Published on  Mon, Jan 26 2009, 07:43 GMT

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Weekly Outlook: Sterling Weakness and Yen Strength to Continue, Dollar Fate Depends on Commodities

Sat, Jan 24 2009, 20:57 GMT
by ActionForex.com Team

ActionForex.com

Weekly Outlook: Sterling Weakness and Yen Strength to Continue, Dollar Fate Depends on Commodities

Looking back at the past week, Sterling's weakness and yen strength dominated the forex markets while dollar also strengthened on risk aversion. GBP/USD hit new 23 year low and closed -936 pips (-6.79%) while GBP/JPY made new record low and closed down -1129 pips (-0.23%). Nevertheless, the picture was mixed up a little bit towards the end of Friday as dollar retreated on strength in gold and rebound in oil while DOW's refusal to close below 8000 level limited yen crosses' fall. Indeed, the Canadian dollar staged a strong rebound on Friday following rebound in crude oil prices while Aussie also pared some of last week's losses as Gold is back pressing 900 level. The outlook is turning somewhat unclear.

Nevertheless, firstly, note that EUR/JPY, GBP/JPY, CAD/JPY and NZD/JPY's break of recent important support last week should have confirmed medium term down trend resumption. As discussed before, major stock indices are expected to take out last year's low in the near future and European stocks are leading the way now. CAC 40 has already taken out Nov's low while DAX is also in proximity to Oct's low too. DOW is still stubbornly holding on 8000 level but there is no change in the view that rebound from 7392 has completed. Investors are probably just waiting for Q4 GDP from US this week to commit further selling in US stocks. Hence after all, yen's strength is still expected to continue.

Secondly, it now seems that every news from UK is bad news. Last week's selling in Sterling was triggered by announcement of the second bank rescue plan and the fear of debt rating downgrade and BoE King's message that the bank will enter into quantitative easing soon. Further selling was triggered after the dovish MPC minutes, climbing unemployment rate to 6.1% and release of worst contraction in GDP in Q4 by -1.5% qoq. In between, markets had no reaction to higher than expected CPI reading of 3.1% yoy in Dec and surprised growth in retail sales by 1.6% mom in Dec. The pound will likely remains pressured.

Thirdly, note that Canadian staged a very impressive rebound on oil prices even though BoC cut rates by 50bps to 1.00% and signaled further easing. Retail sales in Canadian fell more than expected by -2.4% in Nov while CPI moderated more than expected to 1.2% yoy in Dec. However, there is no confirmation in reversal in crude oil yet and last week's rebound may merely be part of consolidations. On the other hand, Gold's break of 892 resistance is building up the case that 681 is an important low and that provided the support to Aussie which keep it above Oct's lows against dollar and yen.

Fourthly, Dollar continued to respond positively to negative news even though new residential construction data dived further to new record low in Nov and initial jobless claims soaring to 15 year high of 589k. Though some weakness was seen towards the end of the week as gold strengthened.

Considering the above, Sterling will likely remain the weakest currency, in particular against the broadly strong yen. The timing of another round of yen buying will probably depend on when DOW finally gives up 8000 level. Euro and Swissy will likely remain soft against the greenback and yen too, but less weak than Sterling. Aussie could be "relatively" steady, supported by gold and AUD/NZD flows. Canadian dollar is rather uncertain, depending on whether crude oil can extend the rebound further. If gold and oil rises together, dollar will likely retreat further against commodity currencies and be dragged down against yen even though it's still likely be firm against European majors. However, even if gold rises, if oil fails 50 level and weakens again, the impact on dollar will counter each other and should add some fuel for dollar's rally in general and in particular in USD/CAD.

Currency Heat Map Weekly View

Highlights from US will definitely be on Friday's prelim Q4 GDP which is expected to show annualized contraction of -5.3%. FOMC will announce rate decision but markets will likely have little reaction to Fed being on hold at 0-0.25%. Other important data from US include existing home sales and new home sales, consumer confidence, durable goods orders.

From Eurozone, main focus should be on Friday's Jan CPI estimate which is expected to slow to 1.4% yoy, further down below ECB's target of 2%. Other data include Germany Ifo, Eurozone M3, economic sentiment and unemployment rate.

Aussie PPI and CPI will also be featured. In particular, CPI is expected to contract by -0.4% in Q4 which should pave the way for RBA to cut rates again in Feb.

RBNZ is expected to cut rates by 100bps from 5.00% to 4.00% this week, making the OCR temporarily below RBA's 4.25% before RBA meets on Feb 3.

Other important data to watch include UK Gfk, nationwide house price, Canadian GDP and PPI, Japan CPI, unemployment rate and retail sales, Swiss KOF.

More Forex Technical Analysis Reports Here.

GBP/JPY Weekly Outlook

GBP/JPY dived further to as low as 118.81 last week after taking out 128.78 low. Though, with 4 hours MACD crossed above signal line, an intraday low might be in place. Some consolidation could be seen initially this week, with risk of recovering to 125.40 or above. But upside should be limited by 128.78 support turned resistance and bring resumption. Current fall from 141.52 is expected to target 161.8% projection of 141.52 to 128.78 from 135.82 at 115.21 on resumption.

In the bigger picture, the strong break of 128.78/129.71 support zone confirms that medium term fall from 215.87 is still in progress and has resumed. Revised interpretation is that such fall is developing into a five wave sequence (184.47, 197.42, 129.71.......) Fourth wave correction was brief and has completed at 141.52 already. Decline from there is treated as the fifth wave. Having said that, downside could extend further to 61.8% projection of 197.42 to 129.71 from 141.52 at 99.67 which is very close to 100 psychological support. On the upside, a break of 135.82 will be the first signal that a medium term bottom is finally formed.

In the longer term picture, as discussed before, the corrective nature of the rise from 129.32 (95 low) to 251.09 (07 high) suggests that it's merely consolidation in the longer term down trend. The strength of the decline from 251.09 is also consistent with the view that it's resumption of the multi-decade down trend. Such decline should develop into a five wave structure. Note that the decline from 215.87 is not treated as the fifth wave, but the third wave inside the third wave that started at 241.35. While downside momentum is seen diminishing in weekly MACD, there is no signal of a reversal yet.

