Mid-Day Report: Sterling Strengthens on PPI, Dollar to Trade Sideway in Holiday Session
Action Insight | Written by ActionForex.com | Jan 15 07 14:21 GMT |
Forex Mid-Day Technical Report Sterling Strengthens on PPI, Dollar to Trade Sideway in Holiday Session
Cable strengthens further today after accelerating PPI output index and strong revision to prior month’s PPI input index. Output price climbed 0.2% mom and 2.2% yoy in December. This is raising the odds that tomorrow’s consumer inflation report will beat expectation. PPI input increased 0.1% mom, 1.9% in Dec comparing to expectation of 0.2% and 1.4%. But Nov’s PPI input index growth was revised strongly upward from 0.1% mom and 2.8% yoy to 0.6% and 3.3% respectively.
Elsewhere, dollar remains soft against Euro and should continue to trade in tight range with market holiday in US today. Yen weakens mildly ahead of the upcoming Asian session’s inflation report from Japan. December Domestic Capital Goods Price Index (CGPI) is expected to stay flat mom, with 2.5% yoy growth, comparing to prior month’s -0.1% and 2.7%. Any surprise from this piece of Japanese data may stir some ripples in the market but traders will remain cautious ahead of Thursday’s BoJ announcement. EUR/USD
Daily Pivots: (S1) 1.2875; (P) 1.2908; (R1) 1.2952; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
EUR/USD’s recovery from 1.2867 continues. As discussed before, a minor bottom is formed at 1.2867 and further consolidation is expected to follow. EUR/USD could recover further towards 4 hours 55 EMA (now at 1.3008). However, short term risk remains on the downside as long as recovery is kept below 1.3052 cluster resistance (38.2% retracement of 1.3364 to 1.2867 at 1.3057) and further decline is still expected to follow. Below 1.2867 low will bring further fall towards 1.2760 support.
In the bigger picture, with a break of 1.2922 cluster support (50% retracement of 1.2483 to 1.3362 at 1.2923), and bearish divergence condition in weekly MACD, a medium term top could be already in place a 1.3364. Sustained break of 1.2760 will have 161.8% projection of 1.3364 to 1.3051 from 1.3296 at 1.2790 and possibly medium term rising channel line (now at 1.2705) taken out. This 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 this cluster support will confirm this case and have medium term outlook turned bearish.
On the upside, a break of 1.3052 cluster resistance will indicate the fall from 1.3364 has possibly completed after drawing support from resistance line (1.2978 to 1.2937, now at 1.2853). Focus is turned back to 1.3296 resistance but a break of 1.3364 is needed to indicate rise from 1.2483 has resumed. Otherwise, medium term outlook is, at best, neutral.
GBP/USD
Daily Pivots: (S1) 1.9473; (P) 1.9539; (R1) 1.9655; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
Cable’s rally from 1.9261 continues today and reaches as high as 1.9667 so far. At this point, intraday bias remains on the upside as long as cable stays above 1.9588 support and further rally is still expected to follow towards 1.9750 resistance. Below 1.9588 will turn intraday outlook consolidative. But pullback should be contained above 1.9452 resistance turned support and bring rally resumption.
In the bigger picture, break of 1.9564 cluster resistance (61.8% retracement of 1.9750 to 1.9261 at 1.9563) suggest correction from 1.9846 has completed after three waves down to 1.9261. Break of 1.9750 will encourage further rise towards 1.9846 high and then next upside target of 138.2% projection of 1.8090 to 1.9142 from 1.8517 at 1.9917.
On the downside, it will take a break below 1.9452 support will argue that the whole rise from 1.9261 has completed but a break below 1.9315 is needed to confirm. Below 1.9315 support will bring a retest of 1.9261 low and then 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). We’ll still hold on to the preferred case that price actions from 1.9846 is merely correction to rise from 1.8834 only as long as 1.9177 remains intact. But 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.
USD/CHF
Daily Pivots: (S1) 1.2438; (P) 1.2483; (R1) 1.2521; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.
