Mid-Day Report: Euro and Yen still in Range ahead of Event Risks
Action Insight | Written by ActionForex.com | Feb 07 07 15:03 GMT |
Forex Mid-Day Technical Report Euro and Yen still in Range ahead of Event Risks
On the one hand, Euro’s recovery against dollar extends further today. On the other hand, yen continues to retreat. But after all both the EUR/USD and USD/JPY pair are still in kept in established range as traders are still cautious ahead of two major event risks, ECB meeting tomorrow and G7 meeting over the weekend. On the other hand, Sterling was still kept by near term 1.9745 resistance against dollar ahead of BoE’s announcement. And it seems like further choppy trading will continue for the rest of the day as the economic data released today failed to trigger volatility.
US Q4 productivity growth in the non farm business sector rose 3.0%, far above consensus expectation of 2.0%. This marked a sharp rebound from the downwardly revised 0.1% decline in Q3 and largest jump since Q1. Labor costs rose 1.7%, missing expectation of 2.1% but prior quarter’s rise was revised upward from 2.3% to 3.2%. The data is supportive to Fed’s holding rates unchanged to guard against inflation risk. Philadelphia Fed President Plosser said today that “With growth prospects of the economy improving, there is some risk that we may not see a return to price stability unless monetary conditions are further tightened.” Reactions to these were muted.
Earlier today, UK industrial/manufacturing production report was mixed with IP unexpectedly dropped 0.1% in Dec, dragging yoy growth to 0.4%. Meanwhile, MP came in a touch above expectation by growing 0.2% mom and 2.3%. German industrial production was disappointing, dropping 0.5% mom in Dec, dragging yoy growth to 5.2%. EUR/USD
Daily Pivots: (S1) 1.2932; (P) 1.2961; (R1) 1.3011; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
EUR/USD continues to edge higher in early US session, breaking above 1.30 level. At this point, intraday bias remains on the upside as long as EUR/USD stays above 1.2972 minor support and further rebound could seen. Below 1.2972 will suggest the recovery from 1.2911 has possibly completed and should shift focus back to this support.
However, the overall short term picture remains mixed. As long as 1.3052/57 cluster resistance (38.2% retracement of 1.3364 to 1.2867 at 1.3057) holds , price actions from 1.2865 will be treated as consolidation to decline from 1.3364 only. Hence, further fall is still in favor. But below 1.2911 is needed to encourage a retest of 1.2865 low first and break will confirm recent decline from 1.3364 has resumed for downside target of 1.2760 support. Otherwise, choppy sideway consolidation may still continue.
In the bigger picture, an important medium term top could be in place at 1.3364 already, with bearish divergence condition in weekly MACD and RSI. Sustained break of 1.2760 support, which will also have medium term rising channel line (1.1639, 1.2483, 1.2978, now at 1.2764) taken out too, will add much weight to the case that whole medium term up trend from 1.1639 has completed. Focus will then be on 1.2483 cluster support (50% retracement of 1.1639 to 1.3364 at 1.2502). Decisive break of 1.2483 cluster support will confirm this case and have medium term outlook turned bearish.
However, sustained break of 1.3052/57 cluster resistance will indicate the fall from 1.3364 has already completed at 1.2865, after drawing support from resistance line (1.2978 to 1.2937). Further rally should then be seen towards next resistance zone of 61.8% retracement of 1.3364 to 1.2865 at 1.3173 and falling trend line resistance (1.3364 to 1.3296, now at 1.3175.) first. Also, it will save the case that medium term up trend from 1.1639 is still in progress with EUR/USD kept inside the rising channel. Break of 1.3296 resistance will suggest the rise from 1.2483 has possibly resumed and EUR/USD could make a new high above 1.3364 before finally making a top on above mentioned bearish divergence condition in weekly chart.
