Daily Report: Dollar and Yen Retreat
Action Insight | Written by ActionForex.com | Jan 09 07 08:04 GMT |
Forex Daily Technical Report Dollar and Yen Retreat
Dollar and yen continue to retreat against European majors today after last week’s sharp rally. Germany trade surplus and current account surplus both widened more than expected in November. German industrial production will also be featured later today. But reactions should be muted as markets’ focus is on the latter part of the week on US trade balance and retail sales as well as ECB rate decision.
Fed Vice Chairman Kohn delivered a 2007 outlook yesterday. Kohn maintained a surprisingly hawkish tone stating that the economic activity is “is likely to post continuing healthy gains over coming quarters” and even suggested that growth in the second half of the year could bounce back to potential. Even though Kohn believed that inflation will gradually moderate, but he heavily qualified his comments by suggesting that some of the recent deceleration in inflation may have been due to one-time factors. He cited tight labor markets, elevated labor compensation and the already-high level of inflation as risks to the expected slowing of price growth. After all, his comments are inline with the Fed minutes in a way that inflation is still a predominant concern of the board members.. EUR/USD
Daily Pivots: (S1) 1.2984; (P) 1.3010; (R1) 1.3048; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
After edging lower to 1.2972, EUR/USD recovers as expected and is now pressing 55 hours EMA (now at 1.3043). At this point, recovery is expected to extend towards 1.3104 resistance. Also, with 4 hours MACD’s recovery to above signal line and 4 hours RSI’s recovery from oversold region, a short term bottom should be formed. Break of 1.3104 resistance will confirm this and bring further rebound.
Also, discussed before, as 1.2922 cluster support (50% retracement of 1.2483 to 1.3362 at 1.2923) remains intact, we’re still holding on to the preferred case that price actions from 1.3362 is merely consolidation to rally from 1.2483. Break of 1.3179 resistance will add much credence to the case that fall from 1.3296 has completed and should bring retest of this resistance.
However, one should note that further decline cannot be ruled out as long as EUR/USD stays below 1.3104 cluster resistance. Also, sustained break of 1.2922 cluster support will seriously dampen the preferred case and at least, suggests deeper decline will be seen to challenge 1.2760 support.
In the bigger picture, EUR/USD’s medium term up trend from 1.1639 (06 low) is still in force and is expected to continue towards 1.3668 (04 high) and probably further to 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. However, as it’s unclear whether this rally from 1.1639 represents resumption of multi-year up trend from 0.8223 or just part of a large scale consolidation that started at 1.3668, close attention will be paid to loss of upside momentum and reversal pattern formation as EUR/USD approaches 1.3668/1.3822 zone. On the downside, break of 1.2760 support will turn medium term outlook neutral and argue that whole medium term rally from 1.1639 has completed.
GBP/USD
Daily Pivots: (S1) 1.9288; (P) 1.9346; (R1) 1.9432; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
Cable’s rebound from 1.9261 extends further to as high as 1.9454 today. Break of mentioned 1.9432 resistance with 4 hours MACD back to above signal line indicates a short term bottom is already formed at 1.9261, after getting support from the short term rising trend line. Further rise is now expected to follow towards 1.9564 support turned resistance (61.8% retracement of 1.9750 to 1.9261 at 1.9563)
As discussed before, with 1.9177 cluster support (50% retracement of 1.8517 to 1.9846 at 1.9182, 23.6% retracement of 1.7047 to 1.9846 at 1.9185) remains intact, we’re still holding on to the preferred case that price actions from 1.9846 is merely correction to rise from 1.8834 only. Break of 1.9564 cluster resistance will add much credence to the case that fall from 1.9750 has completed and should bring further rise to this resistance.
However, below 1.9261 will indicate fall from 1.9750 has resumed and 1.9177 cluster support will be back to focus again. Break of 1.9177 will dampen this case seriously and should bring further decline to 1.8834 support.
In the bigger picture, cable’s medium term up trend from 1.7047 is still in progress and further rise is expected to follow towards 2.0106 cluster resistance (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067). But close attention will be paid to sign of loss of upside momentum and reversal pattern formation as cable approaches 2.0106 cluster resistance. On the downside, sustained break of 1.9177 cluster support will turn medium term outlook neutral and argue that the whole rise from 1.7047 has possibly completed. Break of 1.8834 will add further weight to this case and turn focus back to 1.8517 support.
