GCI Forex Research

€

The euro came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2720 level and was capped around the $1.2945 level. Data released in the U.S. today saw January headline retail sales escalate 1.0%, the first improvement in seven months, after declining for seven consecutive months. Retail sales were off 9.7% from the previous year and some economists believe the increase in January activity may have reflected deep discounts at retailers. Excluding autos and automobile parts, retail sales were up 0.9% from a revised record 3.2% pullback in December, representing the largest gain since May 2008. Other data released today saw weekly initial jobless claims off 8,000 to 623,000 last week. Other data released today saw December business inventories off 1.3%, the largest decline since October 2001, while business sales were off 3.2% in December. Moreover, it was reported that prices of single-family homes in Q4 fell 12.4% y/y to their lowest levels since 2003. U.S. legislators were poised today to pass a US$ 789 billion stimulus package to reverse the current economic recession. Wall Street Journal reported the Federal Reserve is very cautiously considering when it can begin to pay the long end of the Treasury curve. In eurozone news, European Central Bank President Liikanen warned “Economic data show that we have moved to a longer period of weak economic development. The economic crisis seems to be lasting longer and spreading.” ECB Vice President Papademos added “I do not see a dependence, or necessary sequence, between the level or path of policy rates and the possible adoption of ‘non-standard’ measures aimed at improving the functioning of markets and preserving the stability of the banking system. It cannot be excluded that euro area inflation may reach a level close to zero for a short period of time. “A further easing of monetary policy may be appropriate in order to maintain inflation over the medium term at a level consistent with price stability.” ECB member Tumpel-Gugerell noted “We have practically doubled our liquidity measures, and of course are thinking about what we can do.” Data released in the eurozone today saw EMU-15 December industrial production fall 2.6% m/m and 12.0% y/y, the sharpest declines since at least 1990. EMU-15 Q4 GDP data will be released tomorrow. Euro bids are cited around the US$ 1.2475 level.

¥/ CNY

The yen depreciated marginally vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.70 level and was supported around the ¥89.80 level. Data released in Japan overnight saw January annualized wholesale inflation print below 0% for the first time since December 2003 on account of declining corporate activity. Wholesale prices were off 0.2% y/y, far below forecasts. These data suggest the Japanese economy is again experiencing significant deflationary headwinds. This will increase pressure on Bank of Japan to resort to unconventional monetary easing measures, probably including increased asset-backed and government bond purchases. After experiencing strong deflation for nearly a decade, the central bank is quite sensitive regarding the need to prevent prices from declining too rapidly. Traders are paying close attention to the Group of Seven meeting in Rome tomorrow and Saturday. Some dealers believe the Japanese delegation will press their counterparts to warn against the strength of the yen or strongly condemn currency misalignments. The Nikkei 225 stock index shed 3.03% to close at ¥7,705.36. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥114.90 level and was capped around the ¥116.65 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥127.10 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥77.05 level. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8345 in the over-the-counter market, up from CNY 6.8332. Traders are eager to see if China’s currency policy is discussed at this weekend’s Group of Seven meeting in Rome. Data released in China overnight saw January bank lending up CNY 1.62 trillion, a record pace. January M2 money supply growth accelerated as well.

Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (“GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (“Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (“CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Source: FOREXYARD

Yesterday’s drop in Crude Oil prices lent weight to the notion that traders are expecting the consolidating USD to spike in value versus its major currency pairs in the not-too-distant future. The passage of Barack Obama’s stimulus bill yesterday may also lend weight to this notion. Today, traders could see the value of the EUR/USD pair drop towards the 1.2800 price level as US Retail Sales and Unemployment Claims provide a level of support to this currency pair.

Economic News

USD – Will Today’s Retail Sales Data Drive the USD Higher?

The greenback completed yesterday’s trading session with mixed results versus the major currencies. The U.S. Dollar was little changed against the EUR, with the pair closing at the 1.2950 level, but higher against the GBP in a volatile session which saw the pair closing at the 1.43 level. This came amid signs that the U.S. Senate and House of Representatives will be able to bridge their differences on the economic stimulus plan.

