All My Net Biz

Action Insight | Written by ActionForex.com | Jun 05 07 14:19 GMT |
Forex Mid-Day Technical Report Dollar Sent Lower by Bernanke but Drawing Support from ISM

Dollar’s sell off resumes in early US session after comments from Bernanke which said that housing market’s drag on the economy could persist somewhat longer than expected even though the slump has not spilled over into other parts of the economy yet. He said in his speech “http://www.federalreserve.gov/boarddocs/speeches/2007/20070605/default.htm in the International Monetary Conference in South Africa via satellite that tighter standard is now required by investors and creditors will no doubt restrain housing demand in the subprime market and some near-prime borrowers may also be shut out. Regarding inflation, though, Bernanke still believes that risk is to the upside and economy will grow at near trend rate.

Dollar additionally pressured by speculation that the United Arab Emirates may be the next Middle Eastern country to end the dollar peg. Syria and Kuwait had recent announced that they would dump the dollar peg to curb rising import costs and inflation that was pushed up by rising costs of imports from Asia and Europe. However, much stronger than expected ISM non-manufacturing index, which rose to 59.7 in May versus expectation of 55.3, is providing some support to the greenback.

Euro, on the other hand was supported by solid Services PMI in May and IMF’s raising of its forecast for the growth in the Eurozone economy from 2.3% in 2007 to around 2.5%. IMF also expects that the expansion will “continue apace” next year. Though, Apr retail sales missed expectation by growing 0.2% mom, 1.6% yoy only.

The Aussie remains firm too and took out this year high of 0.8390, reaching as high as 0.8406 so far, highest since Aug 90. Though RBA is widely expected to keep rate unchanged at 6.25% in the coming Asian session, expectation is still firm on another rate hike, probably in near term. Also, Aussie continues to draw support from carry trade. Q1 GDP will also be closely watched in the coming Asia session too and is expected to grow 1.0% qoq, 2.9% yoy. EUR/USD

Daily Pivots: (S1) 1.3445; (P) 1.3472; (R1) 1.3515; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/USD rise from 1.3391 extends further to as high as 1.3553 in early US session, breaking short term falling trend line resistance (now at 1.3513) as expected. At this point, intraday bias will remain on the upside as long as 1.3487 holds and further rise is expected to be seen to 1.3609 resistance. Touching of 1.3487 will turn intraday outlook consolidative first.

As discussed before, corrective fall from 1.3681 has completed with three waves down to 1.3391 already. Bullish convergence condition in 4 hours MACD and RSI as well as nearly meeting of 100% projection target of 1.3681 to 1.3461 from 1.3609 at 1.3389 are both supporting this case. Sustained trading above the trend line resistance will add more weight to this case. Meanwhile, in case of pull back, sustained trading below 1.3364 cluster support is needed to confirm underlying bearishness. Otherwise, the corrective fall from 1.3681 is still considered either ended or to be ended soon. That is, another strong rebound is likely to follow.

In the bigger picture, with 1.3364 cluster support (38.2% retracement of 1.2865 to 1.3681 at 1.3369) remains intact, the rise from 1.2865 is still expected to resume to above 1.3681. However, risk of medium term reversal is still high. As discussed before, medium term up trend from 1.1639 is interpreted as having first move completed with three waves up to 1.2978, subsequent sideway consolidation completed at 1.2483. Rise from 1.2483 is treated as resumption of the whole up trend from 1.1639. With such interpretation, we’d expect risk of medium term reversal to increase significantly after EUR/USD met resistance zone between 1.3668 and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. Hence, focus is now on reversal signals.

On the downside, decisive break of 1.3364 cluster support (38.2% retracement of 1.2865 to 1.3681 at 1.3369) is needed to confirm a medium term top is made. More importantly, with bearish divergence condition in daily MACD and RSI, this will warn that the whole rally from 1.2483 has also completed, and, so is the whole up trend from 1.1639. Focus will then be back to medium term rising channel support (now at 1.3049).

GBP/USD

Daily Pivots: (S1) 1.9841; (P) 1.9882; (R1) 1.9952; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Cable’s rise from 1.9733 extends to as high as 1.9968 in early US session, meeting mentioned target of 1.9956/58 cluster resistance (61.8% retracement of 2.0132 to 1.9676 at 1.9958 and 100% projection of 1.9676 to 1.9899 from 1.9733 at 1.9956) as expected. At this point, intraday bias will remain on the upside as long as 1.9891 minor support holds. Sustained trading above 1.9956/58 will encourage further rise to retest 2.0132 high.

