The Canadian Dollar and Forex Trading Strategy
Loonie remains steady; could gain on the currency market
The Canadian dollar looks to have good prospects right now in currency trading on the FX market. As part of a forex trading strategy, the loonie could complement a currency portfolio looking for a relatively stable commodity currency. Bloomberg reports on the Canadian dollar in forex trading:
``This report is positive for the Canadian dollar,'' said Steven Butler, director of foreign exchange trading in Toronto at Scotia Capital Inc. ``Higher inflation eliminates the chance of a rate cut. We may get a note of caution from the Bank of Canada in the next meeting.''


Forex Forecast Looks Grim for U.S. Dollar
IMF forecast shows slowing U.S. economy
A slowing U.S. economy may not be able to adequately support the U.S. dollar in currency trading on the FX market. And an IMF reports shows the U.S. economy growing at a slower rate than the rest of the global economy. The National Post reports on this news that may stymie the U.S. dollar forex forecast:
"An IMF forecast that was released last week showed for the first time in 37 years you will get 5% global growth and the U.S. accounting for less than 10% of that growth -- half its normal share of global GDP," said Stefane Marion, assistant chief economist at National Bank in Montreal. "You've never seen the global economy growing at 5% with the U.S. growing ... only 2.2%."


A Look at Forex Trading Today
The currency market
The U.S. dollar is firming a bit against the other major currencies on the FX market as it attempts to recover from yesterday's beating in forex trading. However, the U.S. dollar is still down against major currencies, and the Japanese yen is making solid gains today in currency trading. Reuters reports on the FX market:
By 1010 GMT, the euro was down 0.6 percent on the day at 160.28 yen , having fallen 1 percent earlier, moving away from this week's record high of 162.42.
The dollar was also down 0.6 percent at 117.84 yen .
The euro was steady at $1.3601 after hitting a two-year high of $1.3619 earlier and still in sight of the record high at $1.3670 set in December 2004.
Sterling was down 0.3 percent at $2.0026 after hitting a 26-year peak on Wednesday.


GFT Market Recap: London Session
The JPY continued its rally at the start of the session but did suffer a small set back as China released its GDP figure which came in higher than expected at 11.1% v’s 10.4%. Other data that was released out of China showed that inflation is accelerating at a quick pace and there is speculation that the government will take measures to control the rapid expansion of the economy. The USD/JPY traded up from 117.72 to 118.14 after the China data announcements. However, after that market settled down a bit the JPY began to strengthen and USD/JPY traded to lows around 117.70 after the data. The USD gave some of the gains it made during the Asia trading session back as both the EUR and CHF traded higher on the day. The USD did stay rather firm against the GBP as the pair is hovering at the lower end of the days range.
RANGES

10:00pm-6:00am EST

Low High
EUR/USD
1.3560 1.3607
GBP/USD
1.9985 2.0061
USD/JPY
117.60 118.14
USD/CHF
1.2000 1.2045


European Mid Morning Update 19th April 2007
Most of the move looks complete today and lack of news should maintain range trading
German Producer Prices for March was fairly benign, rising by +0.4% MoM and +2.5% MoM. The annualized increase was the lowest since September 2004. Forecasts had centered on an outcome of +0.5% and +2.7% respectively. Obviously energy prices were the key driver for the MoM increase although on an annual basis they are still lower by 2.4%. This is another positive from Germany providing a general picture of prices under control.
Italian Industrial Orders undershot forecasts by a large margin, slipping by -0.3% MoM in February and down -2.5% YoY. This is a fairly erratic series but the size of the shortfall will send a few shudders through Italian businesses. It should also be noted that February last year saw a particularly strong month reporting a 3.3% MoM rise and a strong 14.1% YoY rise. This would explain the dip in the annualized figure, but the monthly decline is disappointing.
The following economic releases are due later today:
March U.S. Leading Indicators +0.1%
AprilECB Publishes its monthly report
Swiss ZEW Survey – Expectations - 20.5
U.S. Initial Jobless Claims (Apr 14) 325K
U.S. Continuing Claims (Apr 7) 2530K
U.S. Philadelphia Fed Index 2.0
It has been a fairly Asian session with both Euro and Aussie Dollar testing their respective highs but without significant penetration. The Euro is lower already while the Aussie has dipped below yesterday’s corrective low and much of the pressure has come from a shake out in carry trades.
This is backed up by the losses below 118.00 seen against the Yen. The implied consumer strength from the Tankan and Tertiary Index reports come right on the heels of stories that tomorrow’s BOJ monthly outlook will be issuing a warning about the threat of higher inflation. This sees interest rates knocking on the doors of the BOJ waiting for the next hike. Indeed, as I have been warning, the weekly cycles are bearish here for the coming 3-4 months and the decline should easy work its way below the 115.16 low and to 113.21-42 at the very least.
Elsewhere even the EURCHF cross appears to be correcting itself with strength seen by the Swissie below the 1.2024 low against the Dollar. This has potential to 1.1969 but expect a reversal there to join the general Dollar recovery.
The Pound too hit resistance announced yesterday at 2.0133-38 and this has particular long term implications. For now the upside is complete and with GBPJPY moving lower from its highs we should see the impact in both the Yen and the Pound against the Dollar.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 118.80-00 1.3666-68 1.2100-25 2.0131-38
Res: 118.00-20 1.3610-18 1.2065-75 2.0060-93
Spt: 117.50-78 1.3524-55 1.1969-97 1.9974-10
Spt: 116.95-10 1.3440-50 1.1878-98 1.9900-05