The market expressed some optimism for the USD after the U.S Congress and Obama administration reached a deal yesterday on a $789 billion economic stimulus package that would mix tax cuts and new government spending in an effort to rescue the faltering U.S. economy. Analysts now say that the USD is likely to continue to appreciate against the EUR given investors’ hopes for a big stimulus package, which might be a slight positive for risk-taking. This is important, as it removes some uncertainty in the U.S economy in contrast to the recent weak economic data coming from the Euro-Zone.

As for today, a batch of data is expected from the U.S. economy. These figures are expected to set the tone for the USD’s pairs and crosses. Special attention should be given to the Retail Sales which is expected to increase from previous reading. Traders pay close attention to this figure as it has a strong correlation with the value of the U.S. Dollar. Also today, the weekly Unemployment Claims figure is scheduled and should also have an impact on the market because if it delivers unfavorable figures it will validate a problematic U.S. market, and the USD is likely to weaken slightly as a result.

EUR – German Data Indicates a Weakened Euro-Zone

The EUR finished yesterday’s trading session with mixed results versus the major currencies. The 15-nation currency saw gains versus the GBP for most of the day and closed at the 0.8900. Versus the JPY, the Euro-Zone currency was broadly unchanged throughout most of the day, as most of the market movement from yesterday was focused on the USD.

In addition, yesterday was a slow news day in Europe as there was only one economic indicator published. Germany’s inflation rate dropped to the lowest level in almost five years in January after the recession deepened and oil prices plunged. The inflation slowdown in Germany, Europe’s largest economy, was led by a 15% drop in prices for Crude Oil from a year earlier. In recent months, the Euro-Zone economies are not having much of an impact on the value of their currency. The EUR may in fact be waiting for clear signs of direction from the United States’ economy before picking a direction.

Looking ahead to today, the most important financial indicator scheduled to be released from Europe is Industrial Production. Analysts are forecasting this figure to decrease from its previous reading. Traders will be paying close attention to today’s Industrial Production announcement as a stronger than expected result may bolster the EUR in the short-term.

JPY – Foreign Influence over the Yen Gaining Strength

The Yen completed yesterday’s trading session with mixed results versus the other major currencies. The JPY was broadly unchanged versus the EUR yesterday and closed its trading session at around the 116.00 level. The JPY also saw bullishness against the GBP as it jumped around 100 points and closed at 129.20.

Japan’s wholesale inflation dropped for the first time in more than five years as the global recession lowered the cost of oil and commodities. Falling commodity prices and weakening demand for goods kept many firms from hiking prices and even led some to make cuts.

As for today, Japan will be absent from the economic calendar. The JPY’s trends will be affected by the rallies of its primary currency pairs. It seems the USD and EUR are expected to continue a volatile trading session today and their crosses with the JPY will likely be as well. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY’s movement today, especially U.S. Retail Sales since it has a correlation to Japanese exports.

Oil – Price of Crude Oil Hits One-Month Low

Oil prices slid 4.3% during yesterday’s trading session, the lowest in four weeks. This drop came after a U.S. government report showed Crude Oil inventories rose more than expected in the world’s top energy consumer, and after the International Energy Agency (IEA) said that global energy demand this year would post its biggest decline since 1982 under the weight of the economic crisis.

Oil prices have dropped significantly in the last few months due to the global economic slowdown and its impact on consumer and business fuel consumption, raising alarms for OPEC members that have agreed to record output cuts to counter this weakness.

Technical News

EUR/USD

This pair continues to build towards a volatile price movement as all oscillators are still showing the price floating in neutral territory. The Bollinger Bands on all charts are still tightening in anticipation of a significant movement as well. With the weekly Momentum oscillator showing mild downward pressure, there is a possibility that the price will go bearish after the breach. Setting short positions with tight stops might be the right choice today.

