Economic News - USD.Yesterday the greenback held firm at around 3-month highs against the JPY and surged towards the 1.3454 level versus the EUR.

The currency...

... is being supported by easing
concerns about the outlook for the US economy. Dollar buying sentiment remains
strong after recent indicators supported the view that the US economy is on the
right track. The re-assessment of the US growth outlook is weighing down on US fixed
income markets and this is providing the dollar with some extensive support.

After weeks of selling the dollar and buying the EUR, investors took advantage of a
quiet day in terms of news flow to square off their positions. In particular, the
chances of a rate cut in the US are considered less likely, whereas ECB rate hikes
are already aggressively priced in, making the dollar now more attractive than the
EUR in the short term.

Although there seems to be a positive outlook for the USD, this week is void of any
significant news so trading will be subdued and the dollar is unlikely to post any
sharp gains. We shall see this week a gradual and not a rapid dollar rise
particularly verse the JPY. The only factor that could hold back the bullish dollar
rampage is the growing risk appetite which will draw capital away from the US in
search of higher yields.

* EUR
In contrast with the US, where markets are becoming less convinced that a rate cut
may be delivered, the European financial markets are already fully pricing in two
more rate hikes and most of a third towards the end of the year. This has made any
gains in the EUR very hard to eke out. Traders will be closely monitoring the ZEW
and IFO German business confidence indicators which will be released tomorrow and on
Thursday respectively. The ZEW expectations index is forecast to come in at 23.0 in
May, a large improvement on April's figure of 16.5. We believe that this figure will
release positively and continue on its rising trend as the German GDP flash estimate
released surprisingly stronger than expected last week. If the ZEW report comes out
very strong the EUR may be able to get some reprieve from the current bear hold. The
EUR meanwhile slipped back from its record high against the JPY as traders pocketed
profits after the single currency's recent rise into uncharted territory. After
holding out at 163.62 against the Yen the EUR slipped to 163.45 and the EUR also
took a dip against the dollar dropping from 1.3469 to the 1.3459 level.

Elsewhere, the Sterling's performance was mixed, weaker against the dollar but
higher against the yen. High money supply data released yesterday morning was partly
offset by weaker mortgage approvals figures. The BoE is already widely expected to
raise rates again in the coming months, so attention will be on the minutes on
Wednesday, for a closer look at the logic behind their rate hike this month.



* JPY
Today trading is expected to remain very calm as a result of the bare international
economic calendar. The Japanese yen, which is the scape goat of the so-called carry
trades, weakened against all the majors yesterday. It has touched three-month lows
against the dollar and come off all-time lows against the EUR. In Japan, consumer
prices due out on Friday are the main economic event this week with the market
expecting a third straight fall. Nevertheless this expected fall has not changed
the general sentiment of economists that there will be another quarter-point
interest rate hike in the third quarter of 2007 and the BOE Governor Fukui also
mentioned last week that rates could go up even if consumer prices keep falling.
As a result of the empty international economic calendar the recent bearish
momentum of the Yen is expected to continue until the end of the week.



Technical News
* EUR/USD
After the last trading day, the volatility regarding the EUR/USD decreases, we
expect that the bearish trend will continue to gather momentum also for today. EUR/
USD is in a downtrend directed by 1H exponential moving averages. 1H, 4H Elliott
pattern implies that the EUR/ USD will continue to gather momentum. The price should
continue to move downwards in a range of 1.3480 to 1.3400. 1.3475 seems like a
strong entry point.


* GBP/USD
On the 4 H chart, a rising wedge (bearish) is forming which may imply a continuation
of the bearish trend, it is recommended to time the entrance to the market with
short term charts, 1.9738 seems like a strong entry point. At the moment GPB USD is
being traded around 1.9765 to 1.9700 range. The volatility is low, we should expect
to also see today bearish pressure on the GBP


* USD/JPY
The USD/JPY broke 121.50 resistance. USD/ JPY is in an uptrend supported by 1H
exponential moving averages. The volatility is low. Bollinger bands are tightened.
We should expect to see today a bullish configuration. 1H, 4H Elliott pattern imply
that the USD/JPY will continue to gather momentum. The target is expected at 121.90


* USD/CHF
The USD CHF is in a bullish configuration. The volatility decreases . USD CHF moves
without trend and swings around exponential moving averages (EMA 50 and 100).
Bollinger bands are tightened. 1H, 4H Elliott pattern implies a continuation of the
bullish pressure. The uptrend should continue, and the expected target is 1.2370.




The Wild Card
* EUR/JPY

Forex trades should be aware that on the 4 H chart, the 5 Elliott pattern can be
observed and the A,B,C is to be formed ,in this case the C wave is expected to make
this pair consolidate at 163.60 however its not a classic pattern and therefore
need to be caution is needed on this kind of move

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