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Published on  Sat, Jan 24 2009, 20:57 GMT

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Mid−Day Forex Technical Report − Sterling Still the Biggest Loser after Worse than Expected GDP Contraction

Fri, Jan 23 2009, 13:21 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Sterling Still the Biggest Loser after Worse than Expected GDP Contraction

The overall themes in the forex markets are unchanged, with Sterling's weakness being the main focus, in particular after deeper than expected contraction in UK GDP in 4Q. GBP/JPY and GBP/USD have fallen -2.6% and -2.1% today and are having cumulative loss of -11% and -8.5% respectively this week. Yen strength is also catching up as risk aversion is back following weakness in European stocks markets. EUR/JPY and AUD/JPY both lose over -2% so far today. Dollar, on the other hand, benefits from risk aversion once again and resumes recent rally.

Data released in US session saw Canadian CPI dropped more than expected by -0.7% mom in Dec. Yoy rate is down from 2.00% to 1.2% comparing to consensus of 1.4. Core CPI dropped -0.4% mom, rose 2.4% yoy. Markets has little reaction to the data after a week of BoC rate cut and monetary policy report update.

UK's preliminary 4Q GDP contracted -1.5% qoq (consensus: -1.2%, Q3: -0.6%), the worst since 2Q80, officially entered into recession with two consecutive quarters of contraction. In annualized terms, UK GDP fell -1.8% yoy, overshadowing the -1.4% slide expected. Prime Minister Gordon Brown said that UK will fight this recession with "with every weapon at our disposal. December's retail sales unexpectedly rose 1.6% mom, compared with market expectation of -0.3% and November's +0.3% due to holiday effect. However, the reading may be distorted due to cut in VAT, aggressive discounts and early Christmas sales during the period. After all, there is little support for the pound.

In the Eurozone, overall PMI improved slightly to 38.5 in January from a record low of 38.2 in December. Both the manufacturing and service components ticked higher to 34.5 (consensus: 33.2) and 42.5 (consensus: 41.5) from 33.9 and 42.1, respectively. The Germany composite output index, on the other hand, dropped to record low of 38 in January from 39.5 in the previous month with the manufacturing PMI plunging to 32 from revised 32.7 in December and service component sliding to 45.4 from revised 46.6.

In its monthly report for January, the Bank of Japan reduced its economic forecast for the 3rd straight month as ‘Japan's economic conditions have been deteriorating significantly'. On Thursday, the central bank revised down its real GDP growth estimate for the fiscal year ended Mar 09 to -1.8%, compared with October's projection of +0.1%. Moreover, forecast for fiscal year 2009 is also lowered to -2% from +0.6% projected in October.

Technically, dollar index's rally is still in progress, and climbs further to 86.79 so far. Intraday bias will remain on the upside as long as 85.23 minor support holds. Current rise from 77.69 is expected to extend to retest 88.46 high. Below 86.23 will turn intraday outlook neutral and bring consolidation first.

More Forex Technical Analysis Reports Here.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3702; (P) 1.3861; (R1) 1.4035; More

GBP/USD's decline resumes by taking out 1.3621 low and dives further to as low as 1.3533 so far. At this point, intraday bias remains on the downside as long as 1.3914 minor resistance holds. Further decline should now be seen to 61.8% projection of 1.8668 to 1.4557 from 1.5722 at 1.3186 next. On the upside, above 1.3914 will turn intraday outlook neutral and bring consolidation. But short term outlook will remain bearish as long as 1.4469 support turned resistance holds.

In the bigger picture, as discussed before, decline from 2.0158 is interpreted as being a five wave sequence (1.7445, 1.8668, 1.4557, 1.5722). Fifth wave decline from 1.5722 is still in progress and sustained trading below 1.3680 long term support (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667) is setting the stage for further decline to 61.8% projection of 1.8668 to 1.4557 from 1.5722 at 1.3186 next. Break will target 100% projection at 1.1611.

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Published on  Fri, Jan 23 2009, 13:21 GMT

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Daily Forex Technical Report − Sterling in Range, Await GDP to Confirm Recession

Fri, Jan 23 2009, 07:34 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Sterling in Range, Await GDP to Confirm Recession

Sterling and Euro remain in range as markets await important economic data from Europe today. In the UK, the preliminary 4Q08 GDP is anticipated to have contracted -1.2% qoq following a decline of -0.6% in 3Q08. Two consecutive quarters of contraction will confirm technical recession in UK. On annual basis, the UK economy is expected to shrink -1.4%, the largest drop since 1991. Retail sales is expected to dropped -0.6 mom in Dec. GBP/USD is bounded in tight range after hitting a 23 year low of 1.3621 earlier this week, drawing support from 2001 low of 1.3680. Markets seem to be waiting for today's data for either a strong breakout or rebound.

The Eurozone's PMI manufacturing and service are expected to have dropped further to 33.2 and 41.5, from 33.9 and 42.1, respectively. In Germany, the readings should also have weakened to 31.8 and 45 for manufacturing component and service component. Note that EUR/GBP is still struggling around an important near term fibonacci resistance at 0.9493. The chance of making another recover high above 0.9799 will depend of whether EUR/GBP will take out this resistance decisively, or bounce off from the current level.

To be released later today, Canada's inflation continues to ease in December with the CPI anticipated to come in at -0.4% mom from -0.3% in the previous month. On yearly basis, the gauge should have slowed from 2.0% to 1.4%. Concerning core CPI, the reading is expected to have dropped -0.2% mom and rose 2.4% yoy. In the January Monetary Report released yesterday, BOC forecasts total CPI will dip below 0% for 2 quarters in 2009 due to decline in energy prices. However, both total and core inflation will return to target level of 2% yoy by 1H2010.

Released in Asian morning, Japan's all industry index plunged 2.3% mom in November, compared with market expectation of -2.2% and a revised -0.4% in October. Industrial production component remained poor with a reduction of 8.2% while construction and tertiary components dropped 0.8% and 0.9% from the previous month, respectively.

More Forex Technical Analysis Reports Here.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3702; (P) 1.3861; (R1) 1.4035; More

GBP/USD remains bounded in tight range above 1.3621 after recent decline stalled at key support of 1.3680 long term support (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667). With an intraday low in place, some more recover could be seen and above 1.4052 will bring stronger rebound. Though, firstly, outlook won't turn bullish before a break of 1.4469 resistance. However, considering the importance of 1.3680 long term support, outlook will remain neutral only until breakout on either side.