European Morning Update 19th April 2007
Dollar soft in Asian trading
There was slightly mixed news out of Japan this morning though more biased to the positive. The Reuters Tankan report was unchanged at +28 in April. Manufacturers are still downbeat on the back of higher prices and depressed output. Non manufacturers were upbeat with their sentiment rising to a new 3 year high at +26.
The non manufacturer’s sentiment was reflected in the Tertiary Index which astounded with a robust leap of +1.0% which left the forecasts of -0.4% well in its wake. This is evidence of consumers putting their hands in their pockets to back up the BOJ’s positive report of consumption on a rising trend.
From the two reports the balance is net positive and will provide more support for a move towards the next rate hike. The Yen has already begun to pick up on the back of the report and following yesterday’s evidence that some carry trades are being liquidated we can expected further Yen strength over the coming 3-4 months.
The outlook for Australian consumer inflation over the next 12 months rose briskly in April to the highest level for 5 months with a survey showing median forecasts looking for a 3.8% pace over the coming year. This is up from the prior month’s reading of 3.2%. While the survey doesn’t inquire about wage increases it may be an indication of corporations seeing price pressures and thus focus will be on the Q1 CPI report next Tuesday. Pressure is already mounting for a hike at next month’s RBA MPC.
Finally Australia’s Merchandise Imports saw a solid gain over March rising by 8.9% to A$15.36bn. This followed from February’s 3.2% decline. Machinery and transport were the big gainers, possibly evidence of attempts to increase capacity. The full March trade figures are due on May 4th.
The following economic releases are due later today:
February
Italian Industrial Orders s.a. (MoM) +1.3%
Italian Industrial Orders n.s.a. (MoM) +2.0%
Italian Industrial Sales s.a. (MoM) +1.2%
March German PPI (MoM) +0.4%
German PPI (YoY) +2.7%
U.S. Leading Indicators +0.1%
April
ECB Publishes its monthly report
Swiss ZEW Survey – Expectations - 20.5
U.S. Initial Jobless Claims (Apr 14) 325K
U.S. Continuing Claims (Apr 7) 2530K
U.S. Philadelphia Fed Index 2.0
Now yesterday was a more interesting day and certainly gave us some information that helps with the structure a lot more. Key highlights were the peak in EURUSD at 2.0016-18, the low in USDCHF at 1.2024, the peak in GBPUSD at 2.0131, the lows seen in USDCAD at 1.1263-76 and the bounce from 118.10 USDJPY. All round now we are seeing deeper and more consistent Dollar bullish divergences and thus, even if there is one more low today the overall picture does suggest the Dollar bullish cycles turning higher for the coming 3-4 weeks looks more like a winner.
All we need so is pick that Dollar low.
If I have any preference then I have to say the lows have been seen – with possibly the exception of USDJPY. If there is one more attempt to push the Dollar lower then the extended targets at 1.3666 EURUSD and 1.1969 USDCHF are the levels to look out for. However, emphasis should now be on looking for Dollar buying levels against the Europeans.
A quick note on GBPUSD which is interesting to read but for now please forget it after having read it… The 2.0138 resistance was generated by a measurement in an expanded flat from the 1.9548 high down to the 1.7046 low. If this holds it would suggest the next major target is back at 1.7046… However, as mentioned, this is a long, long term count and there needs to be more information to confirm this and as such is intended only as background information.
As for USDJPY … well it bounced perfectly from 118.10 but this morning has broken below. This tends to suggest to me that the upside is complete and thus the major direction should now be lower. I’d still like to see break of 117.50-78 but with daily & weekly cycles bearish I don’t feel like fighting them…
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 118.80-00 1.3666-68 1.2100-25 2.0131-38
Res: 118.00-20 1.3610-18 1.2065-75 2.0060-93
Spt: 117.50-78 1.3524-55 1.1969-97 1.9974-10
Spt: 116.95-10 1.3440-50 1.1878-98 1.9900-05

Forex Trading Strategy: U.S. Economic Data
U.S. economic data provides clues for dollar in currency trading
Part of a good forex trading strategy is checking economic data for clues as to where a currency is headed in forex trading. U.S. economic data today is trending toward dollar softness, and it is important to figure that into your forex trading strategy. Forbes reports on the U.S. economic data due out today:
Later on in the day, investor focus will be on a raft of data from the US, where inflation, housing starts and industrial output figures are all due.
CPI inflation is seen at 0.7 pct, with the core figure at 0.2 pct.


Forex Forecast: Will Euro Drop Versus Yen on FX Market?
Some currency anaylsts predict a euro correction in currency trading
The forex forecast for EUR/JPY may see it moving lower as a sharp correction triggers a drop in the euro in forex trading on the currency market. Bloomberg reports on the a likely EUR/JPY correction on the FX market:
The euro may see a ``sharp correction lower'' against the yen in coming days, according to charts that some traders use to predict price movements, said analysts at Citigroup Inc., the biggest U.S. bank.
Europe's single currency ``should be closer to 157.50- 158.00'' versus the yen, wrote New York-based Tom Fitzpatrick and London-based John Noyce in a research note dated yesterday.

Yen Weakness Worse than Dollar Softness in Currency Trading
Japanese yen up slightly in forex trading, but not enough
Even though the Japanese yen rose slightly against the U.S. dollar in currency trading on the FX market earlier today, it is not expected to maintain its gains. Yen weakness is considered worse than dollar softness in forex trading, reports Reuters:
But market participants said any respite for the low-yielding yen would be fleeting as investors dump the currency for higher-yielding currencies and assets as part of trading strategies such as the carry trade.
"The yen remains weak," said Tomoko Fujii, a senior economist and strategist at Bank of America in Tokyo.
"The G7 was a non-event, and thus far we've seen nothing to stop the move" to sell yen, she added.


