Yesterday, the USD lost grounds against most of its rival currencies but remained within its recent range. The recent USD...

... weakness has been caused by some traders' renewed expectations for higher U.S. interest rates after contradictory U.S. economic data.



The greenback continues with bearish momentum following Tuesday's
losses, which resulted by the Housing Starts' plunge to its lowest level in the last
17 years added by the adverse economic information from mortgage and lending
markets. The USD was 0.1% lower against the JPY, trading at 107.80, and also
depreciated to 1.5528 compared with 1.5462 against the Euro.
Also yesterday, the Crude Oil prices climbed up, passing the $136 following an
imminent strike trend in Nigeria. Crude Oil prices moved up in anticipation of the
supply data from the U.S, which showed a decrease in stockpiles by 1242k barrels in
the week ending on June 13.
On tap today, we are expecting a batch of mixed U.S. data. Unemployment Claims is
expected to rebound back to 375K, the Philadelphia Fed will release its
Manufacturing Index for June which is expected to hike to -10 compared with May's
reading of -15.6. We also expect hawkish speeches from the Treasury Secretary
Paulson and the Fed's Vice-Chairman Donald Kohn about risk management and its
implications for systemic risk. As most indicators are expected to have a rising
trend, this should give the greenback a recovery from the previous trading days
during today's trading session.



* EUR
The EUR finished yesterday's trading session with signs of strength against most of
its counterparts, despite sparse new economic data and expectations that the ECB
will initiate aggressive interest rate rises to curb inflation pressures in the
month of July.
The Euro rose 18 pips to 1.5528 against the USD after slipping earlier to 1.5462.
The cross remains confined to the 1.5300-1.5550 range because of the lack of
significant new economic data. Against the JPY, the EUR rose up 20 pips to 167.61
reaching the 168.00 mark, and was also up against GBP, rising to 1.2605 despite the
hawkish comments of the BoE that the interest rate will remain at 5%.
Trading conditions are expected to become more volatile, as the analysts from the
Euro Zone and U.S. have been predicting a series of rate hikes by the Fed and the
ECB before year-end; however it is probable that the Fed will maintain the interest
rate target at 2% after a sharp reduction from 3.5%. However, it has become a common
opinion that the ECB will raise the interest rate to 4.25% in July.
Today, we don't expect significant economic data to come out from the Euro economy,
as the only economic reading will be Italian Unemployment Rate. Expected to be
released at 8.00 GMT, experts expect the rate to be reduced by 0.1% from a previous
reading of 6.1%. However, traders should expect to see an active EUR trading session
in response to key U.S. data releases today.



* JPY
Yesterday, the JPY saw mixed results against major currencies. It appreciated vs.
the USD, passing the 107.60 point, but retreated against the Euro. The only economic
data from yesterday was the Japanese All-industries Index, rising by 0.8% compared
with the last reading of 0.3% in March.
It is also worth mentioning that the Bank of Japan (BoJ) monetary policy meeting
released the minutes from the last meeting. A significant note in the minutes was
that the BoJ raised the caution level regarding the growing risk of inflationary
pressures in the global economy, raising the expectation of an increase in the
interest rate before the end of the year.
Looking ahead to today, there will be almost no significant economic releases from
the Asian markets except the speech by the BoJ Governor at the annual meeting of the
National Association of Shinkin Banks, in Tokyo. High volatility is expected to take
place after Shirakawa's speech. Traders should pay attention to his speech in order
to get a sense of the direction of the currency for the near future.

Technical News
* EUR/USD
The daily chart and the 4 hour chart show that the momentum on is still bullish.
However, the 4 hour chart's Relative Strength Index floats near the upper line
indicating that the current trend might be closing to its end. On the Hourlies, the
local bearish correction is already intact. A bearish cross of the Hourly chart's
Slow Stochastic validates that correction as well.


* GBP/USD
The daily chart is showing that the pair does not have a distinct direction, as the
chart appears to be quite horizontal for the past 2 weeks. The Bollinger Bands are
widened, and the 4 hour Slow Stochastic also provides no clear indication. On the
Hourlies, the pair has been range trading with high volatility for a while now.
Waiting for a clearer sign before entering the market might be the smart move today.


* USD/JPY
There is a very distinct bearish channel forming on the daily chart, as the pair now
floats at the middle of it. All oscillators are showing bearish momentum, and the 4
hour chart's Bollinger Bands are getting tighter which indicate an additional
upcoming downwards move. The next target price of 107.10 appears to be valid.


* USD/CHF
The typical range trading on the daily chart continues. Both the RSI and Slow
Stochastic are floating in neutral territory. The hourlies are also providing mixed
signals with no specific direction. Good strategy might be to wait for a clearer
signal before entering the market n this pair.

The Wild Card
* Wild - Gold
Gold broke the 883.50 resistance level. Gold is in an uptrend supported by 1 Hour
exponential moving averages. Bollinger Bands are widened indicating increased
volatility. We should expect to see a bullish configuration today. 1 Hour and 4 Hour
Elliott patterns are also implying that Gold should gather momentum during the day.
The target is expected to hit 894. This provides
forex traders with an opportunity to go long taking advantage of a bullish correction.


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