In the bigger picture, key long term support of 1.3680 is already met and some support could be seen at the current level. As discussed before, decline from 2.0158 is interpreted as being a five wave sequence (1.7445, 1.8668, 1.4557, 1.5722). Break of 1.4469 support turned resistance will be an important alert that the fifth wave down is also completed. That is, a medium term bottom is at least in place and stronger rise should then be see to 1.5722 and above to correct the whole fall.

On the downside, however, sustained trading below 1.3680 will indicate that such medium term down trend is still in progress and will path the way to next target of 61.8% projection of 1.8668 to 1.4557 from 1.5722 at 1.3186.

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Published on  Fri, Jan 23 2009, 07:34 GMT

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Mid−Day Forex Technical Report − Dollar Responds Positively to Negative Data Again

Thu, Jan 22 2009, 14:14 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Responds Positively to Negative Data Again

Dollar once again responds positively to negative data in early US session. Housing starts dropped -15.5% to new record low at 5.5m in Dec. Building permits also sank to new record low of 5.5m. Initial jobless claims surged to 16 year high of 589k, seven straight weeks above 500k mark. Dollar and yen recovers yesterday's loss on risk aversion as US stocks are set to have a lower open after yesterday's 3.5% rebound. After all, the direction in the currency markets will be heavily influenced by developments in the equity markets.

Also released in US session, Canadian retail sales had their sharpest decline since 1998, dropped by -2.4% in Nov mainly due to falling gasoline prices. Ex-auto sales dropped -2.3%. Leading indicators fell -0.6% in Dec. USD/CAD was supported above 1.2529 minor intraday support and strengthens. Short term outlook in the pair remains bullish.

Released earlier, UK's CBI industrial trend came in at record low of -43 in January, much lower than consensus of -39 and -35 in the previous month, indicating manufacturers anticipate severe decline in output in the coming 3 months. Eurozone's industrial orders plunged 4.5% mom in November, better than consensus of -4.8% and the revised -5.7% in October. In Switzerland, ZEW economic expectation surprisingly improved to -66.7 in January from -76.2 in the previous month, showing some effect from SNB's aggressive rate cuts over the past few months.

The Bank of Japan decided to keep interest rate unchanged at 0.1% but announced it will consider buying corporate bonds with maturity up to 1 year. Moreover, the central bank revised downward economic and inflation outlook. For the year ending Mar 31 2009, GDP will contract 2% while CPI will drop 1.1%. For 2010, economic growth is expected to rise 1.5% with inflation will fall 0.4%.

More Forex Technical Analysis Reports Here.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2474; (P) 1.2619; (R1) 1.2695; More.

No change in USD/CAD's outlook. Intraday bias remains on the upside as long as 1.2529 minor support holds. Rise from 1.1761 is still expected to extend further to retest 1.3005/15 resistance zone. Though, consider mildly bearish divergence condition in 4 hours MACD and RSI, below 1.2529 will indicate that a short term top is in place and bring pull back to 1.2316 support for consolidation.

In the bigger picture, there is no confirmation of completion of medium term up trend from 0.9056 yet. Such rise is expected to be developing into a five wave sequence (1.0378, 0.9823, 1.3015, ......). Consolidation from 1.3015 is treated as the fourth wave consolidation and might have completed at 1.1761 already. Decisive break of 1.3005/15 will confirm medium term up trend resumption and should then target 61.8% retracement of 1.6196 to 0.9056 at 1.3469. On the downside, below 1.2316 support will argue that consolidation from 1.3015 is extending further for another test of 1.1464 support before completion.

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Published on  Thu, Jan 22 2009, 14:14 GMT

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Daily Forex Technical Report − Yen Stays in Range after BoJ on Hold and Cut Forecasts

Thu, Jan 22 2009, 08:32 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Yen Stays in Range after BoJ on Hold and Cut Forecasts

The Japanese yen remains in range after volatile price actions in the past 24 hours. BoJ left rates unchanged at 0.1% as widely expected. The bank has revised down both the growth in inflation forecasts for 2008 and 2009 fiscal years. GDP is expected to contract by -1.8% in 2008, down from prior forecast of +0.1% growth. In 2009, GDP is expected to shrink by -2.0%, down from prior estimate of +0.6%. Regarding inflation, BoJ expects -1.1% fall in 2009 , down from prior estimate of 0%. In separate release Japanese Trade deficit widened to -320b yen in Dec due to record drop in exports by -35.00% yoy.

On the data front, as recession in the Eurozone deepens, industrial orders remain in the downtrend and November's reading should come in at -4.8% mom, following a plunge of 4.7% in October. In Switzerland, ZEW economic expectation should have worsen to -77.5 in January (December -46.2). UK's January reading for CBI industrial trend is also anticipated to have dropped to -39 from -35 in December.

Note that highly volatile price actions are seen the dollar, surging to 23 year high against sterling and dropping to 13 year low against yen at the same time, then reversed. Focus will turn to whether US stock markets can extend yesterday's rebound, as well as the string of economic data to be released today. Housing starts in December probably fell to an annualized 610K in December compared with record low level of 630K in the previous month. Since Jan 2006, the reading has been plunged by 73%. December's building permits is also anticipated to have dropped to 610K from 620K in November. House price index in November will be released and should have been down 1.2% following a fall of 1.1% in November. Initial jobless claims are expected to have risen to 540K for the week ended Jan 17. However, 4-week average would have reached 2 months' low at 506.3K. The gauge has been volatile in recent weeks due to holiday seasons and the situation should remain like this in the near future given unusual auto factory shutdowns following the holidays.

Economic forecast Canada's leading indicator to have dropped another 0.7% in December. Concerning retail sales, November's reading would have dropped 1.5% after sliding 0.9% in the previous month. Ex. auto retail sales likely fell 1.4% over the month. After cutting interest rate to 1% Tuesday, the Bank of Canada will release the quarterly monetary policy report which is expected to reveal reduction in growth and inflation forecast.

Technically, while an intraday top is in place in the dollar index at 86.5 and some more pullback could be seen, short term outlook will remain bullish as long as 83.44 support holds. Current rise from 77.69 is still expected to extend towards 88.46 high. However, a break of 83.44 will argue that rebound from 77.69 has completed and bring deeper fall.

More Forex Technical Analysis Reports Here.

