Daily Report: Dollar in Tight Range ahead of Bernanke Testimony II & FOMC Minutes
Action Insight | Written by ActionForex.com | Jul 19 07 07:48 GMT |
Forex Daily Technical Report Dollar in Tight Range ahead of Bernanke Testimony II & FOMC Minutes
Dollar continues to trade in tight range against majors as markets digested Bernanke’s testimony. Regarding inflation, Bernanke echoed latest minutes that inflation show sign of sustained moderation before Fed consider dropping the tightening bias and the current benign report could be just a transitory effect. But still, underlying inflation pressure should abate in the coming months. The most notable message was that real GDP growth is expected to be between 2.25% and 2.50% this year, which is slightly below Fed’s Feb projections. Also, Bernanke argued that conditions in the subprime mortgage market have deteriorated significantly. Bernanke will have his second round of testimony today. FOMC minutes will also be featured but little impact is expected as the information there shouldn’t deviate much from Bernanke’s testimony. Other data include jobless claims, Conference Board Leading Indicators and Philly Fed Survey.
From UK, retail sales is the mostly watched economic data today and is expected to show 0.3% mom, 3.5% yoy growth in Jun, comparing to 0.4% mom, 3.9% yoy in May. Sterling remains firm across the board. However, with key medium term projection target against dollar in proximity to current price, upside of the current rally could be limited in the near term. Also, consider that the more important Q2 GDP data will be featured tomorrow, markets could have little reaction to upside surprise in today’s retail sales data. EUR/USD
Daily Pivots: (S1) 1.3758; (P) 1.3795; (R1) 1.3838; «www.actionforex.com»
EUR/USD’s retreat from 1.3833 was contained by 1.3757 support and recovers mildly since then. Nevertheless, with 4 hours MACD staying below signal line, bearish divergence condition in 4 hours RSI and the touching of 1.3822 fibo resistance (100% projection of 1.1639 to 1.2978 from 1.2483), 1.3833 is still likely the short term top. Intraday bias will remain on the downside as long as 1.3833 high remains intact. Break of 1.3757 support again will confirm that a short term top is formed and further decline should be see to 4 hours 55 EMA (now at 1.3735). Break will encourage deeper decline towards 1.3567 support. On the upside, sustained break of 1.3833 is needed to confirm recent rally has resumed. Otherwise, short term outlook remains neutral with risk of another fall.
In the bigger picture, the current development is dampening the original view that rise from 1.3262 is the last advance in a five wave structure that started at 1.2483. Firstly, the current momentum of the rise from 1.3262 is seen stronger than the prior rally from 1.2865 to 1.3681. Secondly, the falling trend line in both daily MACD and RSI were broken, negating the bearish divergence conditions. In other words, the underlying bullishness in EUR/USD could be much stronger than we originally thought.
Focus remains on 1.3822 resistance. Sustained trading above this level will add much weight to the case that whole medium term rally from 1.1639 is indeed resumption of multi-year up trend from 0.8223 (00 low). That is, further rise should be seen in medium term towards 95 high of 1.4523 with much chance to extend further to 61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004.
On the downside, focus will be on 1.3481 cluster support (61.8% retracement of 1.3262 to 1.3833 at 1.3480). As long as this support holds, the fall from 1.3833 will still be treated as correction to rally from 1.3262 only and another rise is still in favor after completion. However, break will put 1.3262 low into focus. And break will indicate that medium term rally from 1.1639 has likely completed after being limited by 1.3822 resistance as originally expected.
GBP/USD
Daily Pivots: (S1) 2.0474; (P) 2.0511; (R1) 2.0563; «www.actionforex.com»
Cable continues to trade sideway below 2.0547 high today. As discussed before, intraday bias will remain on the upside as long as 2.0456 support holds and further rise is expected to be see to next upside target of 100% projection of 1.9183 to 2.0132 from 1.9621 at 2.0570. But upside could be limited there initially on overbought condition. On the downside, 2.0456 will indicate a short term top is possibly formed and deeper pull back is underway for a retest of inner rising trend line (now at 2.0273).
In the bigger picture, the sustained break of 2.0207 projection target confirms underlying upside momentum is still strong. Also, it added much credence to the case that whole up trend from 1.7047 is resumption of multi-year up trend from 1.3680. In such case, further rally should then be seen to 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677 first. Sustained trading above this level will encourage further rise to 100% projection at 2.3321.
Meanwhile, even in case of a short term correction, consolidation should be relatively brief as long as 2.0056 support holds and rally should resumes sooner after later after completion. But a break below 2.0056 will indicates a medium term top is possibly formed and bring deeper decline to medium term rising trend line (now at 1.9803).
USD/CHF
Daily Pivots: (S1) 1.1962; (P) 1.2005; (R1) 1.2051; «www.actionforex.com».
USD/CHF could not sustain above 1.2035 minor resistance and retreats back to tight range trading. Nevertheless, bullish convergence condition in 4 hours MACD and RSI indicates that a short term bottom could be in place at 1.1960. At this point, intraday bias is still on the upside and further recovery should be seen to 4 hours 55 EMA (now at 1.2057) and above. On the downside, firm break of 1.1960 is needed to confirm recent fall from 1.2467 has resumed for 1.1878 (06 low).
