The USD had a strong trading day against its currency crosses yesterday. The USD's rally was supported by a batch… … of better than forecasted economic releases and a hawkish speech by Fed Chairman, Bernake.

The USD also took advantage of the falling
Crude Oil prices which traded at around $134 a barrel yesterday. After trading at
around 1.60 on Tuesday, the EUR/USD fell to the low of 1.58 as the USD gained
momentum. The USD/JPY rose from around 104.00 to trade above 105.00 in yesterday's
market following the releases from the U.S.

The USD took advantage of a batch of positive economic data that was released
yesterday. Both the Core CPI and general CPI beat forecasts and kept an increasing
trend compared to last month's results. The Capacity Utilization Rate, which
measures the percentage of available resources being utilized by manufacturers,
mines, and utilities, and the Industrial Production, both beat expectations with
their results announced simultaneously. The icing on the cake in terms of economic
data was the Crude Oil Inventories, which were measured at 3.0 million, compared to
negative value last week, which further dropped the Crude Oil price as well. Around
this time, Fed Chariman Bernake gave the semiannual monetary policy testimony before
the House Committee on Financial Services, in Washington DC. In his words, Bernake
said a “top priority” for the central bank is to bring inflation to an acceptable
level. He helped the greenback's rally by easing traders' worries as he said that he
believes mortgage giants Fannie Mae and Freddie Mac are in “no danger of failing”.

There are more significant economic data releases for the USD today, however it
seems like this time the momentum might shift to a bearish trend. The impactful
Building Permits and Housing Starts are expected to slightly drop as traders are
still waiting for a sign of a breakout from Housing Crisis. The Unemployment Claims
are expected to significantly increase by 34K this week. It will be up to FOMC
Member Kroszner, who is due to speak at the Interagency Minority Depository
Institutions National Conference, in Chicago, to save the greenback from a weak
trading day ahead. Kroszner's speech and the Philadelphia Fed Manufacturing Index,
which is the only release which is expected to rise, will be the only indicators
that might save the USD from a bearish trading day.

* EUR
The EUR lost ground versus its major rivals yesterday, most notably losing more than
100 points against the USD. While the USD, GBP and CHF were supported by mostly
better than forecasted economic data, the EUR's economic releases were all very
steady and were valued at their forecast figures. The CPI's from France, Germany and
the whole Euro-Zone were all measured very close to their previous figures and no
there was no surprise to push the EUR ahead of its currency crosses. The French CPI
was even lower than its previous measuring and the worry of very slow economic
growth in the Euro-Zone is becoming more realistic. It also seems like in general
the Crude Oil and EUR have matching trends, so as the Crude Oil prices fell sharply
yesterday, so did the EUR.

There is only one significant economic data release expected today from the
Euro-Zone. The morning will start off with the Italian Trade Balance which is
expected to slightly rise, but stay in the negative zone. Against the USD, traders
might no foresee a direction as both currencies might have bearish trends, but
against all the other crosses, the EUR could lose even more grounds as no impactful
surprises are expected in today's trading.

* JPY
As expected, the JPY's trading trends were caused by its counterparts' momentum
shifts yesterday. There was no economic data released from Japan yesterday and the
trading was based on the USD's bullish momentum and the EUR's bearish momentum. The
USD/JPY cross dropped in the morning to the low 104.00's before the USD's news were
announced, but after the releases, the cross was traded above that 105.00 range. The
low Crude Oil prices did not help the weak JPY and it seems like investors are very
worried about a significant economic slowdown in Japan caused by the high material
costs.

The only economic release in Japan today will be the Monetary Policy Meeting
Minutes. Although the meeting was held about a month ago, this will be the traders'
first opportunity to sense the Japanese financial issues and plans. One should doubt
very optimistic minutes and they will probably focus on the plans by the BoJ to fix
the current issues and revive the Japanese economy. The release of the minutes will
be followed by a speech by BOJ Governor Shirakawa, that will seal off the trading
day.

* Oil
Oil prices tumbled yesterday, putting prices on track for a dizzying drop of more
than $10 in just 2 days of volatile trading. The Crude Oil prices for August
delivery were down $4.27 at $134.47 a barrel shortly before trading closed on the
New York Mercantile Exchange, after earlier sinking as low as $132. Prices fell
$6.44 Tuesday in the biggest one-day drop in dollar terms since the Gulf War.

The Energy Information Administration reported that U.S. crude oil supplies rose by
3 million barrels, or 1%, last week. That is the opposite of the 3 million barrel
draw analysts surveyed by energy research firm expected. US Gasoline supplies also
leapt unexpectedly. Yesterday's Wall Street rally on banks also contributed to the
Oil price drop. U.S. stocks jumped after strong results at Wells Fargo (Home
Mortgage giant) fueled a powerful rally in the battered banking sector. Optimism
over Wells Fargo's earnings helped lift the USD against the EUR as the bank offered
investors a glimpse of stability in the hard-hit U.S. financial system. Further USD
gains came after Bernanke told lawmakers that currency intervention is “something
that should be done only rarely, but there may be conditions in which markets are
disorderly where some temporary action may be justified.” All that, in addition to
an unexpected leap in U.S. Crude Supplies – led Oil prices to fall sharply.

Technical News
* EUR/USD
The bearish channel on the 4 hour chart remains in tact, as the pair is now floating
on the bottom barrier. A bearish cross on the daily chart's Slow Stochastic confirms
that the direction is indeed down. Going short appears to be preferable.

* GBP/USD
After the recent local bullish correction has been halted, the cable is now floating
in neutral territory. A fresh bullish cross on the 4 hour chart's Slow Stochastic
indicates the continuation of the bullish move; however, all other oscillators are
showing mixed results. Waiting for a clearer signal on the hourlies 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 is
now floating on the bottom barrier of it. A break beyond the 104.50 level will
validate the ongoing of the bearish move. Traders should wait for the breach before
swinging in.

* USD/CHF
The range trading continues, as the pair shows no distinct price direction. However,
a fresh bullish cross on the daily chart's Slow Stochastic, accompanied by positive
signals on the 4 hour chart's AcceleratorDecelerator suggests the beginning of a
bullish move. Going long with tight stops seems to be a good strategy today.

The Wild Card
* Gold
The bearish move that embarked yesterday appears to have more steam in it, as the
RSI on the daily chart has crossed the 70 line, indicating that the market is
overbought. This is a great opportunity for
forex traders to enter a very promising trend.

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