USD/JPY Daily Outlook

Daily Pivots: (S1) 87.67; (P) 88.91; (R1) 90.72; More.

USD/JPY dived to as low as 87.12, meeting mentioned 87.13 low as expected by rebounded strongly since then. An intraday low is no doubt in place and some more sideway trading should now be seen. But after all, there is no change in the short term bearish outlook with 90.15 minor resistance intact. Further decline is still in favor and break of 87.13 again will indicate that medium term trend trend has resumed for mentioned target of 82.3 next.

On the upside, though, above 90.15 will be the first alert that whole decline from 94.61 has completed. Further break of 91.29 resistance will confirm this case and bring stronger rebound. Still, even in such case, the corrective nature of rise from 87.13 to 94.61 and that from 94.61 to 87.12 suggest that USD/JPY is merely in the last leg of consolidation. In other words, medium term down trend should still resuming after another test of 94.61 in this case.

In the bigger picture, with USD/JPY still staying below 55 days EMA, fall from 110.66 should still be in progress. On resumption, such decline should target 100% projection of 124.13 to 95.77 from 110.66 at 82.3. However, considering bullish convergence condition in daily MACD, decisive break of 94.61 will be another alert that whole decline from 110.66 has completed. Focus will then be on 100.54 resistance for confirmation.

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Published on  Thu, Jan 22 2009, 08:32 GMT

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Mid−Day Forex Technical Report − Yen Rallies Even Though Stocks Rebound

Wed, Jan 21 2009, 15:25 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Yen Rallies Even Though Stocks Rebound

The Japanese yen continues to be firm even though DOW rebounds over 100 pts in early US session and is back above 8000 level. Though, this time, yen's strength is most apparent against the greenback with USD/JPY dive through 90 level. EUR/JPY remains soft but is still holding above today's day low so far. Dollar retreats against most currencies instead and the dollar index fails to sustain earlier gains. However, note the rebound in stock is much less than yesterday's 300 pts fall. Recent weakness in the global equities markets is expected to continue and extend further. Both the dollar and yen are still in short term up trend against other major currencies, with the yen a bit stronger.

On the data front, Canadian wholesale sales dropped -1.6% mom in Nov, slightly above market expectation of -1.5%. The US NAHB housing market index is expected to be unchanged at a record low of 9 in January.

Unlike the market's expectation of a unanimous vote on December's 50 bps rate cut, the BOE's minutes revealed the MPC voted 8-1 to lower interest rate to 1.5%, the lowest since 1694. David Blanchflower originally suggested a 100 bps reduction but the committee believed either leaving the rate unchanged or cutting too much would unsettle the market which has already priced in 50 bps.

According to International Labor Organization (ILO), UK's unemployment rate rose to 6.1% in November from 6% in the previous month. The claimant count in December rose 77.9K to 1.16M, the highest level since Jan 2000, as economic continued to deteriorate. The 3-month average earning in November increased by 3.1% yoy, lower than +3.3% as market expected and in October. The nation's PSNCR rose significantly to 44.2B pounds, much more than consensus of 17.8B pounds and 10.32B pounds a month ago.

BoE Governor King said overnight that it's sensible for MPC to prepare for the possibility to "move beyond" conventional instrument as downside risks of inflation remains high even though the bank has 'big cuts' in the interest rate already. This is affirming market's expectation that BoE will soon follow BoJ and Fed to enter quantitative easing. Also King said that UK officials may start buying assets within weeks to loosen credit markets as the record low interest rates in UK fails to avert a marked recession.

Released overnight, New Zealand's retail sales remained unchanged in November from the previous month, better than market expectation of a drop of -1.2% and October's -1.3% fall. The 325 bps cut in interest rate since July 2008, reduction in income tax and sharp fall in oil price helped boost consumer spending. In Australia, Westpac consumer confidence slid by2.2%, the first decline in 3 months, in January after rising 7.5% in December. According to the survey, Australian consumer became more optimistic on their household finance. However, they are worry much about global economic outlook. Germany PPI dropped -1.0% mom in Dec and moderated from 5.3% yoy to 4.3% yoy.

More Forex Technical Analysis Reports Here.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 89.28; (P) 90.13; (R1) 90.57; More.

USD/JPY dives further to as low as 89.22 in early US session and at this point, intraday bias remains on the downside as 90.18 minor resistance holds. Further break of 88.47 will confirm that fall from 84.61 as resumed. As discussed before, corrective rise from 87.13 should have completed with three waves up to 94.61. Break of 87.13 will confirm medium term down trend resumption. On the upside, above 90.18 will turn intraday outlook neutral and bring more choppy consolidation before resuming recent decline.

In the bigger picture, with USD/JPY still staying below 55 days EMA, fall from 110.66 should still be in progress. On resumption, such decline should target 100% projection of 124.13 to 95.77 from 110.66 at 82.3. However, considering bullish convergence condition in daily MACD, another rise above 94.61 will be another alert that whole decline from 110.66 has completed. Focus will then be on 100.54 resistance for confirmation.

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Published on  Wed, Jan 21 2009, 15:25 GMT

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Daily Forex Technical Report − Sterling Pressured in Risk Averse Markets, BoE Minutes and UK Job Report Awaited

Wed, Jan 21 2009, 07:52 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Sterling Pressured in Risk Averse Markets, BoE Minutes and UK Job Report Awaited

The forex markets stabilize a bit in Asian session but risk aversion remains the main theme. Asian stocks are generally lower, with Nikkei down another 2% following 4% decline in DOW overnight. Note that both Euro and Aussie have taken out last week's lows against dollar and yen, and that serve as another indication of weaknesses. As discussed before, we're expecting to global stock markets to extend current fall to retest last Oct/Nov's low and hence, further dollar and yen strength is favored.

Dollar index retreats mildly from 86.39 after hitting near term channel resistance. Nevertheless, intraday bias remains on the upside as long as 85.31 minor support holds. The current rise from 77.69 is still expected to extend further towards 88.46 high. A drop below 85.31 minor support will turn intraday outlook neutral and bring consolidation. But short term outlook will remain bullish as long as 83.44 support holds.

Sterling remains the biggest loser this week, dropping over 7% against yen and over 6% against dollar. BoE Governor King said that it's sensible for MPC to prepare for the possibility to "move beyond" conventional instrument as downside risks of inflation remains high even though the bank has 'big cuts' in the interest rate already. This is affirming market's expectation that BoE will soon follow BoJ and Fed to enter quantitative easing. Also King said that UK officials may start buying assets within weeks to loosen credit markets as the record low interest rates in UK fails to avert a marked recession.