In the bigger picture, USD/CHF has likely completed a medium term triangle consolidation already, which started at 1.1919 with five waves to 1.2467. Firm break of 1.1993 will confirm this case. 1.1878 (06 low) will be the initial target. And since, in such case, fall from 1.2467 is viewed as resumption of medium term down trend from 1.3283, further weakness should be seen to 100% projection of 1.3283 to 1.1919 from 1.2768 at 1.1404, with much chance to extend to retest 1.1288 (04 low).
On the upside, break of 1.2232 resistance will mess up the short term picture a little bit. In such case, chance is swung to the case that the triangle consolidation indeed started at 1.1878. In other words, the overall outlook didn’t change and just that another rally should be seen before completion. Hence, even in such case, upside should be limited below 1.2467 high and bring another medium term decline.
USD/JPY
Daily Pivots: (S1) 121.56; (P) 121.95; (R1) 122.32; «www.actionforex.com»
USD/JPY continues to gyrate inside established range of 121.54 and 122.60 today. As discussed before, further rise is still mildly in favor as long as 121.54 support holds. Break of 122.60 resistance will indicates the rally from 120.96 has resumed. In other words, this will also add much weight that correction from 124.13 has completed at 120.96. Further rise should then be seen to 123.66 resistance. Break will bring retest of 124.13 high.
On the downside, below 121.54 will turn short term outlook mixed again. In such case, correction from 124.13 could still be in progress for another test of 120.76 cluster support (38.2% retracement of 115.13 to 124.13 at 120.70) before completion.
In the bigger picture, rise from 115.13 has made a top at 124.13 and turned into consolidation since then. But still, rally from 108.99, which is treated as resumption of whole up trend from 101.66, is still in progress. Even in case of a deeper correction, downside is expected to be contained by 118.35/57 cluster support zone (38.2% retracement of 108.99 to 124.13 at 118.35 and 61.8% retracement of 115.13 to 124.13 at 118.57) and bring rally resumption. Next medium term upside target will be resistance zone of 100% projection of 101.65 to 121.38 from 108.99 at 128.72 and 100% projection of 108.99 to 122.17 from 115.13 at 128.31. However, break of 118.35/57 cluster support argue that rise from 108.99 has possibly completed and put 115.13 low into focus.
EUR/JPY
Daily Pivots: (S1) 168.01; (P) 168.30; (R1) 168.60; «www.actionforex.com»
EUR/JPY continues to trade inside established range of 167.71 and 168.93 today. But still, since retreat from 168.93 should have completed after drawing support from 4 hours 55 EMA, intraday bias remains on the upside for retest of 168.93 high. Break will indicate recent rally from 161.49 has resumed for next upside target of 100% projection of 161.49 to 166.94 from 164.23 at 169.68. However, a break below 167.71 again will indicate that a short term top has likely completed, possibly with bearish divergence conditions in 4 hours MACD and RSI. In such case, deeper decline should be see to166.69 support first.
In the bigger picture, whole medium term rally from 130.60 is still in progress and the interpretation remains unchanged. First wave up ended at 143.60, subsequent correction ended at 137.167. The third wave up ended at 159.63 while fourth wave correction has ended at 150.75. Rise from there represents the final advance in this structure. With 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64 taken out decisively, next medium term upside target will be 100% projection of 137.16 to 159.63 from 150.75 at 173.22.
However, break of the short term rising trend line support (now at 165.22) will dampen this view and indicate that the rise from 150.75 has possibly completed earlier then we thought.In such case, deeper decline should be seen to test 161.49 low first.
Forex News Digest
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Wed, 18 Jul 2007 11:25:00 GMT from Bloomberg
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«www.actionforex.com» Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:50 JPY Japan All industry index Jul -0.30% 0.20% 1.20%
6:00 EUR Germany PPI M/M Jun 0.20% 0.20% 0.30%
6:00 EUR Germany PPI Y/Y Jun 1.70% 1.80% 1.90%
6:15 CHF Swiss Trade balance (chf) Jun 1.72B 1.11 B 1.04 B 1.04B
8:30 GBP U.K. PSNCR Jun 6.15 B 6.206 B
8:30 GBP U.K. Retail sales M/M Jun 0.30% 0.40%
8:30 GBP U.K. Retail sales Y/Y Jun 3.50% 3.90%
9:00 CHF Swiss ZEW survey Jul N/A -0.1
12:30 USD U.S. Jobless claims 311 K 308 K
12:30 CAD Canada Wholesale trade M/M May 0.50% -3.10%
13:30 USD Bernanke Testifies Before Senate Panel on Monetary Policy
14:00 USD U.S. Leading indicators Jun 0.00% 0.30%
16:00 USD U.S. Philadelphia Fed survey Jul 13.3 18
18:00 USD Minutes of June 28 FOMC Meeting (Text)