British Pound News: Sterling Breaks $2 in Forex Trading
U.K. pound up in currency trading, supported by inflation
Yesterday, MarketWatch reported the following as the currency market slowed for the day in London:
"We have a string of events which could well propel sterling to break the $2 level. Today's move above $1.9900 was kick-started with the higher-than-expected production inflation figures," noted Martin Slaney at GFT Global Markets.Today, that prediction was realized as the U.K. pound broke the $2 level against the U.S. dollar for the first time in 15 years in currency trading on the FX market. Forbes reports on this British pound news in forex trading:
The prospect of higher borrowing costs in the UK is strengthening the pound against the dollar, as speculation grows of a cut in US interest rates, and against the yen, where rates seem set to remain at 0.5 pct for the time being.


GFT Market Recap: London Session
The UK data was at the forefront in today’s session as market participants were watching for accelerating inflation out of the UK numbers. When the UK’s CPI and RPI were released it showed exactly that has the CPI came in higher than expected at 3.1% v’s 2.8% (y-y) as did the RPI which came in at 4.8% v’s 4.6%. The GBP rallied sharply and the GBP/USD reached highs above the psychological level of 2.0000 and traded up to 2.0033. The USD also lost a little ground against the JPY today and stayed in rather tight ranges against the EUR and CHF.
RANGES

10:00pm-6:00am EST

Low
High
EUR/USD
1.3526
1.3549
GBP/USD
1.9902
2.0033
USD/JPY
119.10
119.69
USD/CHF
1.2111
1.2133



European Mid Morning Update 17th April 2007
Market awaits the key U.K. and U.S. CPI numbers
Some minor releases seen so far in Europe with Swiss February Real Retails Sales declining to +4.5% YoY but above the forecast of +4.0% YoY and provide solid signs of strength with unemployment at very low levels, inflation almost flat and industry looking buoyant. It should keep the SNB on track for a further rate hike but whether this will cause any strength in the Franc itself is unlikely with the market even favoring the Euro on an interest rate basis with prompted the SNB to comment that the level of the Franc does not reflect fundamentals.
The Italian February Trade Deficit narrowed to EUR-1.8bn and better than the EUR-1.95bn forecast. This is less than half of the February number last year and displays an improving balance with strong exports and imports under control. Q1 GDP should be quite good.
The following economic releases are due later today:
FebruaryEuro-zone Trade Balance EUR -5.0bn
Euro-zone Trade Balance s.a. EUR 0.6bn
March U.K. CPI (MoM) +0.3%
U.K. CPI (YoY) +2.8%
U.K. CPI Core (YoY) +1.8%
U.K. RPI (MoM) +0.5%
U.K. RPI (YoY) +4.6%
U.S. CPI (MoM) +0.6%
U.S. CPI (YoY) +2.8%
U.S. CPI (Excl food & energy)(MoM) +0.2%
U.S. CPI (Excl food & energy) (YoY) +2.6%
U.S. Housing Starts 1500K
U.S. Building Permits 1515K
U.S. Industrial Production +0.2%
U.S. Capacity Utilization 82.0%
AprilGerman ZEW Survey – Economic Sentiment 10.0German ZEW Survey – Current Conditions 69.0Euro-zone ZEW Survey – Economic Sentiment 8.0
The U.K. CPI may well provide the most action for the European morning with PPI showing a growing firmness in output prices which threatens high street prices. Forecasts are focusing on a +0.3% MoM rate that should bring the annual rate just short of the 3% upper band. In spite of the strong Pound which should make imports cheaper U.K. inflation has remained high and higher energy prices threaten to test the critical 3.0% upper target range which will only exacerbate the pressure on the BOE to hike rates. This in turn suggests further upward pressure on the Pound. However, watch the 1.9956-59 area that may well contain the upside on this first attempt. However the psychological 2.0000 level beckons and should be tested over the coming week.
Elsewhere the two other releases of note are the German and Euro-zone ZEW survey which are expected to show continued strength and the U.S. CPI numbers. This latter release could also have an impact with the market fearing high inflation accompanying the slowdown in the economy. We have Fed officials watching this closely and while an annualized rate of above the 2.8% forecast is clearly bad for the economy the threat of a hike in rates could generate a temporary recovery in the Dollar.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 120.34-53 1.3640-66 1.2234-80 2.0016-45
Res: 119.86-07 1.3590-16 1.2150-88 1.9956-59
Spt: 119.00-10 1.3510-20 1.2029-75 1.9862-76
Spt: 118.10-40 1.3440-50 1.1969-97 1.9741-80