BOE will release MPC minutes for the meeting on Jan 8. Markets expect an unanimous 9-0 vote to cut interest rate by 50 bps to 1.5%. Moreover, the minutes will indicate the central bank remains bearish on the nation's economy. The ILO unemployment rate should have edged higher to 6.1% in November from 6% a month ago. Other employment data are 3-month average earnings (November) and claimant count rate (December). While the former is anticipated to remain at 3.3%, the latter should have risen by 85K from 75.7K in November. PSNCR in December probably widened to 17.8B pound from 10.32B pounds in the previous month.

In Canada, economists forecast wholesale sales would have contracted 1.5% in November following a drop of 1.8% in October. The US' NAHB housing market index should have remained unchanged at a record low of 9 in January.

Released overnight, New Zealand's retail sales remained unchanged in November from the previous month, better than market expectation of a drop of -1.2% and October's -1.3% fall. The 325 bps cut in interest rate since July 2008, reduction in income tax and sharp fall in oil price helped boost consumer spending. In Australia, Westpac consumer confidence slid by2.2%, the first decline in 3 months, in January after rising 7.5% in December. According to the survey, Australian consumer became more optimistic on their household finance. However, they are worry much about global economic outlook. Germany PPI dropped -1.0% mom in Dec and moderated from 5.3% yoy to 4.3% yoy.

More Forex Technical Analysis Reports Here.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3713; (P) 1.4077; (R1) 1.4293; More

GBP/USD recovers mildly after hitting as low as 1.3811 but still intraday bias remains on the downside as long as 1.4055 minor resistance holds. Current fall from 1.5372 is expected to extends further to 1.3680 long term support (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667) next. On the upside, above 1.4055 will turn intraday outlook neutral and bring stronger rebound. But upside should be limited below 1.4469 support turned resistance and bring at least on more fall before making a bottom.

In the bigger picture, break of 1.4350 low confirms that medium term fall from 2.0158 has resumed. Such decline is interpreted as developing into a five wave sequence (1.7445, 1.8668, 1.4557, 1.5722) and should now be in the five wave decline. Further fall should be seen to 1.3680 long term support (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667). Some support could be seen there to make a medium term bottom. On the upside, above 1.4980 resistance will be the first alert that a medium term bottom is already in place and bring large scale consolidation. However sustained break of 1.3680 will path the way to deeper medium term fall to 61.8% projection of 1.8668 to 1.4557 from 1.5722 at 1.3186.

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Published on  Wed, Jan 21 2009, 07:52 GMT

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Mid−Day Forex Technical Report − Sterling Still the Biggest Loser, BoC Cuts 50bps

Tue, Jan 20 2009, 14:38 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Sterling Still the Biggest Loser, BoC Cuts 50bps

Sterling continues to be the biggest loser today on concern of rising level of UK government debts, Sovereign debt downgrade as well as deep recession. GBP/USD dived to a seven year low of 1.3862 while GBP/JPY continues to made new record low at 125.21. Slower than expected drop in UK inflation did little to help the Pound. Meanwhile, Dollar and yen are generally higher on risk aversion. Though, Aussie is somewhat supported by rebound in Gold prices and is relatively steady. Canadian dollar, on the other hand, dips after BoC cuts rates by 50bps to 1.00% as markets expected.

Bank of Canada slashed the key interest rate to lowest level since it's founded in 1934 to 1.00%. Moreover, the bank signaled further policy easing as it said that it "will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required."

UK inflation fell slower than expected in Dec. CPI plunged -0.4% mom, the lowest level since April while on yearly basis, the gauge rose 3.1%, compared with 4.1% in the previous month. The major factor for the ease in inflationary pressure was the VAT cut to 15% from 17.5% announced on Nov 24. December's RPI also dropped to 0.9% yoy from 3% in November, fueling speculation that the reading will turn negative next month.

ZEW economic sentiments in January surprisingly jumped to -30.8(consensus:-46, December: -46.1) and -31 (consensus:-44, December: -45 ) in the Eurozone and Germany respectively after the ECB cut interest rates by a total of 225 bps since October 2008. German's reading signaled a third consecutive month of improvement and although remained in negative territory, the big jump in January suggests that the reading has bottomed out with the trough at -63.9 in July the lowest level since the index began in December 1991.

Released overnight, New Zealand's Q4 CPI plunged -0.5% qoq (consensus:-0.4%, Q3: 1.5%), the most in a decade. On annual basis, inflation slowed sharply from 18 year high of 5.1% in Q3 to 3.4% in Q4. The lower-than- expected CPI will open the door for RBNZ ito have another massive rate cut on Jan 28.

More Forex Technical Analysis Reports Here.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2962; (P) 1.3173; (R1) 1.3280; More

EUR/USD's decline continues today and reaches as low as 1.2906 in early US session. At this point, intraday bias remains on the downside as long as 1.3049 minor resistance holds. As discussed before, consolidation from 1.2329 has possibly completed at 1.4719 already. Current fall from 1.4719 is expected to extend to retest 1.2329 low. On the upside, above 1.3049 will turn intraday outlook neutral and bring consolidation. But upside should be limited below 1.3385 resistance and bring another fall. Break of 1.3385 is needed to indicate completion of decline from 1.4719. Otherwise, short term outlook will remain bearish.

In the bigger picture, a medium term bottom no doubt in place at 1.2329 and fall from 1.6038 should have completed. Whether such fall is impulsive or corrective in nature is debatable. But after all, in either case, as long as 1.4867 resistance holds, such decline is still in favor to resume and should target 1.1639 medium term support next. Though, some larger scale consolidation could be seen first. However, above 1.4867 will dampen the bearish view and argue that stronger rally would be seen to retest 1.6038 record high.

