FOREX MARKET UPDATE 15/05/07

Tuesday May 15, 2007



EUR-USD
1.3546. Current rise should end around 1.3543 or 1.3561. Objectives of this downmove are 1.3527 or 1.3509. A rise above 1.3577 is again bullish.
USD-CHF
1.2191. Corrective dips should ideally halt near 1.2189 or 1.2180 for one more thrust upwards towards 1.2200 - 1.221 area or 1.2228 in extention. Fall below 1.2171 puts it back on a downward path.
USD-JPY
120.35. Current rise should end around 120.28 or 120.52. Objectives of this downmove are 120.12 or 119.88. A rise above 120.68 is again bullish.
GBP-USD
1.9794. Any possible decline should be supported around 1.9768 - 1.9743 zone for rally to above 1.9871. A clear break of 1.9743 will damage this expected rally.
EUR-CHF
1.6513. Current rise should end around 1.6506 or 1.6530. Objectives of this downmove are 1.6488 or 1.6464. A rise above 1.6548 is again bullish.
EUR-JPY
163.03. Current rise should end around 162.92 or 163.30. Objectives of this downmove are 162.65 or 162.27. A rise above 163.57 is again bullish.
EUR-GBP
0.6842. Currently uptrend should end around 0.6856 - 0.6851 area. A correction down to below 0.6827 is expected. A rise above 0.6860 will abort the expected correction.
AUD-USD
0.8322. Our preferred view is for a drift down to 0.8309 or below 0.8295. Resistances is at 0.8297. A rise above 0.8344 would delay but not abort this expected fall.
USD-CAD
1.1059. Market should meet resistance at 1.1080. We expect then an extended move down to 1.1045 -1.0996 area.

FUNDAMENTAL ANALYSIS
1. Tuesday, May 15th, 2007 (4:30 am New York Time) UKWe have UK CPI coming out. There will be a few numbers released, but the most important one is probably going to be UK CPI year over year, that's expected to come out at 2.8% versus 3.1% last month. If the number comes out again at 3.1% or higher, that means that inflation is not slowing, and UK will probably have to do at least 1 or even 2 more interest rate hikes this year, so GBP/USD may possibly go up by 100 pips or more in the first 2 hours of the report. If the number comes out at 2.5% or lower, it would be hugely low, and that would mean that inflation is slowing down rather rapidly, so there maybe no need for more rate hikes, and GBP/USD may possibly go down by 50 pips or more in the first hour of the report. Since the price is right now at around 1.9800 on GBP/USD, which is relatively low, I think we have much bigger upside potential on it, than a downside. So keep that in mind. I may possibly use less conservative triggers on this trade, and that will largely depend on where the price is at before the report.

2. Tuesday, May 15th, 2007 (8:30 am New York Time) USA
Then we have US CPI coming out, which is the inflationary measure for the US. Remember, the US government keeps saying that inflation is their #1 concern when making interest rate decisions, so if the inflation is rather high, US will probably not cut for the next while, and that should be strengthening for the dollar short term. Most important number on this report will probably be the Core CPI month over month, which is expected to come out at around 0.2%, which seems to be a normal rate for the US. If it comes out at 0.4% or higher, we may see GBP/USD going down by 50 pips or more in the first hour of the report. If it comes out at 0.0% or lower, GBP/USD may possibly go up by 50 pips or more in the first hour of the report. Just remember, that this report will be coming out 4 hours after the UK inflation, and the proper way of trading it may heavily depend on where the UK inflationary figures come out. So be careful of some quick retracements, if this report is conflicting with the UK inflation.

Then we have TIC data coming out of US 30 minutes after the CPI, and we have the New Zealand PPI coming out also. However, both of these are not very good indicators, and trading the TIC data may largely depend on what the CPI numbers do. So I don't even want to talk about these two, I suggest just staying out.


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