European Morning Update 17th April 2007
Quiet range trading seen in the Asian session
The Aussie remained within a tight 0.8312-30 range this morning unmoved by the NAB Business conditions index for Q1 which remained unchanged from the prior 17. Notable was a rise in employment conditions and rising CAPEX plans which point to confidence in expanding capacity. The report is positive and reflects expectations of continued growth but with the big restraint being full employment and therefore a shortage of skilled labor. Overall this is neutral for the Aussie which needs to overcome recent highs if the uptrend is to continue. However a downward correction looks more likely at this point.
One of the key factors for the Japanese economy to solidify the base for the recovery to continue is consumer confidence and this took a further knock in March with the index edging lower by 1.4 to 47.2 and below forecasts of 47.8. One reason for the drop has been suggested to be the fact that the survey was conducted in person rather than over the phone. That aside, the Japanese are naturally conservative by nature and generating a reading reflecting strong confidence is always going to be a tough thing. That aside, with the market more Yen bearish the result will add to the desire to buy Dollars on dips – with the 119.00-10 area the first test of key support.
The following economic releases are due later today:
FebruarySwiss Adjusted Real Retail Sales (YoY) +4.0%
Italian Trade Balance (Total) EUR -1.95bn
Italian Trade Balance (EU) EUR 500mn
Euro-zone Trade Balance EUR -5.0bn
Euro-zone Trade Balance s.a. EUR 0.6bn
March U.K. CPI (MoM) +0.3%
U.K. CPI (YoY) +2.8%
U.K. CPI Core (YoY) +1.8%
U.K. RPI (MoM) +0.5%
U.K. RPI (YoY) +4.6%
U.S. CPI (MoM) +0.6%
U.S. CPI (YoY) +2.8%
U.S. CPI (Excl food & energy) (MoM) +0.2%
U.S. CPI (Excl food & energy) (YoY) +2.6%
U.S. Housing Starts 1500K
U.S. Building Permits 1515K
U.S. Industrial Production +0.2%
U.S. Capacity Utilization 82.0%
AprilGerman ZEW Survey – Economic Sentiment 10.0
German ZEW Survey – Current Conditions 69.0
Euro-zone ZEW Survey – Economic Sentiment 8.0
A much duller day than expected was seen yesterday with the Dollar failing to break below the lows seen in early Asia. The strength seen from those lows, while not particularly penetrating did break minor Dollar resistance against the Euro and this is beginning to suggest we may see a slightly larger pullback before the next round of weakness. This I can accept against the Euro but the same sort of expectation against the Swissie is going to make that more complicated and the need to tread carefully continues.
The Pound had a stronger showing than I had initially expected and there may be a little more seen today but I don’t think today’s the day we retest the 2.0000 level. It will before too long and this will be the first touch of this high level since 1992. However, all round I still maintain that the general wave structure is at a stage where a slightly larger pullback is beginning to look more and more likely but perhaps we have to wait until next week before that occurs. For now the basic Dollar direction does still appear to be lower although not directly.
As for USDJPY I have to say the short term has become a touch more complicated. I still tend to favor the overall move getting towards 120.53 but the structure looks a bit strange. Again, possibly EURJPY may well be the place to look and this appears to require a second test down towards the 161.40-44 area before we see that resume the rally which should reach 163.00-30 at least with minor risk of as much as 164.00.
The Aussie held below the 0.8357 peak and should see further losses today while USDCAD is still in the process of finding a low which it should do within the 1.1276-99 range.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 120.34-53 1.3640-66 1.2234-80 2.0016-45
Res: 119.86-07 1.3590-16 1.2150-88 1.9956-59
Spt: 119.00-10 1.3510-20 1.2029-75 1.9862-76
Spt: 118.10-40 1.3440-50 1.1969-97 1.9741-80

European Morning Update 16th April 2007 European Morning Update 16th April 2007
Dollar appears to be heading for a reversal higher
The U.K.’s Rightmove house price survey has shown a surprise 15% YoY rise over the March-April period, the fasted pace in four years and up from the prior month’s 12.2%. Asking prices climbed by 3.6% over the month, this itself the highest increase in five years. With price inflation still above the BOE’s upper target band (in spite of the Pound being at 15 years highs against the Dollar) the prospect of a further rate hike appears highly probable now which can only provide further strength for the Pound over the coming 1-2 months.
Australian business confidence has risen by 4 points to +10 to take it well above its long term average. Greater confidence was seen in small to medium sized companies and most strong in financial services and property construction. Of the larger businesses energy and construction recorded the highest confidence. This underlying strength will keep the pressure on the RBA to hike rates once again in spite of PM Howard’s suggestion it may not be required.
Japan’s February Industrial Production saw a sharp rise of +0.8% MoM, far above forecasts of -0.2% to bring the YoY rate to +0.7%. The rise was generated by the government’s annual modification of the output numbers and thus a little caution should be used for this result. Capacity Utilization was released at 106.3 being down by 0.4% on the month and -2.1% YoY. It is rather difficult to react to these figures without knowing the full extent of the revision. However, METI has forecast a rise in manufacturing output over March of as much as +1.8% but revising the original April reading of +1.3% down to only +0.4%. The Cabinet monthly outlook report is due today and it is still expected that they will still downgrade the assessment of manufacturing to “flat” from “increasing modestly” and this outlines the more likely situation.
Japan’s March Tokyo Condominium Sales were lower by 28% YoY and down from February’s 19.4% drop. The average price of a condominium apartment was 11.8% YoY higher with the average price per square metre being higher by 10.6%. These are quite surprising numbers with land prices only less than 1% higher over a year ago and CPI around flat. Take home wages are minimally higher and it doesn’t take a mathematician to work out that corporate profits are much higher.
The following economic releases are due later today:
FebruaryU.K. DCLG House Prices (YoY) 11.3%U.S. Business Inventories +0.2%
MarchGerman CPI (MoM) +0.3%German CPI (YoY) +1.9%U.K. PPI s.a. (MoM) +0.9%U.K. PPI n.s.a. (YoY) +0.2%U.K. PPI Output Prices (MoM) +0.3%U.K. PPI Output Prices (YoY) +2.2%U.K. PPI Input Prices (MoM) +0.3%U.K. PPI Input Prices (YoY) +2.7%Euro-zone CPI (MoM) +0.6%Euro-zone CPI (YoY) +1.9%U.S. Advance Retail Sales +0.5%U.S. Retail Sales (less autos) +0.8%
AprilU.S. Empire Manufacturing 7.5U.S. NAHB Housing Market Index 35.0
It is a bit difficult to be too definite after the movements on Friday. The Dollar strength that I had suggested we should see into the close did happen but then the reversal bit far too deeply. As I mentioned on Friday we are seeing new lows for the Dollar against the Euro but Friday’s losses still failed to see these moving to the 1.2029 low and the depth of the pullback from 1.2067 has been such that it doesn’t appear to really support a bearish scenario.
However, if I look at the general picture across the board there does seem to be a common picture of a major Dollar low developing today and causing a few weeks of a corrective pullback. There appears to be a weekly cycle low in the Euro around mid-May and therefore I am beginning to get more bullish for the Dollar but we need to pick out levels carefully.
The pound seems set for 1.9912-15 while USDJPY remains with a particularly strange pattern but if I have any preferences it is still for a move to the 120.53 area. Watch EURJPY along with this which still looks to have potential to 162.75-163.25.
Aussie looks spent and has a tentative topping pattern at 0.8357 (max 0.8385) while the Canadian Dollar is beginning to suggest it may just have found its low…
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSDRes: 120.34-53 1.3640-66 1.2291-20 1.9985-16Res: 119.93-07 1.3590-16 1.2205-45 1.9912-15
Spt: 119.03-10 1.3540-50 1.2029-74 1.9840-50Spt: 118.10-20 1.3440-50 1.1969-97 1.9741-80