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Published on  Tue, Jan 20 2009, 14:38 GMT

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Daily Forex Technical Report − Sterling Hit Hard on Worry of Downgrade

Tue, Jan 20 2009, 07:36 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Sterling Hit Hard on Worry of Downgrade

The broad based deep selloff in Sterling that's triggered by RBS losses and UK's second bank bailout package extended further in Asian session today. Investors are clearly unconvinced by UK's 100b pound bailout, that includes a term that banks must agree to "have specific and quantified lending commitments that will be binding and externally audited", as mutual responsibility as PM Brown said yesterday. In particular, markets are worried of a downgrade in UK government debts if losses in bank assets accelerate. GBP crosses dominate the top movers list so far today as GBP/JPY dives to new record low of 127.39. GBP/USD resumes medium term down trend to 1.4133 so far. Meanwhile, EUR/GBP extends the recovery to as high as 0.9184.

Dollar and yen, on the other hand, rides on risk aversion and soars broadly. Nikkei was down over 2%. As mentioned in our weekly report, we're expecting major stock index to extend lower to retest last Oct/Nov's lows. Further dollar and yen strength could be seen if European stocks extend yesterday's loss later today. Dollar index rises further to as high as 85.48 today. Short term outlook remains bullish as long as 83.46 support holds and the dollar index is expected to extend current rise from 77.69 to retest 88.46 high.

On the data front, in the UK, December's CPI probably fell deeper by -0.8% mom, a third consecutive monthly decline, following November's -0.1%, as pre-Christmas sales and value-added tax should have caused great drop in consumer price inflation. On yoy term, CPI is expected to slow sharply from 4.1% to 2.7%, back into BoE's 2-3% range for the first time since last March..

Germany's ZEW should have improved for the third consecutive month to -44 in January while still in negative territory. ZEW in the Eurozone is also expected to have improved slightly to -46 from -46.1 in the previous month. Rate cuts in the Eurozone as well as the government's spending package probably helped boost sentiment but the gauge should remain weak in the near-term as both European and global economy are still at trough.

The Bank of Canada will announce rate decision today. Economists forecast the central bank will reduce the policy rate by 50 bps to 1%. In the previous meeting in December, the BoC had aggressively cut interest rates by 75 bps in order to stimulate Canadian economy. Moreover, the country's manufacturing shipments in November probably slid 0.5% mom, matching the drop in October.

Released overnight, New Zealand's Q4 CPI plunged -0.5% qoq (consensus:-0.4%, Q3: 1.5%), the most in a decade. On annual basis, inflation slowed sharply from 18 year high of 5.1% in Q3 to 3.4% in Q4. The lower-than- expected CPI will open the door for RBNZ ito have another massive rate cut on Jan 28.

Japan's tertiary industry index dropped 0.9% mom in November, below market expectation of -0.8% and a revised 0.5% in October. Consumer confidence dropped more than expected from 28.4 to 26.2 in December.

More Forex Technical Analysis Reports Here.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.4252; (P) 1.4580; (R1) 1.4745; More

GBP/USD's break of 1.4350 low confirms that medium term down trend has resumed. At this point, intraday bias remains on the downside as long as 1.4357 minor resistance holds. Further decline is expected to next target of 1.3680 long term support (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667). On the upside, above 1.4357 will turn intraday outlook neutral and bring consolidation. But upside should be limited well below 1.4980 resistance and bring another fall.

In the bigger picture, break of 1.4350 low confirms that medium term fall from 2.0158 has resumed. Such decline is interpreted as developing into a five wave sequence (1.7445, 1.8668, 1.4557, 1.5722) and should now be in the five wave decline. Further fall should be seen to 1.3680 long term support (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667). Some support could be seen there to make a medium term bottom. On the upside, above 1.4980 resistance will be the first alert that a medium term bottom is already in place and bring large scale consolidation.

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Published on  Tue, Jan 20 2009, 07:36 GMT

df8793c7-1dfb-4ee3-8534-575c4fb0d04c

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Mid−Day Forex Technical Report − Euro and Sterling Plummet

Mon, Jan 19 2009, 14:21 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report Report

Euro and Sterling Plummet

Both Euro and Sterling drop sharply today on negative news from Europe. On the other hand, the Japanese yen, and to a lesser extent dollar, reverses earlier losses rise across the board. Last week's pullback in Yen and greenback seems to be over already even though today's move might be exaggerated by thin holiday trading. Nevertheless, traders are advised to keep an eye of near term levels for signal on resumption of dollar and yen's recent rise.

European Commission forecasts the Eurozone economy to shrink -1.9% in 2009, a sharp downward revision from Nov's estimate of 0.1% growth. Such expectation is even more pessimistic than ECB's forecasts of -0.5% contraction made last month. More downgrade

S&P said today that they also downgraded Spain's AAA sovereign credit rating as its budget deficit swells. The rating was downgrade to AA+ and was assigned a "stable" outlook. Five days earlier, S&P cut Greece's rating to A- and threatened to downgrade's Portugal's debts too.

UK Government announced the second bank rescue plan earlier today, hoping to unfreeze lending. Treasury authorized BoE to buy 50b pounds of assets in banks and plans to raise its stakes in RBS. In return to government support, banks are require to increase lending and that will have "legal binding ". All in all, the new measures would add at least 100b to the 250b committed by Prime Minister Brown in October.

On the data front, retail sales in Switzerland dropped 1.4%, the first decline since July, in December from a year ago. The gauge came in much weaker than expected as consensus predicted it to have grown 1.5% yoy after November's +2.9% yoy. Although sales of food and tobacco increased, it's offset by decline in spending in clothing and shoes. Japan's industrial production in November was revised downward to -8.5% mom from initial reading of -8.1%. On yearly basis, it dropped 16.6%, also worse than preliminary figure of -16.2%.

More Forex Technical Analysis Reports Here.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.4578; (P) 1.4779; (R1) 1.4932; More

GBP/USD's sharp fall today is consistent with the view that recovery from 1.4469 has completed at 1.4980 already. Break of 1.4669 will bring fall to 1.4350 low first. As discussed before, we're still favoring the case that consolidation from 1.4557 has either completed at 1.5722 or 1.5372. Break of 1.4350 low will confirm that medium term down trend has resumed. However, above 1.4980 will argue that more sideway trading could be seen in mentioned range of 1.4350/5722 before resuming medium term down trend.

In the bigger picture, interpretations of the fall from 2.0158 is that first wave has completed at 1.7445, second at 1.8668, third at 1.4557. Fourth wave consolidation might have completed with three wave to 1.5722 or it's an expanding triangle that's completed at 1.5372. In either case, break of 1.4350 low will confirm down trend resumption to 1.3680 long term support (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667). On the upside, though, above 1.5372 will indicate that such consolidation is still in progress but upside should still be limited by 1.5722 resistance and bring down trend resumption.

