The greenback experienced a trading session of mixed results yesterday. Soon after the trading day began, the USD reached a… … 6 month record against the EUR as the pair fell to a rate of 1.4630. However, it was a straight or shall we say “strait” downfall for the USD ever since, as the cross rose to breach the 1.4800 level.

The USD made its record high against the EUR as a result of a much better than
expected Producer Price Index figure. The indicator rose by 1.2%, beating
expectations for only a 0.6% rise. The surprising surge reflects an increasing
inflation pace, that might only be stopped by interest rates hikes, and the market
promptly reacted to continue the USD's rally. However, 3 elements have joined
together to provide traders with an excellent opportunity to gain profits on their
short USD positions. The first one was the Building Permits indictor which fell
beyond expectations to its lowest growing rate since 1991, as only 0.94M new
residential building permits were issued during July, showing that the housing
market in the U.S is in the midst of a crisis and not over it. The second reason for
the falling Dollar was the second day of bearish American stock markets. After a
positive month for the equity markets that had largely contributed to the bullish
trend the USD had gone through, two consecutive days of falling stocks prices
managed to generate some wariness for the investors, and have them partially close
their long positions on the USD. The third reason was the recuperation of oil
prices, which rose by over $3 a barrel yesterday, to be traded around $115, giving
extra support to the weakening USD.

As the sole indicator that will be published from the U.S. economy today is the
Crude Oil Inventories, traders are well advised to follow Crude Oil prices, and
refer to them as one of the most influencing information that might affect the USD.
In case that no dramatic changes will occur, the USD is widely expected to resume
its general trend of bullish behavior against its major currency rivals.

* EUR
The German Economy Leads the Way For the Euro
Yesterday, the EUR has appreciated against all its major currency rivals. Its most
notable bullishness was experienced vs. the USD after the pair had breached the
14800 level in the morning. The EUR also sustained rising trend against the GBP and
the JPY.

The EUR's bullish behavior came firstly as a result of exclusively positive data
coming from the Euro-Zone yesterday. The German economy, the strongest economy in
the Euro-Zone, was the main source of the favorable data. The German Producer Price
Index rose by 2.0%, well above expectations for only a 0.7% rise. Even more
important was the German ZEW Economic Sentiment that measures the institutional
investor sentiment. The indicator came at -55.5, and not at the expected -62.0. The
European ZEW economic sentiment was also published, and also delivered better than
expected figures as it came in at -55.7, almost 8 points higher than predictions.
The EUR was also riding rumors suggesting that an interest rate hike is expected
from the Euro-Zone, rumors which were highly enhanced by the German Producer Price
Index outcome, as the high inflation rate might compel the European Central Bank
chiefs to raise its interest rates.
In addition to the EUR's positive data, the USD has suffered from some disturbing
news yesterday, and with the help of the rising oil prices, the EUR's correcting
move against the USD was imminent.

As for today, no significant data is scheduled from the Euro-zone, and so low volume
should be expected within EUR crosses. However, following yesterday's bustle, the
market is very likely to continue its wakeful momentum. As opposed to yesterday, the
EUR seems to have maximized its positive data, and a downtrend could be seen today,
especially against the USD that will look to continue its rally.

* JPY
BoJ Expecting a Growing Phase For the Japanese Economy Soon
Yesterday, the JPY underwent a session of volatile behavior against most of its
major currency counterparts. The JPY rose against the USD as the pair descended
beneath the 109.60 rate. However, it mainly saw bearish trends against the EUR and
the GBP.

Yesterday, the Bank of Japan (BoJ) has decided to leave its interest rate at its
current level of 0.5%, the lowest in the industrial world. The BoJ Governor
explained this decision by saying that he believes the falling commodities prices,
along with the stabilizing overseas economies has eased inflation concerns in Japan,
and that very soon the Japanese economy should enter a growing phase. However, he
did say that it is still unclear weather the current downtrend in commodities
prices, such as Crude Oil, will remain intact, leaving an open window for any
interest rates manipulation that might be needed in the future.

Looking ahead to today, at late-night the Japanese Trade Balance will be published,
and is forecasted by analysts to deliver much better figures than the survey from
last month, as it's expected to rise from 0.14T to 0.35T. However, the JPY will be
mainly influenced by overseas developments, and traders should pay attention to the
USD and EUR in order to determine the JPY's direction for today.

* Crude Oil
Oil Prices Jump Up Bullishly
The Crude Oil prices rose bullishly by more than $3 in yesterday's trading session.
A barrel of oil was breached the $115 barrier as the USD weakened against the EUR
and a rally in heating oil pulled new buyers into energy markets. There was even
more volatility in the markets as September contracts expire today. Although the
Tropical Storm Fay seems to be less threatening than many expected, and oil
facilities in the Gulf are no longer expected to be in threat.

The American Crude Oil Inventories are expected to be released today at 2:35 GMT and
will cause volatility in the Crude Oil trading. After a negative value last week,
the expectation is for 0.7M this week, which should lower the Crude Oil prices in
this case as it means that supply is rising. As the bad weather worries seem to be
almost over and higher Crude Oil Inventories in the forecast, the Crude Oil prices
should lower in today's markets.

Technical News
* EUR/USD
The pair is currently correcting up on a local level within the bigger bearish
trend. The upcoming bearish cross on the 4 hour chart's Slow Stochastic indicates
that the bullish trend's comeback is at the doorstep. A strong breach through 1.4700
will probably validate the bearish return.

* GBP/USD
The pair is consolidating around the 1.8650 level and appears to be accumulating
momentum ahead of the next break. The 4 hour chart is showing moderate bearish
momentum, with the Bollinger Bands tightened indicating that a breach might be quite
imminent. In case of a violent bearish move, the pair will probably heading towards
the 1.8500 zone.

* USD/JPY
The pair is still traded within the bullish channel as the direction is currently
unclear. No significant breach has been made in either direction, yet there is a
bearish hint in the form of a cross on the 4 hour Slow Stochastic. The Bollinger
Bands are tightening which indicates that the break is near. Going short with tight
stops might be smart today.

* USD/CHF
There are no distinct patterns on both the daily and the hourly charts. Mixed
signals are being given from both, and it appears that the pair's next move is quite
vague. It would be preferable for traders to wait for a clear sign before
approaching this pair today.

The Wild Card
* Wild – CAD/CHF
There is a very distinct bearish channel forming on the 4 hour chart as the pair now
moves down within the channel. The Slow Stochastic is showing quite a strong bearish
cross; wile the RSI floats at the overbought territory further supporting the
ongoing downtrend. It appears that the pair is heading 1.0100 and going short might
be a preferable strategy for
forex traders today.

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