GBP/USD

The price of this pair appears to be floating in the over-sold territory on the 4-hour chart’s RSI, signaling an upward correction in the near future. The recent bullish cross on the 4-hour chart’s Slow Stochastic supports this notion. With the Bollinger Bands on the hourly chart tightening, a volatile bullish spike may occur later today. Entering buy positions with tight stops before the breach might be the right strategy today.

USD/JPY

There appears to be an imminent bullish cross on the hourly chart, indicating an upward correction may occur soon. However, the weekly chart’s Momentum oscillator shows steep downward pressure. Waiting for the upward correction to peak then setting sell positions might be a wise choice today.

USD/CHF

There appears to be a leveling-off in the price of this pair as all oscillators show the price floating in neutral territory. Even the weekly Momentum oscillator shows almost no direction. Yet, this pair fluctuates within quite a wide trading range of approximately 130 pips. The relatively volatile nature of the recent trend allows traders to open short term positions and to maximize profits by buying on lows and selling on highs.

The Wild Card – Gold

There appears to have been a violent breach of the upper border of the Bollinger Bands on both the hourly and 4-hour charts, signaling moderate downward pressure on the price of this commodity. The price currently floats in the over-bought territory on the 4-hour chart’s RSI and a bearish cross has recently formed on this chart’s Slow Stochastic, which supports the notion of a downward correction in the near future. Forex traders can benefit from this potential trend reversal by setting early sell positions and riding out the downward movement.

Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

The United States trade deficit narrowed to its lowest level in almost six years according to a release by the Commerce Department today. The U.S. trade deficit decreased by approximately 4.00 percent as the deficit leveled at $39.9 billion in December following a revised deficit of $41.6 billion in November.

Market forecasts were expecting the deficit to fall further to approximately $36.0 billion for the month. The trade balance decline to a $39.9 billion deficit marked the lowest standing for the balance since 2003.

The U.S. had a total of $133.8 billion worth of exports in December which was a decrease of $8.5 billion from November’s total. December also saw a decrease in imports as it totaled $173.7 billion worth of imports compared with $183.9 billion in November for a decline $10.2 billion. Exports and imports both fell for the fifth straight month in December.

The U.S. trade deficit with China also fell in December. The U.S. deficit with China declined to $19.9 billion in December after a deficit of $23.1 billion in November. Other notable U.S. trade deficits were with the European Union at a $7.0 billion, Japan at $5.3 billion, OPEC at $4.7 billion and Mexico at $4.1 billion. U.S. trade surpluses with other countries for December included Hong Kong at $1.0 billion, Australia at $0.7 billion, Singapore at $0.7 billion and Egypt at $0.2 billion.

U.S. Dollar gains in Forex Trading.

The U.S. dollar has been gaining today in forex trading against the major currencies. The dollar has gained against the euro, Australian dollar, Swiss franc, Japanese yen, British pound, New Zealand dollar and the Canadian dollar.

The euro has fallen versus the dollar as the EUR/USD has declined from today’s 1.2892 opening(00:00 GMT) to trading at approximately 1.2859 in the afternoon of the US trading session at 1:04pm EST.

The British pound has declined today versus the dollar from 1.4502 dollars per pound to trading at 1.4342 dollars per pound. The dollar is trading higher against the Japanese yen today as the USD/JPY trades at 90.59 after opening at 90.37.

The dollar has gained slightly against the Canadian dollar after opening at 1.2430 earlier today to trading later at 1.2439. Against the Swiss franc, the USD has gained ground from the 1.1588 opening to trading at 1.1622.

The New Zealand and Australian dollars are both falling against the US dollar from their opening exchange rates. The NZD/USD currently trades at 0.5241 after opening at 0.5245 while the AUD/USD trades at 0.6524 after opening today at 0.6515.

EUR/USD Chart – The Euro falling against the US Dollar today in Forex Trading and trading below the 21-period simple moving average.

Source: FOREXYARD

U.S. Treasury Secretary Timothy Geithner gave a less-than-inspiring speech yesterday regarding the U.S. bank bailout program. Many analysts criticized the speech as failing to give enough specific details regarding the plan which led most to assume that this bailout may not be as well thought-out as originally assumed. Stock markets and world economies felt the pinch as investor confidence dropped following this event.