Pro Commentary Lite April 16th 2007 ... GBPUSD
An excerpt from FX-Strategy's Pro Commentary

Price: 1.9875
Resistance:
1.9886
1.9912
1.9951
1.9985
Support:
1.9840
1.9810
1.9780
1.9741
Bias:
Mixed – waiting for breaks
Daily Bullish:
The wave structure is not clear. We do feel there is risk for 1.9912-15 to be tested but wait for a break above the 1.9886 high. Care at 1.9912-15 as this could cap – and if it does then we should also see a bearish divergence. Thus a stronger bullish stance requires breach of 1.9915 and if seen would extend the upside towards 1.9951 and 1.9985 at least. Next resistance is at 2.0016.
MT Bullish:
We retain our bullish stance and while 1.9670-00 supports this should move to 1.9985 minimum and we suspect 2.0016 and possibly as high as the 2.0078 level which should cap for a larger decline. (April 12th)
Daily Bearish:
We have seen gains to 1.9886 within an unclear wave structure. We tend to favor a small breach for 1.9912-15 but are not too confident there will be any further gains. Support is at 1.9540-50 and if this gives way then the downside becomes favored for a move back through 1.9780 (which could initially cause a small correction) and then down to 1.9723-41 which could again cause a pullback.
MT Bearish:
We are getting a little more cautious about the upside with risk of the 1.9912-15 capping for a reversal back to the 1.9589 low once again. (April 16th)

ELLIOTT WAVE COMMENTS
13th April
While we have seen a break above 1.9817-23 we feel this is most likely in an expanded flat Wave –b- with a 38.2% expansion at 1.9853. This should cause a pullback to the Wave a low at 1.9723 and possibly the 50% pullback at 1.9706 before Wave –c- can start.
16th April
We are a little cautious but feel there is risk of a cap being seen at the 38.2% expansion of the 1.9823-1.9589 decline which rests at 1.9912-15. This would imply a second test down to 1.9589 and possibly just below in an expanded flat Wave –iv-.
Ian Copsey


GFT Market Recap: Asia Session
The majors opened slightly different than Friday’s closes following the G7 meeting this weekend. The market was pretty volatile early in the session. The G7 statement on FX was unchanged from the last meeting.

RANGES

3:00 pm-11:00pm EST

Low
High
EUR/USD
1.3549
1.3575
GBP/USD
1.9853
1.9885
USD/JPY
118.97
119.66
USD/CHF
1.2123
1.2136


GFT Daily Forex Market Commentary
Forex Market Commentary for April 16, 2007 by Cornelius Luca
GFT Daily Forex Market Commentary
The dollar fell sharply versus the European currencies on Friday on renewed expectations of higher rates outside the U.S. versus flat domestic borrowing costs and the yen sank on misplaced disappointment that the G7 was not planning to criticize Japan for its artificially weak currency.
Euro/dollar
Euro/dollar rallied to a 2 ½ years on Friday. It’s overbought, but sell it only if a bearish reversal is confirmed. On a medium-term basis, the euro/dollar formed several bullish flags.
Initial resistance is at 1.3620. Above 1.3705, distant resistance is at 1.3805.
If 1.3620 holds, look for a correction toward 1.3440. Intermediate support is at 1.3540 and 1.3500.
Oscillators are rising.
NEAR-TERM: Mildly bullish MEDIUM-TERM: Bullish LONG-TERM: Bullish
Dollar/yen
Dollar/yen encountered very volatile conditions on Friday, when it reached a 1 ½-month high and formed the range for the entire week. It’s still facing the key Gann levels that bordered it last week, so only closes outside them will inject new life in this pair. Dollar/yen has been pushing against the top of its rising resistance for six consecutive days, so unless it breaks higher quickly, the downside will become really favored. Initial resistance remains at 119.65 from another 50-point pivot that targets 119.15 and 120.15. Distant resistance now comes at 120.75. Below 118.75, strong support remains at 118.25 from a 50-point pivot that targets 117.75 and 118.75.
Oscillators are rising.
NEAR-TERM: Slightly bearish MEDIUM-TERM: Slightly bullishLONG-TERM: Bullish
Sterling/dollar
Sterling/dollar nailed an over 2 ½-month high of 1.9886 on Friday. It should attempt to pad its gains, but it is difficult to ignore the fact that the MACD provides a bearish divergence and that the pair is overbought. This suggests that long positions should be accompanied by fairly close stop-loss orders.
Initial resistance is at 1.9905. If this Gann level breaks, the pound would likely take attack another Gann level at 1.9990. This is only a hair away from the psychological 2.0000 level. Immediate support is at 1.9825. Below 1.9780, strong support follows at 1.9700.
Oscillators are rising.
NEAR-TERM: Slightly bullish MEDIUM-TERM: Slightly bullish LONG-TERM: Slightly bullish
Dollar/Swiss franc
Dollar/Swiss franc fell to as low as a three-week low on Friday, but when the dust settled, it failed to close outside its rising channel. Expect more attempts to close below this line, now at around 1.2145.
If successful, look for a re-test of the support at 1.2068. Below it there is a key level at 1.2030. Dollar/Swiss franc then has strong support at 1.2000. Initial resistance comes at 1.2230. Next level is 1.2290. Distant resistance is at 1.2370.
Oscillators are mixed.