GBP/USD
Daily Pivots: (S1) 1.9623; (P) 1.9671; (R1) 1.9755; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
Cable’s rebound from 1.9537 extended further to as high as 1.9732 but is still limited by 1.9745 cluster resistance (61.8% retracement of 1.9913 to 1.9480 at 1.9748). Short term outlook remains mixed On the downside, firm break of mentioned trend line (1.8517 to 1.8834, now at 1.9544) is needed to confirm fall from 1.9913 has resumed. Meanwhile, on the upside, break of 1.9745 resistance will indicate rebound from 1.9480 is still in favor for 1.9913 high. Otherwise, further choppy sideway trading will continue.
In the bigger picture, with mentioned trend line support remains intact, the rise from 1.8517 is still in progress and further rally could still be seen that brings cable above 1.9913 high. However, close attention will be paid to sign of loss of upside momentum and reversal pattern formation as cable approaches key 2.0106 cluster resistance (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067) as the whole medium term up trend from 1.7047 could complete at or below this level.
Meanwhile, we already have bearish divergence conditions in weekly RSI, daily MACD and RSI. Sustained break of the trend line support will confirm that whole rise from 1.8517 has completed and bring decline towards 1.9237/61 cluster support (23.6% retracement of 1.7047 to 1.9913 at 1.9237). Decisive break of 1.9237/61 cluster support will add much weight to the case that whole medium term up trend from 1.7047 has already completed earlier than we thought and much deeper decline should be seen towards next cluster support at 1.8834 (38.2% retracement of 1.7047 to 1.9913 at 1.8818) first.
USD/CHF
Daily Pivots: (S1) 1.2357; (P) 1.2427; (R1) 1.2466; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.
USD/CHF edges lower to 1.2380 in early US session. At this point, intraday bias remains on the downside as long as USD/CHF stays below 1.2420 resistance and further decline is still expected to follow. As discussed before, a short term top should be formed at 1.2571 already, after breaking of the short term rising channel with bearish divergence condition in 4 hours MACD and RSI. Below 1.2382 will add further evidence to this case by completing a head and shoulder top. Further correction should then be seen to 100% projection of 1.2571 to 1.2382 from 1.2517 at 1.2328 or lower.
On the upside, above 1.2420 will turn intraday outlook consolidative. Break of 1.2517 will suggest the corrective fall from 1.2571 has completed and should bring retest of this high. But still, a firm break above 1.2571 is needed to confirm recent rally from 1.1878 has resumed.
In the bigger picture, as long as 1.2268 support holds, the current price actions from 1.2571 should merely be a correction to rally from 1.1878 and hence further rise is still in favor. On the upside, decisive break of mentioned medium term trend line resistance (1.3238 to 1.2768, now at 1.2525) will indicate that whole medium term down trend from 1.3283 has already completed at 1.1878. Further rally should be seen towards 1.2768 cluster resistance(61.8% retracement of 1.3283 to 1.1878 at 1.2746) first. Break of 1.2768 cluster resistance will add much weight to the case that whole corrective rise from 1.1288 (04 low) has resumed and further rally should be seen towards 1.3283 (06 high) or above.
However, sustained break of 1.2268 resistance turned support will raise much doubt about this scenario. In particular, weekly MACD will still be kept negative with daily MACD staying below signal line. Deeper decline should be seen towards 1.2211 support and even further to retest 1.1878 low as the medium term down trend from 1.3283 is back in force.
USD/JPY
Daily Pivots: (S1) 119.85; (P) 120.20; (R1) 120.44; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
USD/JPY’s rebound from 119.94 extends further to 120.70 so far and is now pressing short term falling trend line (now at 120.75). At this point, further recovery cannot be ruled out as long as USD/JPY stays above 120.33 minor support. However, below 120.33 will suggest that the recovery has possibly completed and should bring retest of 119.94 low.
Meanwhile, as discussed before, a short term top should be formed at 122.17, after subsequent fall has taken out short term rising channel and with bearish divergence condition remaining in 4 hours MACD and RSI. Hence at this point, further correction is still expected to follow as long as USD/JPY stays below 121.34 resistance. Downside target for such correction will be 119.21/24 cluster support (38.2% retracement of 114.41 to 122.17 at 119.21 and 100% projection of 122.17 to 120.07 from 121.34 at 119.24).