Economic News

USD – Dollar Records Mixed Results as Bank Bailout Plans Disappoint Investors

The Dollar recorded some mixed results in yesterday’s trading as traders were disappointed by Treasury Secretary Timothy Geithner. Geithner spoke yesterday about the Treasury’s plan for a new $2 trillion Dollar banking bailout plan. This follows the approval by the U.S. Senate of Obama’s $800 billion Dollar stimulus plan. Geithner received criticism that he wasn’t specific enough in his speech, leading to a lack of confidence in the Dollar and U.S. Stock market.

Against the EUR, the USD fell 40 pips to 1.2871 by the close of Tuesday’s trading. The Dollar also lost ground against the JPY by nearly 100 pips to 90.36 as investors cut their losses and returned to what they saw as a safe-haven currency. However, against the Pound, the USD rose by 350 pips to close at 1.4481. This was due to a knock-on effect as the British economy has been extremely volatile as of late, especially as a result of the failing banking sector. Therefore, bad news from the U.S. means even more bad news for Britain and the GBP.

Looking ahead, Obama and Geithner need to show more substance in order to rescue the U.S. economy. Only time will tell if both stimulus plans will lift the U.S. out of recession. Today, however, does have some important economic data releases from the U.S. Firstly; Geithner is scheduled to speak again at 15:00 GMT. At 13:30 and 19:00 GMT respectively, the U.S. Trade Balance and U.S. Budget Balance figures are set to be published. If the figures are indeed as forecast, or worse even, the USD may fall against its major currency pairs. On the other hand, better than expected figures could lead to a bullish Dollar in today’s trading.

EUR – Pound Tumbles Due to Aftershock of U.S. Treasury Speech

The Pound slid against it major currency pairs as it felt the shockwaves of the Pessimism in the U.S. following the disappointing speech about a banking bailout by U.S. Treasury Secretary Timothy Geithner. The British economy and British currency are extremely volatile due to negative news from the U.S. and Europe, as their economy has been hit worse than many other countries in the developed world since the start of this recent recession. For example, Britain’s GDP is expected to decline the most out of the G7 nations, by over 2.8%, according to the International Monetary Fund (IMF).

The GBP slid by a staggering 350 pips to 1.4481 vs. the USD. It slid by 220 pips vs. the EUR, against the JPY it slid by an enormous 430 pips to 131.19. These large losses show that investors returned to safe-haven currencies in yesterday’s trading sessions. The thing that this shows forex traders is that the Pound acts very negatively to uncertainty in the financial world. Therefore, a lesson for the future may be for investors to follow U.S. news events more closely, and use the GBP as bait. This is useful because the Pound is very volatile to both positive and negative economic news coming from the U.S.

Today there are several important news events that may determine GBP and EUR currency crosses. These are the British Claimant Count Change at 9:30 GMT, the Bank of England’s (BoE) inflation report at 10:30 GMT and a scheduled speech by BoE Governor King also at 10:30 GMT. Positive news may lead to a reversal of yesterday’s losses in the GBP. Traders are advised to watch the Euro-Zone’s reaction to this as King’s speech may lead to the European Central Bank (ECB) revealing more details about possible rate cuts next month. This may result in high volatility for the EUR’s pairs in today’s trading.

JPY – Yen Climbs as U.S. Bank Bailout Produces Pessimism

The JPY rose against its major currency crosses in Tuesday’s trading, as traders flocked back to the safe-haven Japanese currency. This came about as stocks in the U.S. and Japan fell heavily following statements by U.S. Treasury Secretary Timothy Geithner concerning the new $2 trillion U.S. banking bailout plan. Traders reacted with pessimism as they saw very few specific details about how Geithner, Obama, and the U.S. government will go about salvaging the U.S. banking sector, and thereby save the U.S. economy.