Asian Morning Update 16th April 2007
Dollar starts the week on a soft note
Euro-zone February Industrial production saw a healthy +0.6% MoM and +4.1% YoY rise against forecasts of +0.4% and +4.1% respectively. The numbers correspond well with the results from the big three and maintain prospects for growth this year.
The U.S. February Trade Deficit narrowed to US$58.4bn against forecasts of US$60.0bn, the improvement driven by a large drop in oil imports by 21% to the lowest level since February 2003. Total imports were down by 1.7% and exports down by 2.2%.
U.S. March PPI saw a +1.0% MoM and +3.2% YoY rise, higher than forecasts of +0.7% and +3.0% respectively and follows Thursday’s import price index which saw a much higher level on the back of a hefty rise in oil prices. Core PPI was flat on the month. PPI for consumer goods was up by +1.4% MoM with gasoline again providing the main impact. Not particularly good numbers but the Fed will find some solace in the unchanged core rate.
Finally from the States the Reuters/University of Michigan consumer confidence index dipped to 85.3 in April versus forecasts of 87.5 and down from March’s 88.4. Current conditions was down by 1.1 to 102.4 while the economic outlook was down by 0.4 to 74.3. The subdued readings of consumer confidence appear to be spreading across surveys now and do have some threat of snowballing the overall slowdown.
The ECB’s Weber was talking at the G7 conference saying “We see in the medium term an inflation rate in the Euro area of about 2 percent, perhaps slightly more. We assume that growth in the first quarter in the Euro zone could be moderated some way because of the German (value-added tax increase but a solid trend is still working and could lead to a more positive growth than we had expected originally.” The continued strength of the European economy was considered a significant positive suggesting that globalization allows the global economy to maintain growth even if one economic power sees below average performance which should allow a faster recovery. Interestingly Mersch commented that even if the U.S. was to undergo a hard landing the Euro could withstand a 10% depreciation against the Dollar.
The G7 communiqué was upbeat stating: “Although risks remain, the global economy is having its strongest sustained expansion in more than 30 years and is becoming more balanced." However, no special mention was made regarding the weakness of the Yen using the same wording from the February statement, “Japan's recovery is on track and expected to continue," the G7 said. "We remain confident that the implications of these developments will be recognized by market participants and will be incorporated in their assessment of risks. Indeed, recent Yen weakness has been mostly confined to the Pound and antipodean currencies while the Euro has been strong all round, not just confined to the Yen.
The economic calendar is fairly full this week with the Dollar remaining weak on Friday in spite of a sharp initial pullback on Friday. The immediate implication does appear to suggest the Dollar’s downside should extend with the Euro rising to new highs in early Asian trade though still remains above lows against the Pound and Swiss Franc.
Although there are recurrent rumors that G7 will be looking further into the carry trades position, the Yen has weakened further all round on the back of the fact that interest rates are unlikely to move higher over the next 2-3 months at least.
More later when the analysis is complete.
Asian economic releases expected today are:
Japanese March Tokyo Condominium SalesJapanese February Industrial Production (MoM) -0.2%Japanese February Capacity Utilization Japanese Cabinet April Economic Report
U.K. Rightmove House Prices

Still Looking for Currency Traders for DealBook WEB Beta
Sign up and be the first to try this forex trading platform
GFT is still looking for currency traders to try out its new DealBook WEB, a web-based forex trading platform that allows you the convenience of currency trading from anywhere, without having to download FX software.The Beta version is not live forex trading, but it will give you the chance to learn the basics of the program, and to give you a chance to provide input on this newest of GFT's state of the art currency trading tools.


Yen Carry Trade Unwinds Ahead of G7 Meeting
Japanese yen rises in forex trading
The Japanese yen is up in currency trading on the FX market as the yen carry trade unwinds as a forex trading strategy ahead of the G7 meeting. Reuters explains the dynamics behind the yen carry trade and the G7 meeting:
But investors, cautious ahead of the G7 meeting and also key U.S. inflation data next week, were unwinding positions.
"If people are worried the G7 might again issue a statement that the yen is undervalued, people will be uncomfortable being short yen going into the G7 meeting," said Johan Javeus, currency strategist at SEB in Stockholm.
"The market is overly worried... They (the G7) are likely to stick to their usual words. But with record high levels in euro/yen the market might be inclined to take some profits."


Australian Dollar Forex Forecast
Aussie expected to remain strong through weekend in forex trading
The Australian dollar forex forecast calls for a stronger Aussie over the weekend. Economic data is driving the economy, and the Australian dollar is up against the U.S. dollar on the FX market. The Herald Sun reports on the Aussie in forex trading:
[Currency strategist Robert] Rennie said the dollar would likely strengthen over the weekend unless news out of the G7 surprises the market.
"If nothing comes out of G7, it's pretty much plain sailing for the Aussie," he said.
Westpac expects the dollar to remain comfortably above 80 US cents at least until mid-year.