USD/CHF
Daily Pivots: (S1) 1.2324; (P) 1.2367; (R1) 1.2404; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.
USD/CHF’s rally from 1.2111 was limited at 1.2412. Subsequent retreat has dragged 4 hours MACD below signal line and suggest that a short term top is already in place at 1.2412. Further consolidation is now expected to follow with risk of pull back to 1.2270 support. But still, as long as retreat is contained above 1.2270 support, further rally is still in favor in the short term towards 100% projection of 1.1878 to 1.2268 from 1.2111 at 1.2501. Break of 1.2270 is needed suggest the rise from 1.2111 has completed and bring deeper decline.
In the bigger picture, break of 1.2343 resistance has opened up a few possibilities. Above 1.2501 projection will starts to argue the rise from 1.1878 could be of impulsive nature. In other words, the whole down trend from 1.3283 could have completed and the current rise from 1.1878 could be a resumption of the medium term rebound from 1.1288 to 1.3283. But still, a strong break of 1.2768 cluster resistance is needed to confirm such case. Otherwise, USD/CHF will just be bounded in choppy range trading between 1.1878 and 1.2768. Meanwhile, on the downside, a break below 1.2110 support is needed to shift focus back to the downside. Otherwise, further rally is still in favor.
USD/JPY
Daily Pivots: (S1) 118.32; (P) 118.56; (R1) 119.03; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
At this point, USD/JPY is still engaged in choppy sideway trading between 117.96 and 119.03. As discussed before, bearish divergence condition in 4 hours MACD and RSI indicates a short term top is already in place at 119.68. Hence, from a short term angle, further consolidation is expected to follow as long as USD/JPY stays below 119.86 resistance. Another fall is expected towards to 38.2% retracement of 114.41 to 119.68 at 117.67 or lower.
However, downside should be contained by 116.42/63 support zone (61.8% retracement of 114.41 to 119.68 at 116.42) and bring resumption of rise from 114.41. below 116.42/63 support zone will argue that whole rally from 114.41 has completed and put focus back to 114.41 low again.
In the bigger picture, fall from 121.38 to 108.99, with its three wave nature, should either represent the correction to whole year long up trend from 101.65 to 121.38, or part of such correction. That is, the medium term rally from 108.99 is either resumption of the whole up trend from 101.65 or a rising leg of consolidation pattern that started at 121.38.
Favor is still in the former case as long as USD/JPY stays above 113.14/39 cluster support (61.87% retracement of 108.99 to 119.86 at 113.14). And above 119.86 will bring further rise to 121.38 (04 high) again. Also, note that the current rally has pushed USD/JPY above multi-year falling trend line (147.68 to 135.20, now at 117.65) again. Sustained break of 121.38 resistance will confirm that whole up trend from 101.65 has resumed.
Forex News Digest
http://c.moreover.com/click/here.pl?r762167337
Tue, 9 Jan 2007 04:38:00 GMT from The Australian
http://c.moreover.com/click/here.pl?r762150630
Tue, 9 Jan 2007 04:20:00 GMT from Reuters
http://c.moreover.com/click/here.pl?r762133703
Tue, 9 Jan 2007 03:59:00 GMT from Bloomberg
http://c.moreover.com/click/here.pl?r762097099
Tue, 9 Jan 2007 03:09:00 GMT from Reuters Canada
http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
00:01 GBP U.K. BRC retail sales Dec 2.50% 1.50% 0.50%
00:30 AUD Australia Retail sales Nov 0.20% 0.30% 0.80% 0.90%
07:00 EUR Germany Trade balance (euro) Nov 19.3B 16.0 B 17.2 B 17.4B
07:00 EUR Germany Current account (euro) Nov 12.5B 11.0 B 11.6 B 11.7B
07:00 EUR Germany Imports M/M Nov -3.80% -0.50% -0.20% -0.40%
07:00 EUR Germany Exports M/M Nov -0.50% -1.70% 2.60% -2.50%
11:00 EUR Germany Industrial prod’n M/M Nov 1.00% -1.40%
11:00 EUR Germany Industrial prod’n Y/Y Dec 4.60% 3.40%
13:15 CAD Canada Housing starts Dec 225.0 K 225.0 K
http://www.actionforex.com/general_information/forex_newsletters/forex_newsletter_200507301487/