The JPY rose 80 pips against the EUR in yesterday’s trading to close at 116.39. Against the USD, the JPY climbed 100 pips to finish yesterday’s trading at 90.36. The JPY rose by a staggering 530 pips versus the GBP in yesterday’s trading to close at 131.19. Forex traders are advised to follow Japanese, U.S., and British data releases throughout today’s trading. The results of these may determine the JPY’s strength against its major currency crosses into the middle of next week’s trading.

Oil – Oil Plummets on U.S. Stimulus Doubts

The price of Crude Oil dropped by $1.80 a barrel, or 4.5%, to $38.04 in yesterday’s trading as investors lost confidence due to the weak statements made by U.S. Treasury Secretary Timothy Geithner regarding the U.S. banking rescue package. Additionally, even though the U.S. Senate passed the economic stimulus plan, the House of Representatives and Senate need to close the gap on the further disagreements about the stimulus bill. Furthermore, it seems that OPEC threats of further decreasing Oil production has not dissuaded traders from selling-off Crude Oil.

Oil is expected to tumble by another $2 to $36 a barrel by the end of this week, as U.S. Crude Oil Inventories continue to build up. The Crude Oil Inventories figures are expected to be released later today at 15:00 GMT. U.S. stockpiles of Oil are likely to increase into March, adding additional downward pressure to the price of Oil. It is advisable to follow economic developments coming out of the U.S. as these developments may be the main factor determining the price of Crude Oil in the coming months.

Technical News

EUR/USD

This pair has apparently been building towards a volatile price movement recently as all oscillators show the price floating in neutral territory. The Bollinger Bands on all charts are also beginning to tighten in anticipation of a significant movement. Traders should wait for the breach and swing.

GBP/USD

The price of this pair appears to be floating in the over-sold territory on the RSI of the hourly and 4-hour charts, indicating an upward correction may occur in the near future. A bullish cross also appears to be forming on the 4-hour chart’s Slow Stochastic, adding support to this notion. Going long might be the right choice today.

USD/JPY

The pair has finally ceased range-trading and has recently moved downward; however, the price currently floats in the over-sold territory on the hourly and 4-hour chart’s RSI, signaling an upward correction may be imminent. Going long with tight stops might be the right choice today.

USD/CHF

There appears to be a leveling-off in the price of this pair as the Bollinger Bands on the hourly chart appears to be tightening, signaling an impending volatile price movement. Most oscillators show a lack of direction, however. Waiting for a clearer signal might be the right choice today.

The Wild Card – Oil

The price of this commodity appears to be floating in the over-sold territory on the RSI of the hourly and daily charts, indicating an upward correction to the recent downward movement may occur later today. The imminent bullish cross on the daily chart supports this notion. As the price of this commodity has discovered a new range to trade in, forex traders can benefit greatly from selling on highs and buying on lows within this price zone.

Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: FOREXYARD

The EUR fell sharply in late-day trading after it was reported that Russian banks may seek to restructure over $400 billion loans. This adds to the already fragile European banking system and highlights the considerable tension that still exists in the financial markets.

Economic News

USD – USD Regroups after Negative News for Euro Banks

The Dollar initially lost ground yesterday but recovered in late trading as forex markets shrugged off a delay to the much anticipated U.S. bank bailout announcement. Despite the postponement, riskier currencies gained favor and currencies such as the USD and JPY fell as traders’ risk appetite increased.

The U.S. bank bailout package is expected to provide added stability to the global economy, restore confidence to shaky financial markets, and has the potential to boost U.S. economic growth. This is providing traders with new reasons to take on riskier positions. This type of trading weighed on the Dollar yesterday but the currency later recovered as the EUR/USD finished the day down at 1.2821.

The bank bailout announcement was delayed as officials in the Obama administration focused on details that could potentially hold up the approval of the $819 billion economic stimulus package in the U.S. Senate. Both bailout packages are being highly anticipated and it is yet unknown what impact they will have on the financial markets. Traders are advised to follow tomorrow’s announcement by Treasury Secretary Geithner as he outlines the bank bailout plan. This key event may help decide the day’s direction for the EUR/USD.