U.K. Pound Down v. Japanese Yen, But Up v. U.S. Dollar
The sterling and currency trading on the FX market
The U.K. pound is losing ground to the Japanese yen in forex trading on the currency market, but it is gaining against the U.S. dollar. Indeed, the sterling is expected to perhaps reach the $2 mark against the dollar in forex trading in the next few weeks. Bloomberg reports on the U.K. pound in currency trading on the FX market:
Against the dollar, the pound rose to $1.9863 from $1.9793 yesterday. BNP Paribas said the currency extended gains after it broke a key resistance of $1.980, citing charts that predict price movements. Resistance is a level where sell orders may be clustered. BNP's technical analysts expect the British unit to rise to $2 in the next few weeks.


Euro Hits Lifetime High Against Japanese Yen in Forex Trading
Asian session profitable for euro in currency trading
The euro is still rising in currency trading on the FX market. It hit a new lifetime high against the Japanese yen in the Asian forex trading session, and is expected to remain strong. Forbes reports on the euro and Japanese yen:
Earlier in the Asian session, the euro struck a new lifetime high of 160.88 yen against the yen, even though the European Central Bank (ECB) now seems likely to raise interest rates only in June, rather than in May, dealers said.The euro is also moving up against the U.S. dollar in forex trading, based on the fact the U.S. data continues to be weak, and the ECB is expected to lift interest rates in June.


GFT Market Recap: London Session
The USD weakened against the other majors, ahead of the G-7 Ministers Meeting. The JPY was the main beneficiary as there is speculation that there will be comments out of the G-7 saying the JPY weakness is unwarranted.

RANGES
10:00pm-6:00am EST

Low
High
EUR/USD
1.3500
1.3538
GBP/USD
1.9809
1.9870
USD/JPY
118.20
118.92
USD/CHF
1.2073
1.2152


European Mid Morning Update 13th April 2007
Dollar weak but position squaring ahead of the weekend G7 will limit losses
French CPI rose in line with expectations at +0.4% MoM and +1.2% YoY over February. While this is a rise from January’s annualized +1.0% it should be remembered that this was an eight year low and thus the inflationary picture in France is still subdued. As with the Italian numbers earlier the main component fuelling the rise was the increase in oil prices which were higher by +1.6% MoM. With intrinsic price pressures still contained the next few months could well see moves in CPI correlated to oil prices. The ECB will be comfortable with this result.
The following economic releases are due later today:
FebruaryEuro-zone Industrial Production s.a. (MoM) +0.4%Euro-zone Industrial Production w.d.a. (YoY) +4.1%U.S. Trade Balance US$ -60.0bn
MarchU.S. PPI (MoM) +0.7%U.S. PPI (YoY) +3.0%U.S. PPI (excl Food & Energy) (MoM) +0.2%U.S. PPI (excl Food & Energy) (YoY) +1.8%
AprilUniversity of Michigan Confidence 87.5
Although the Asian session has seen the Dollar under pressure there is little to push the Dollar much further with the economic calendar quite thin. Indeed, with the weekend G7 meeting there is probably more potential for a tidying up of positions which suggests the Dollar should benefit today awaiting communiqués from the financial ministers. Almost certainly Forex will not likely receive any more attention or comment than in the past with the general statement declaring that rates should reflect economic fundamentals.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSDRes: 119.71-07 1.3590-16 1.2180-00 1.9980-85Res: 119.17-53 1.3553-65 1.2130-40 1.9878-15
Spt: 118.10-40 1.3450-70 1.2068-82 1.9810-20Spt: 117.34-51 1.3395-11 1.2029-34 1.9750-60

European Morning Update 13th April 2007
Dollar on the soft side in Asia but losses should be limited
There have been no economic releases in Asia today except for and IDS report which reported a quarterly rise in U.K. wage settlements of 3.5%. While the number is the same as the 3M figure reported in January and up from 3.42% in February, it actually marks the highest level since September 2001. Over a quarter of all settlements were 4.0% or above due to the increasing tendency to reference RPI and the recent trend is pointing to an increase in settlements above 4% which will only force the BOE to hike rates.
The IMF’s Rato has added fuel to the rumors of carry trades being discussed over this weekend’s G7 meeting by commenting that such trades need be monitored carefully due to the risk of a sharp move in exchange rates. He identified the Aussie and Kiwi Dollars as the main beneficiaries. At the moment the JPY crosses still remain firm and this should continue in the short to medium term.
It seems customary for the BOJ to state their confidence in the U.S. economy since Japan’s growth has a strong link to the strength of this growth. He repeated this morning that he agreed with Bernanke that there is a “high probability” of achieving a gradual slowdown without tipping the economy into recession even though there are risks from lower CAPEX and high inflation.
The following economic releases are due later today:
FebruaryEuro-zone Industrial Production s.a. (MoM) +0.4%Euro-zone Industrial Production w.d.a. (YoY) +4.1%U.S. Trade Balance US$ -60.0bn
MarchEuro-zone 25 New Car Registrations French CPI (MoM) +0.5%French CPI (YoY) +1.2%U.S. PPI (MoM) +0.7%U.S. PPI (YoY) +3.0%U.S. PPI (excl Food & Energy) (MoM) +0.2%U.S. PPI (excl Food & Energy) (YoY) +1.8%
AprilUniversity of Michigan Confidence 87.5
We had what appears to be a signal of direct gains in EURUSD yesterday. This does look positive and within this pair what we have to watch now are the two scenarios that I have been pondering – the daily expanded flat at 1.3559 and the direct rally to 1.3666. We have reached 1.3523 this morning and we need look at the next move. Now the slight confusion is the lack of follow-through in USDCHF which really didn’t make too much progress on the downside. I think this may well be the differentiator between the two scenarios.
However, for today we note all the way through the risk for a pullback in the Dollar and we tend to feel that some Dollar strength should be seen into today’s close. Watch Dollar resistance levels at 1.3406-20 Euro, 1.2244-50 Swissie and 1.9703-23 Pound.
For USDJPY we have seen a dip slightly earlier than expected but there does seem to be good support between 118.40-80 and while that holds it remains with a Dollar bullish bias and may well see gains prompted by the EURJPY upside which should keep on the uptrend.
Aussie – watch 0.8340-60 and USDCAD 1.1276-1.1320. These areas should be triggering a reversal.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSDRes: 119.71-07 1.3590-16 1.2244-50 1.9912-15Res: 119.17-53 1.3523-53 1.2181-07 1.9835-53
Spt: 118.10-40 1.3440-70 1.2118-31 1.9777-83Spt: 117.34-51 1.3395-11 1.2029-74 1.9703-23