USD/CHF’s retreat from 1.2528 continues today. Dip below inner channel (now at 1.2465) with 4 hours MACD’s dip below signal line and RSI pulled back from overbought region suggest a short term top is already formed at 1.2528, after USD/CHF failed to break firmly above 100% projection of 1.1878 to 1.2268 from 1.2111 at 1.2501 and double channel resistance. However, a break below 1.2408 support is still needed to confirm. Otherwise, further rally is still in favor.
Below 1.2408 will encourage further pull back to 38.2% retracement of 1.2111 to 1.2528 at 1.2369). But downside should be contained by 1.2270 cluster support (38.2% retracement of 1.1878 to 1.2528 at 1.2280, 61.8% retracement of 1.2111 to 1.2528 at 1.2270) and bring further rally.
In the bigger picture, previous break of 1.2343 resistance has opened up a few possibilities. Decisive break of 1.2501 projection level will start to argue the rise from 1.1878 is 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. Further rally should be seen to 1.2768 resistance first. 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 sustained break of 1.2270 cluster support will suggest that the whole rebound from 1.1878 has possibly completed and put focus back to 1.2110 support. Break will shift focus back to the downside for 1.1878 low.
USD/JPY
Daily Pivots: (S1) 120.10; (P) 120.41; (R1) 120.65; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
USD/JPY continues to trade sideway between 120.07 and 120.71 today. With 4 hours MACD dragged below signal line and RSI pulled back from overbought region suggest that a short term top should be in place. Further consolidation is in favor to follow with risk of pull back towards 4 hours 55 EMA (now at 119.51). But downside should be contained above 119.02 cluster support (61.8% retracement of 117.96 to 120.71 at 119.01) and bring another rally.
On the upside, above 120.71 again will indicate rise from 117.96 has resumed for 121.38 resistance (05 high). Meanwhile, Break of 119.02 cluster support will indicate the rise from 114.41 has possibly completed. Focus will then be on 117.96 support and break will encourage deeper correction.
In the bigger picture, sustained break of 119.86 resistance confirmed that whole rally from 108.99 has resumed for 121.38 resistance As discussed before, 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 114.41 support or before sign of reversal.
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?r769747778
Mon, 15 Jan 2007 11:06:00 GMT from Reuters South Africa
http://c.moreover.com/click/here.pl?r769747064
Mon, 15 Jan 2007 11:06:00 GMT from Reuters South Africa
http://c.moreover.com/click/here.pl?r769746132
Mon, 15 Jan 2007 11:05:00 GMT from Bloomberg
http://c.moreover.com/click/here.pl?r769726381
Mon, 15 Jan 2007 10:44:00 GMT from Bloomberg
http://c.moreover.com/click/here.pl?r769719040
Mon, 15 Jan 2007 10:37:00 GMT from Bloomberg
http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:50 JPY Japan Machine orders M/M Nov 3.80% 3.40% 2.80%
23:50 JPY Japan Machine orders Y/Y Nov 0.70% 0.40% -1.20%
9:30 GBP UK house price Dec 8.90% 9.10% 8.60%
9:30 GBP U.K. PPI core M/M Dec 0.10% 0.20% 0.20%
9:30 GBP U.K. PPI core Y/Y Dec 2.40% 2.50% 2.40%
9:30 GBP U.K. PPI input M/M Dec 0.10% 0.20% 0.10% 0.60%
9:30 GBP U.K. PPI input Y/Y Dec 1.90% 1.40% 2.80% 3.30%
9:30 GBP U.K. PPI output M/M Dec 0.20% 0.10% 0.00%
9:30 GBP U.K. PPI output Y/Y Dec 2.20% 2.20% 1.80%
10:00 EUR Eurozone Industrial prod’n M/M Nov 0.20% 0.80% -0.10%
10:00 EUR Eurozone Industiral prod’n Y/Y Nov 2.50% 3.10% 3.60%
10:00 EUR ECB’s Trichet speaks
U.S. Market holiday
http://www.actionforex.com/general_information/forex_newsletters/forex_newsletter_200507301487/