EUR – EUR Plunges on Russian Loan Restructuring

The EUR fell sharply in late day trading after it was reported that Russian banks may seek to restructure over $400 billion loans from foreign banks. The 16-nation currency also came under pressure after European finance ministers suggested it may be more difficult for European banks to borrow in the financial markets.

These two events drove the EUR lower across the board. The EUR/GBP finished the day down sharply at 0.8646 from 0.8771, and the EUR/JPY was also sent lower to the level of 117.17.

The EUR had built on its gains made since Friday and continued to rally through most of yesterday’s trading as the new week began with more support for riskier currencies. Last week saw U.S. Non-Farm Payrolls post a higher than expected job loss numbers and this in turn helped to appreciate the EUR against the Dollar. However, these gains were quickly erased late last night amid the Russian banking news.

JPY – Traders May Look for Further Weakening in the JPY

The JPY gained against its currency pairs on news that Russian banks may seek to restructure loans to their European counterparts. This puts more pressure on the already struggling European banking sector. Japan is not without its own banking troubles considering Japan’s largest investment bank and brokerage, Nomura, will seek new capital upwards of $3 billion. The investment firm is struggling to absorb its acquisition of Lehman Brother’s Asian operations.

Yesterday the USD/JPY finished down at 91.36 while the GBP was at 135.51 Yen from 135.09.

Traders may be looking for further weakening in the JPY, specifically after U.S. Treasury Secretary Geithner’s speech at 16:00 GMT. His outline of the U.S. banking system bailout may help reduce market risk. This could allow traders to dump their safe haven JPY positions for riskier currencies, depreciating the Japanese currency. Look for the USD/JPY to finish the day at the 92.00 mark.

Oil – Oil Settles below $40 Ahead of Inventory Data

The price of Crude Oil settled below the $40 mark yesterday as traders await Crude Oil inventory data due Wednesday. Many have predicated a rise in the price as the U.S. economic stimulus package inches closer to Congressional approval; however, the commodity has been range trading between $39-43 for the past 10 days, unable to find solid support.

Yesterday’s closing price of $39.83 was still within this range. This is more than $100 off Crude Oil’s peak price seen last July.

Wednesday’s Crude Oil Inventories Report, combined with the passage of the U.S. economic bailout plan, has the potential to ignite a price rally. An unexpected drop in inventories could help to push Crude Oil above the $45 resistance level by week’s end.

Technical News

EUR/USD

The hourlies show quite a wide range-trading with no specific direction; however, the daily chart’s Bollinger Bands are tightening, indicating upcoming increased volatility. A bearish cross on the 4-hour chart’s Slow Stochastic indicates an upcoming test of the 1.2800 level once again. If that level is breached, swinging in the trend would be the best strategy.

GBP/USD

The pair’s bullish price movement continues within the bullish channel, which still has yet to be breached. The bullish cross forming on the hourly chart’s Slow Stochastic supports the upward notion as well. The RSI is floating above the 50 level pointing to the continuation of the upward movement. Next testing point might be around 1.4950.

USD/JPY

After touching a base at 90.89, the pair now consolidates a bit higher at around the 91.46 level. All oscillators show that the bullish momentum will probably continue. The Slow Stochastic of the 4-hour chart is showing no crosses in the horizon, and the bullish momentum there appears to be intact as well. On the daily chart, this pair is still trending upwards and there are no imminent indications of a reversal. Therefore, traders can maximize profits by entering steady long positions.

USD/CHF

The bullish momentum continues full steam ahead within the bullish channel which still has yet to be breached. The 4-hour chart is showing a strong bullish cross, and the RSI on the hourly chart also supports the continuation of the bullish movement. Next testing point should be around 1.1780. Going long appears to be preferable today.

The Wild Card – Gold

There is a very distinct downwards channel forming on the hourly chart. A fresh bearish cross on the chart’s Slow Stochastic implies that the bearish correction is quite imminent. The RSI on the 4-hour chart is floating below 40, supporting the notion that there is still more room for the downwards correction. Forex traders can maximize profits by taking advantage of a currently bearish trend.

Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.