Pro Commentary Lite 12th April 2007 ... USDCHF
An excerpt from FX-Strategy's Pro Commentary

Price: 1.2146
Resistance:
1.2181
1.2210
1.2250
1.2282
Support:
1.2131
1.2118
1.2078
1.2029
Bias:
While 1.2118-31 supports we feel there may be room for a return to 1.2244-50
Daily Bullish:
Losses were seen as preferred and these reached just below the 1.2140-50 support, stalling at 1.2131. We see support here and at 1.2118 and feel this may well hold any losses and if so a move back above 1.2155 should then lead to a test of the 1.2181 pivot area with break there forcing a move back to the 1.2207-12 area which could cause a small pullback ahead of a retest of 1.2244-50. At this point we feel it will hold for a second test lower. Thus only above 1.2250-55 would retest 1.2282.
MT Bullish:
The failure to break lower is causing the wave structure to develop a potential strong break higher. A move above 1.2281-00 would heighten this with resistance then at 1.2354, 1.2402 and 1.2525. (April 9th)
Daily Bearish:
Losses reached just below the 1.2140-50 support and we do still see minor risk of this extending to 1.2118. However, at this point we feel it may hold. Thus a more bearish stance will require a break of 1.2118 and if seen would extend the downside to 1.2074-82 where we need to take a little care. Further support is then seen at 1.2029-50 which should hold if seen.
MT Bearish:
We have seen losses that have moved below 1.2145 but the nature of the decline is a little uncertain and before we get further bearish we will need a break below 1.2229-50. (April 13th)

ELLIOTT WAVE COMMENTS
12th April
It certainly looks as if we may have seen a Wave –x- at the 61.8% retracement at 1.2281. This would imply additional losses but since we have had only two ABC structures higher it may be prudent to keep in mind the possibility of a third ABC pattern.
Price has reached a 76.4% retracement at 1.2250 and this may just imply a triangle which would see support around 1.2140-50. Thus use this as a clue – below would imply losses to the 1.2029-34 area being a 138.2% projection in a potential Wave iii of a new Wave (a) lower.
13th April
Care is required at this point which could still see a return to 1.2244-50 in an expanded flat. Given the wave structures elsewhere we would need to see break of the wave equality target at 1.2068.
Ian Copsey


GFT Daily Forex Market Commentary
Forex Market Commentary for April 13, 2007 by Cornelius Luca
GFT Daily Forex Market Commentary
The dollar sank across the board on Thursday, as the incessant demand for the commodity currencies spilled over the European currencies and the yen as well. The dollar is starting to look a bit oversold, but this shouldn’t last for long. Following a brief bounce, the US currency should encounter further weakness. This being said, Friday will see the release of the Trade balance report for February, the PPI report for March and the University of Michigan survey for April. Any of these reports may be market movers, but the trade report should be disregarded. Euro/dollar
Euro/dollar resumed its strong uptrend on Thursday and reached a new over two-year high. Above 1.3525, resistance follows at 1.3555 and 1.3588. There is a pivotal high at 1.3666.
Immediate support is seen at 1.3480. Below 1.3420, the next levels are 1.3365 and 1.3340. Distant support is pegged at 1.3300. Oscillators are rising.
NEAR-TERM: Mildly bullish MEDIUM-TERM: Bullish LONG-TERM: Bullish
Dollar/yen
One day after climbing to its highest level since late February, dollar/yen slipped on Thursday. Sideways to lower trading remains favored, but watch out for the big levels nearby. Below 118.75, strong support remains at 118.25 from a 50-point pivot that targets 117.75 and 118.75.
Initial and key resistance is still seen at 119.65 from another 50-point pivot that targets 119.15 and 120.15. Above 120.75, distant resistance now comes at 121.05 from another 50-point pivot.
Oscillators are rising.
NEAR-TERM: Slightly bearish MEDIUM-TERM: Slightly bullishLONG-TERM: Bullish
Sterling/dollar
Sterling/dollar climbed higher on Thursday, and should push up today as well. Immediate resistance is at 1.9840. The pound will likely attack the area between 1.9905 and 1.9935. Naturally, there is psychological resistance at 2.0000.
Initial support is at 1.9780. Next floors are at 1.9750 and 1.9705. Below 1.9680, strong support follows at 1.9640. A pivotal low is at 1.9590. Oscillators are rising.
NEAR-TERM: Slightly bullish MEDIUM-TERM: Mixed LONG-TERM: Mixed
Dollar/Swiss franc
The dollar/Swiss franc fell to a one-week low on Thursday, but trimmed losses after testing briefly the bottom of its rising channel. More sideways to lower trading is likely today. Support is seen at 1.2135, which marks the bottom the channel. If this floor breaks, then dollar/Swiss franc would likely challenge the 1.2075 level. A key level follows at 1.2050. Initial resistance comes at 1.2200. 1.2240 follows that. Above 1.2282, strong resistance comes at 1.2330.
Oscillators are mixed.
NEAR-TERM: Mixed with bearish bias MEDIUM-TERM: Mixed with upside biasLONG-TERM: Mixed