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Published on  Mon, Jan 19 2009, 14:21 GMT

575e8c43-c927-410f-9a87-25d0be762567

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Daily Forex Technical Report − Quiet Markets, Thin Calendar

Mon, Jan 19 2009, 07:47 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Quiet Markets, Thin Calendar

Dollar and yen are mildly lower as the week starts quietly on higher opens in Asian stocks. Nevertheless, the moves are limited as Asian equities reverse early gains into European session. After all, with US market holiday and a thin calendar today, trading activities would continue to be low. Yen crosses gap higher but quickly lose momentum. After all, the current retreat in yen is generally viewed as a pull back in the short term down trend only and further strength is still anticipated after today's US holiday and the upcoming Obama inauguration.

UK Chancellor of Exchequer Darling will unveil the second UK bank rescue program, adding another 100b pounds to the 250b pounds committed by Prime Minister Brown last Oct. including insurance to underwrite mortgage-backed debt and troubled assets and plans to shrink Northern Rock's lending. Also, the UK government may increase stakes in RBS and Lloyds.

Released earlier, UK Rightmove House Price fell -1.9% mom in Jan, the 8th consecutive month of declines, after plunging -2.3% in the previous month. On annual basis, the gauge slipped -7.3%, the biggest drop since inception of the index in 2002. Japanese Industrial Production continued to contract for a third consecutive month by -8.5% in Nov.

In Switzerland, financial uncertainties and poor economic outlook continues to shrink private spending and November's retail sales is expected to have risen 1.5% yoy in November following a 2.9% gain in October.

Technically, Dollar index's retreat from 85.13 is still in progress but as discussed before, such retreat is expected to be contained well above 81.19 support and bring rally resumption. Above 84.27 will flip intraday bias back to the upside and further break of 85.13 will pave the way to retest 88.46 high.

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AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6638; (P) 0.6717; (R1) 0.6807; More

AUD/USD's recovery from 0.6537 extends further to 0.6840 today but retreats after hitting 4 hours 55 EMA. While some more upside cannot be ruled out, the current recovery is expected to be limited by 0.6956 resistance and bring decline resumption. Below 0.6646 minor support will flip intraday bias back to the downside for 0.6537 first. As discussed before, consolidation from 0.6008 should have completed with three waves to 0.7267. Below 0.6537 will indicate that fall from there has resumed for retesting 0.6008 low.

In the bigger picture, price actions from 0.6008 is treated as consolidation to the impulsive decline from 0.9849 only and has possibly completed at 0.7267 already. Sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for another five wave medium term decline, targeting 0.4773 (01 low) next. Above 0.7267 will suggest that such consolidation is still in progress for another rise to 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completion.

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Published on  Mon, Jan 19 2009, 07:47 GMT

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Weekly Review and Outlook − Dollar and Yen Gained on Risk Aversion, More Strength Ahead

Sat, Jan 17 2009, 22:33 GMT
by ActionForex.com Team

ActionForex.com

Weekly Review and Outlook

Dollar and Yen Gained on Risk Aversion, More Strength Ahead

Dollar and yen gained modestly last week on risk aversion on the back of renewed concern on the banking sectors. World stock markets were still down to close the week despite some recovery towards the end on news of another round of bailouts and US Congress approval of TARP II. Euro was mixed after ECB's rate cut, closing the week down against dollar, yen and Swissy but up against Sterling, Loonie and Aussie. We're maintaining the view that risk appetite/aversion is still the main driving force in the markets and thus the close correlation with stocks should remain.

Taking a look at stocks, DOW was still down -3.7% to close at 8281 despite late recovery. More importantly, last week's break of key near term support of 8367 was taken as a confirmation that the corrective rebound from Nov's low of 7450 has finally completed and another wave of selling has just started. The late recovery is viewed as a pull back to retest the 8367 level before further decline. Elsewhere FTSE was down 6.8% to 4147, DAX down 9.4% to 4336, Nikkei was down 6.9% to 8230. We're expecting the global stock markets to retest last Oct/Nov's lows. Having said that, more strength in the dollar and yen are generally expected.

Economic data from US were generally bad, in particular with retail sales dropped sharply by -2.7% in Dec, (ex autos-3.1%), much worse than markets expectation of -1.2% (ex-auto -1.3%). Dec CPI stayed positive at 0.1% yoy but deflation is inevitable in the near future. Core prices also moderated more than expected to 1.8% yoy. PPI showed first annual drop in sevens by -0.9% yoy with core PPI moderated to 4.3% yoy. Regional Fed surveys from New York and Philadelphia remained negative despite better than expected readings.

Dollar Index surged further to 85.13 before treating mildly. While a short term top might be in place and some more consolidation could be seen, downside is expected to be contained above 81.19 support and bring rally resumption. As discussed before, corrective fall from 88.46 should have completed after three waves down to 77.69. While rise from there represents resumption of larger up trend remains to be seen. But short term strength is nevertheless expected to retest this 88.46 high.

Euro was pressured until ECB finally cut rates by 50bps to 2.00% last week. Indeed, the common currency stabilized and staged a mild recovery as Trichet signaled that the bank will be on hold in Feb and wait for more data before deciding on rates again in March. But after all, markets are still expecting another 50bps cut in Q1 to bring the key ECB interest rate down to 1.50%. The Common currency will like remains pressured. In particular, the 0.9799 top in EUR/GBP looks more like an important top as time past. The common currency will likely be double pressured by selling in EUR/GBP as well as risk aversion in EUR/JPY. Though, some support could be seen against commodity currencies as they would likely be much harder hit by risk aversion.

Commodity currencies, including Canadian dollar, Australian dollar and New Zealand Dollar are generally weak for various reasons. Risk aversion, though, is a common theme. Canadian dollar is pressured by persistent fall in crude oil prices. Aussie was down after data showed rising unemployment rate from 4.4% to 4.5%. Meanwhile, Kiwi was sold off after Standard & Poor's revised the nation's AA+ foreign-currency credit rating outlook to negative from stable.

The Week Ahead

Markets may start off slowly with holiday in US but volatility will continue to build up as the week goes. Development in global stocks remain the main focus. In addition, markets will also pay much attention to BoC which is expected to cut rates by 50bps to 1.00% on Tuesday. BoJ is expected to be on hold at 0.1% on Thursday.