However, since the current price actions from 122.17 is treated as correction to rally from 114.41 only, we’d expect downside to be contained by 119.21/24 support and bring further rally. Above 121.34 will suggest that corrective fall from 122.17 has completed and should bring retest of this high. But still, break of 122.17 is needed to indicate rise from 114.41 has resumed.
In the bigger picture, with medium term up trend from 108.99 remains in force, favor is still on the case that rise from 108.99 represents resumption of long term up trend from 101.66. The preferred interpretation of the rise from 108.99 is that the first move has completed at 117.87. Subsequent price actions to 113.95, 119.86 and 114.41 is treated as interim consolidation that’s skewed upward by the rise to 119.86. Rise from 114.41 is treated as resumption of the whole up trend. With this interpretation, next upside target will be 100% projection of 108.99 to 117.87 from 114.41 at 123.29.
However, decisive break of 117.96 support will rise some doubt about this interpretation In such case, a deeper decline should follow to retest medium term rising channel (now at 115.68) first. A break of this channel will swing favors back to the case that another medium term decline should be seen towards 108.99 low before completing the whole long term consolidation that started at 121.38.
Forex News Digest
http://www.bloomberg.com/apps/news?pid=20601087&sid=aHJ2jpe93WMg&refer=home
http://www.bloomberg.com/apps/news?pid=20601083&sid=ay8bBkUjxs3U&refer=currency
http://www.bloomberg.com/apps/news?pid=20601083&sid=ayXSPECUeoo4&refer=currency
http://www.bloomberg.com/apps/news?pid=20601083&sid=auiCMux3ohvs&refer=currency
http://www.bloomberg.com/apps/news?pid=20601083&sid=aV9WT16dr4lM&refer=currency
http://www.bloomberg.com/apps/news?pid=20601083&sid=ahIh0ZTN1gHg&refer=currency
http://c.moreover.com/click/here.pl?r798821226
Wed, 7 Feb 2007 10:00:00 GMT from Reuters
http://c.moreover.com/click/here.pl?r798812737
Wed, 7 Feb 2007 09:52:00 GMT from International Herald Tribune
http://c.moreover.com/click/here.pl?r798777082
Wed, 7 Feb 2007 09:17:00 GMT from Reuters
http://c.moreover.com/click/here.pl?r798732282
Wed, 7 Feb 2007 08:35:00 GMT from Khaleej Times
http://c.moreover.com/click/here.pl?r798721284
Wed, 7 Feb 2007 08:25:00 GMT from Bloomberg
http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
22:30 AUD RBA Cash Target Feb 6.25% 6.25% 6.25%
00:01 GBP U.K. N’wide consumer confi. Jan 84 85 83
06:45 CHF Swiss Jobless rate Jan 3.30% 3.30% 3.30%
09:30 GBP U.K. Industrial prod’n M/M Dec -0.10% 0.10% 0.50% 0.40%
09:30 GBP U.K. Industrial prod’n Y/Y Dec 0.40% 0.60% 0.80% 0.90%
09:30 GBP U.K. Manufacturing prod’n M/M Dec 0.20% 0.20% 0.30% 0.20%
09:30 GBP U.K. Manufacturing prod’n Y/Y Dec 2.30% 2.20% 2.40% 2.60%
11:00 EUR Germany Industrial prod’n M/M Dec -0.50% 0.50% 1.80% 2.00%
11:00 EUR Germany Industrial prod’n Y/Y Dec 5.20% 6.30% 6.00% 6.30%
13:30 USD U.S. Productivity Q4 3.00% 1.80% 0.20% -0.10%
13:30 USD U.S. Labour cost Q4 1.70% 2.80% 2.30% 3.20%
21:45 NZD NZ Unemployment rate Q4 3.80% 3.80%
http://www.actionforex.com/general_information/forex_newsletters/forex_newsletter_200507301487/