Daily Report: Yen Mildly Firmer after Roller-Coaster Start
Action Insight | Written by ActionForex.com | Jul 23 07 06:17 GMT |
Forex Daily Technical Report Yen Mildly Firmer after Roller-Coaster Start
The Japanese yen is mildly firmer into European session after an extremely volatile start to the week. Yen was sold off in early Asian session, partly due to newspaper polls published on Monday that showed that Prime Minister Shinzo Abe’s ruling camp looked set to lose a July 29 upper house election after falling further behind the opposition. There was also rumor about East European Central Bank buys. The volatility was also helped by the thin markets. However, as dusts settled, the yen recouped the losses and edges higher against dollar and euro and markets’ focus turns back to risk aversion.
The economic calendars in Europe and US are pretty empty today and market’s focus will likely remain on development of the subprime mortgage problem in the US. Dollar will likely remains pressured, even though it’s deeply oversold, as there isn’t any scheduled event that could give it a lift. Focus is actually on the coming fresh housing markets data on Wed and Thu, as well as the Q2 GDP on Fri. EUR/USD
Daily Pivots: (S1) 1.3789; (P) 1.3816; (R1) 1.3852; «www.actionforex.com»
EUR/USD remains firm today and continues to press 1.3842 high. As discussed before, further rally is still in favor as long as 1.3778 support holds. However, we’d like to emphasize that a short term top should be around the corner with overbought condition in both daily and weekly RSI, as well as mild bearish divergence condition in 4 hours MACD and RSI. Break of 1.3778 support, will indicate confirm a short term top is formed and encourage pull back to 4 hours 55 EMA (now at 1.3760) first
In the bigger picture, the current development dampened 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,as long as 1.3481 support holds, any pull back will still be treated as correction to rally from 1.3262 only and another rise is still in expected 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) 2.0498; (P) 2.0542; (R1) 2.0605; «www.actionforex.com»
Cable’s strong rally continues today by rising to as high as 2.0596 so far. Further rally is still in favor as long as 2.0481 support holds. Next will be medium term target of 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677. However, a short term top could be around the corner with overbought condition being displayed in both daily and weekly RSI. Upside of the current rally could be limited between 2.0570 and 2.0677. Below 2.0481 support will indicate that a short term top is likely formed and bring pull back to inner rising trend line (now at 2.0315) or lower.
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 2.0677 will target 2.1 psychological resistance.
On the downside, in case of a pull back, downside should be contained by support zone between 2.0056 and 2.0206 and bring another rally. Break of 2.0056 will suggest that lengthier consolidation will come first with the prospect of another test the medium term rising trend line (now at 1.9807) But medium term outlook will be neutral at worst at long as 1.9621 support remains intact.
USD/CHF
Daily Pivots: (S1) 1.1970; (P) 1.2017; (R1) 1.2054; «www.actionforex.com».
As discussed before, corrective rise from 1.1960 could have completed after failing to take out 4 hours 55 EMA and inner falling trend line. Further weakness is now expected to retest 1.1960 low. However, since a short term bottom is possibly in place at 1.1960 with bullish convergence conditions in 4 hours MACD and RSI, firm break of 1.1960 is needed to confirm fall from 1.2467 has resumed. Otherwise, another rebound could be seen before completing the consolidation.
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) 120.62; (P) 121.52; (R1) 122.19; «www.actionforex.com»
After some initially volatility, USD/JPY edges lower to 120.77 today and is now pressing mentioned 120.76 cluster support (38.2% retracement of 115.13 to 124.13 at 120.70). As discussed before, fall from 124.13 is still in progress and further decline is in favor as long as 122.40 resistance holds even in case of recovery.
On the upside, a strong rebound to above 122.40 is needed to indicate correction from 124.13 has completed. In such case, retest of 123.66 should be seen and break will suggest that recent rally from 108.99 has resumed.
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 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) 166.96; (P) 167.91; (R1) 168.63; «www.actionforex.com»
Similar to USD/JPY, EUR./JPY edges lower to 167.12 after some initial volatility. But after all, it’s still being supported by mentioned 167.13/17 (23.6% retracement of 161.49 to 168.93 at 167.17 and 38.2% retracement of 164.23 to 168.93 at 167.13). As discussed before, prior break of inner rising trend line indicates that a short term top should be in place at 168.93 on bearish divergence condition in 4 hours MACD and RSI. So further fall as long as EUR/JPY stays below 168.86 resistance. Break of 167.13/17 will encourage a retest of short term rising trend line (now at 165.99).
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 164.77) will dampen this view and indicate that the rise from 150.75 has possibly completed earlier then we thought, with bearish divergence condition in daily MACD and RSI. Medium term trend line support (now at 155.67) will then be put into focus.
Forex News Digest
«c.moreover.com»
Mon, 23 Jul 2007 01:25:00 GMT from Bloomberg
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Mon, 23 Jul 2007 00:53:00 GMT from Macro World Investor
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Mon, 23 Jul 2007 00:51:00 GMT from Forbes.com
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Mon, 23 Jul 2007 00:38:00 GMT from Philippine Daily Inquirer
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Mon, 23 Jul 2007 00:18:00 GMT from Bloomberg
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Mon, 23 Jul 2007 00:08:00 GMT from Bloomberg
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Mon, 23 Jul 2007 00:02:00 GMT from Bloomberg
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Sun, 22 Jul 2007 23:04:00 GMT from The Australian
«www.actionforex.com» Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:01 GBP U.K. Rightmove hse prices M/M Jul 0.30% 0.60% 0.80%
23:01 GBP U.K. Rightmove hse prices Y/Y Jul 10.30% 11.20% 13.20%
1:30 AUD Australia PPI Q/Q Q2 1.00% 0.80% 0.10%
1:30 AUD Australia PPI Y/Y Q2 2.30% 2.00% 2.40%