On the downside, touching of 1.9891 will turn intraday outlook consolidative first and bring pull back. But downside should be contained by 1.9819 resistance turned support and bring another rally. Break of 1.9819 is needed to signal rise from 1.9733 has completed and turn focus back to this support.

In the bigger picture, risk of medium term reversal remains high even though a retest of 2.0132 high could now be seen. Firstly, the whole up trend from 1.7047 is not clearly impulsive. One interpretation is that rally from 1.7047 ended with three waves up to 1.9024. Subsequent correction ended at 1.8090. Rally from 1.8090 has already met mentioned target of 100% projection of 1.7047 to 1.9024 from 1.8090 at 2.0067. Secondly, regardless of the larger trend, rise from 1.8090 can be interpreted as being a five wave sequence with first wave ended at 1.9142, second at 1.8517, third at 1.9913 and fourth at 1.9183. The channeling property supports this interpretation too. In such case, the fifth wave rally from 1.9183 has also met target of 61.8% projection of 1.8517 to 1.9913 from 1.9183 at 2.0046 too. With bearish divergence condition remains in weekly MACD and RSI, as well as Daily MACD and key 2.0106 resistance (92 high) not decisively taken out, 2.0132 could be the important medium term top already.

On the downside, break of 1.9733 support is needed to revive the case that fall from 2.0132 is still in progress first. Firm break of the medium term rising channel support (now at 1.9634) will indicate that the whole rally from 1.8090 has completed and add much credence to the case that an important medium term top is already formed and put focus to 1.9183 low. However, sustained trading above mentioned 2.0106 resistance will dampen the above interpretation and indicates that underlying bullishness in cable is much stronger then we thought. Further medium term rally should then be seen towards 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677.

USD/CHF

Daily Pivots: (S1) 1.2198; (P) 1.2251; (R1) 1.2289; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.

USD/CHF’s fall extends further to as low as 1.2161 in early US session after taking out 1.2198 support. At this point, further decline is expected to follow as long as 1.2241 resistance holds. Next downside target will be 1.2124 cluster support (61.8% retracement of 1.1993 to 1.2331 at 1.2122).

As discussed before, Sustained trading below the short term rising trend line (now at 1.2259) indicates the rise from 1.1993 has made a top at 1.2331 already. But with 1.2124 cluster support (61.8% retracement of 1.1993 to 1.2331 at 1.2122) remains intact, USD/CHF could be developing into sideway consolidation only. Firm break of 1.2124 is needed to confirm rally from 1.1993 has already completed and bring retest of this low. Above 1.2241 will suggest fall from 1.2327 has ended and bring recovery.

In the bigger picture, previous break of 1.2282 cluster resistance (50% retracement of 1.2571 to 1.1993 at 1.2282) confirms that fall from 1.2571 has already completed at 1.1993 with bullish convergence condition in daily MACD and RSI. More importantly, this will increase the chance that USD/CHF is about to complete a medium term head and shoulder bottom formation (ls: 1.1919, h: 1.1878, rs: 1.1993). Sustained break of 61.8% retracement at 1.2350 and neckline resistance (1.2768 to 1.2571, now at 1.2334) will add more weight to this case. Stronger rally should then be seen to 1.2571 first and then 1.2768.

However, below 1.2124 cluster support (61.8% retracement of 1.1993 to 1.2331 at 1.2122) will indicate that rebound from 1.1993 has possible completed and save the case that recent choppy price actions could merely be part of a medium term triangle consolidation. And, down trend from 1.3283 should still resume after completing this consolidation in such case.

USD/JPY

Daily Pivots: (S1) 121.50; (P) 121.80; (R1) 122.06; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/JPY dipped to as long as 121.11 in early US session but failed to sustain below inner rising trend line (now at 121.41) and rebounds strongly. Since a short term top has likely formed at 122.13 after breakout from triangle consolidation (which is usually terminal) was limited by 122.17 key resistance and with bearish divergence condition remains in 4 hours MACD and RSI. Further decline is still expected as long as 121.93 resistance holds and next downside target will be 120.83 support. Above 1.21293 will indicate fall from 122.13 has completed and bring retest of this high. But sustained break of 122.17 key resistance is needed to confirm rally from 117.60 has resumed again.

In the bigger picture, since the current rally from 115.13 is not clearly impulsive, it’s being treated as part of a consolidation pattern that started at 122.17. Having said that, upside of this rise will likely be limited by 122.17 and bring another fall to retest 115.13 low before finishing the consolidation. But still, a break of 119.86 resistance turned support is needed to confirm rise from 115.13 has completed first. Otherwise further rally could still follow.

However, strong break of 122.17 resistance will indicate that the correction from 122.17 is already completed at 115.13. That is, the current rise from there represents resumption of the whole up trend from 108.99. In such case, the up trend is expected to extend further to 61.8% projection of 108.99 to 122.17 from 115.13 at 123.28 first.

EUR/JPY

Daily Pivots: (S1) 163.97; (P) 164.15; (R1) 164.44; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/JPY retreats mildly after reaching as high as 164.59 earlier today, just inches below mentioned 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64. Outlook remains unchanged. At this point, further rally could still be seen as long as 162.94 support holds. However, upside momentum remains unconvincing, in particular with bearish divergence condition staying in 4 hours MACD and RSI and with daily MACD remains below signal line. Risk of short term reversal is still high. EUR/JPY could now be in formation of a diagonal triangle to conclude the rally from 150.75. Hence, even though another rise could still be seen, upside will likely be limited by 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64 on further loss of momentum and bring reversal. On the downside, break of 162.94 support will be the first warning that a top is formed. Further break of 162.18 will indicate that the diagonal triangle mentioned has likely completed. Deeper decline should then be seen to 161.05 support and then 159.60.

In the bigger picture, EUR/JPY’s previous break above medium term rising channel resistance suggests that strength of the rally from 150.75 is stronger than we originally thought. But still, interpretation of rally from 130.60 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, targeting 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64 and could terminate there. But sustained break of this projection level will indicate another strong medium term rally is just at its beginning towards 100% projection of 137.16 to 159.63 from 150.75 at 173.22

On the downside, rise from 150.75 could still resume as long as 159.60 support holds. However, sustained trading below 159.60 will warn that prior break of medium term rising channel resistance was merely a throw-over. Also, this will give a serious warning signal that the whole rise rise from 130.60 has ended. EUR/JPY should set to test the medium channel support (now at 154.12) in such case.

Forex News Digest

http://www.bloomberg.com/apps/news?pid=20601087&sid=arrtELA4A_gc&refer=home

http://www.bloomberg.com/apps/news?pid=20601087&sid=aWbq8Mv2ON38&refer=home

http://www.bloomberg.com/apps/news?pid=20601087&sid=aaohAgfrIrBQ&refer=home

http://www.bloomberg.com/apps/news?pid=20601083&sid=aj05.EhwCpx8&refer=currency

http://c.moreover.com/click/here.pl?r963847241
Tue, 5 Jun 2007 09:19:00 GMT from AP via MSN Money

http://c.moreover.com/click/here.pl?r963835926
Tue, 5 Jun 2007 09:06:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r963825950
Tue, 5 Jun 2007 08:55:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r963820412
Tue, 5 Jun 2007 08:50:00 GMT from Street Insider

http://c.moreover.com/click/here.pl?r963819223
Tue, 5 Jun 2007 08:49:00 GMT from The Australian

http://c.moreover.com/click/here.pl?r963817640
Tue, 5 Jun 2007 08:48:00 GMT from Reuters South Africa

http://c.moreover.com/click/here.pl?r963813381
Tue, 5 Jun 2007 08:44:00 GMT from Forbes.com

http://c.moreover.com/click/here.pl?r963809303
Tue, 5 Jun 2007 08:41:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r963799971
Tue, 5 Jun 2007 08:32:00 GMT from Bloomberg

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
01:30 AUD Australia Current account (aud) Q1 -15.4B -14.7 B -15.1 B -15.5B
07:55 EUR Germany Services PMI May 57.5 57.9 57.8
08:00 EUR Eurozone Services PMI May 57.3 57.1 57
08:30 GBP U.K. Services PMI May 57.2 57 57.2
09:00 EUR Eurozone Retail sales M/M Apr 0.20% 0.50% 0.50% 0.40%
09:00 EUR Eurozone Retail sales Y/Y Apr 1.60% 2.00% 2.60% 2.20%
12:15 Bernanke Fukui Trichet Speak to Conference in South Africa
14:00 USD U.S. ISM non-manufacturing May 59.7 55.3 56
15:00 USD Fed Warch speaks
15:40 USD US Treasury Paulson Speaks

http://www.actionforex.com/general_information/forex_newsletters/forex_newsletter_200507301487/