On the data front, UK will dominate the week with CPI, employment, retail sales and Q4 GDP as well as BoE minutes. US calendar will start of lightly but focus will turn to new residential construction data. From Eurozone, focus will be on German ZEW as well as Eurozone manufacturing and services PMIs. Other data include Canadian retail sales, CPI as well as New Zealand CPI, retail sales.

More Forex Technical Analysis Reports Here.

AUD/USD Weekly Outlook

AUD/USD dived further to 0.6537 before recovering mildly. With a short term bottom in place, as indicated by 4 hours MACD's stay above signal line, some more consolidation could be seen initially this week, with risk of recovery further to 0.6810 resistance and above. But upside should be limited by 0.6956 resistance and bring decline resumption. As discussed before, consolidation from 0.6008 should have completed with three waves to 0.7267. Below 0.6537 will indicate that fall from there has resumed for retesting 0.6008 low.

In the bigger picture, price actions from 0.6008 is treated as consolidation to the impulsive decline from 0.9849 only and has possibly completed at 0.7267 already. Sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for another five wave medium term decline, targeting 0.4773 (01 low) next. Above 0.7267 will suggest that such consolidation is still in progress for another rise to 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completion.

In the longer term picture, a long term top is in place at 0.9849 with bearish divergence condition in monthly MACD and RSI. Considering the corrective three wave structure of the multi year up trend from 0.4773 to 0.9849 and the impulsive nature of the fall from 0.9849, the long term down trend could be resuming. Having said that, while some interim medium term consolidation could be seen, the fall from 0.9849 is in favor to extend to retest 0.4773 low at least.

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Published on  Sat, Jan 17 2009, 22:33 GMT

9c462340-6e38-4aa2-a1aa-410d1302427f

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Mid−Day Forex Technical Report − Dollar Regains Some Ground after Mixed Data

Fri, Jan 16 2009, 15:40 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Regains Some Ground after Mixed Data

Dollar remains some ground in early US session after a mixed bag of economic data. Headline CPI in Dec stayed positive at 0.1% yoy, above expectation of -0.2% but core CPI slowed deeper than expected from 2.0% yoy to 1.8%. TIC capital flow recorded -21.7B contraction. Industrial production dropped more than expected by -2.0% mom in Dec with capacity utilization dropped to 73.6. However, U of Michigan consumer sentiments improved from 60.1 to 59.0. After all, risk aversion is still the main theme in the forex markets. with DOW still in recovery, dollar and yen will likely remains soft. However, note that the current recovery might be limited by prior support at 8367. DOW's choppy rise from 7450 should have completed and recent down trend is likely resuming, which should then trigger another round of dollar and yen buying.

Released earlier, Swiss PPI dropped 0.7% mom (consensus:-0.6%; November: -1.4%) in December as driven by decline in oil price. On annual basis, input price rose 0.4%, lower than market expectation of +0.6% and +1.1% in November. The Eurozone recorded a deficit of 4.9B euro in November after a surplus of 0.9B euro in the previous month.

More Forex Technical Analysis Reports Here.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.1132; (P) 1.1192; (R1) 1.1249; More

USD/CHF dips mildly today but still, with 1.1093 minor support intact, further rise is in favor, towards 61.8% retracement of 1.2296 to 1.0366 at 1.1559. But upside is expected to be limited there to break resumption of whole fall from 1.2296. On the downside, below 1.1093 will turn intraday outlook neutral again. Further break below 1.0864 will indicate that rebound from 1.0366 might have completed and would bring retest of this low.

In the bigger picture, the five wave structure of the decline from 1.2296 to 1.0366 is arguing that whole medium term rebound from 0.9634 has completed already. While a short term bottom is in place at 1.0366, rebound from there should be limited by 61.8% retracement of 1.2296 to 1.0366 at 1.1559 and bring fall resumption. Below 1.0366 will target 1.0010 first and then 0.9634 low. Sustained trading above 1.1559 fibo resistance is needed to invalidate the bearish case and put focus back to 1.2296 high.

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Published on  Fri, Jan 16 2009, 15:40 GMT

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Daily Forex Technical Report − Dollar and Yen Pare Gains as Markets Stabilize

Fri, Jan 16 2009, 07:58 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar and Yen Pare Gains as Markets Stabilize

Dollar and yen pare part of this week's gain following the late rebound in the US stock markets and stabilization in Asian equities. But after all, the reactions are mild. US House unveiled an $825b bill including spending projects and tax cuts while Senate voted to let President-Elect Obama to spend the $350b remaining in the TARP. Bank of America got $20b investment from the US government for absorbing Merrill Lynch's assets. UK Government pledged 200m pounds to help troubled property owners from losing their homes. After all, investors are generally calming down from this week's stock selloff. With a long weekend in US in sight, some consolidations will likely be seen today with dollar and yen continuing to retreat.

In the US, December's CPI is expected to have dropped -0.9% mom , the 9th consecutive month of decline after -1.7% and -1% in November and October respectively. Energy prices would again lead the fall while auto, household and other consumer goods should have plunged significantly. Excluding food and energy, core CPI was probably up 0.1%. On annual basis, overall CPI is anticipated to have dropped -0.2%, the first negative reading since 1955, while core CPI should have eased to 1.9% in December, from 2% in November.

US Industrial production in December should have dropped -1% after falling -0.6% in November as manufacturing reduced production in response to falling demand and surging inventory level. December's capacity utilization probably fell to 74.6% from 75.4% a month ago. University of Michigan will release preliminary data on January's consumer confidence which would have dropped to 59 from 60.1 in the previous month, indicating consumers are still worrying about the economic conditions and employment prospects. US' treasury TICs report would show that overall net inflows have increased by US$ 2B in November from US$ 1.5B.

In European session, Switzerland's combined PPI should have declined -0.6% mom in December after falling -1.4% in the previous month. Eurozone's trade balance is expected to have recorded a deficit of -4.8B euro in November following a surplus of 0.9B euro in October.

Technically, Dollar index is losing some upside momentum with mild bearish divergence condition in 4 hours MACD. Some consolidation could be seen with risk of pulling back to 4 hours 55 EMA (now at 83.21). Nevertheless, downside should be contained above 81.18 support and bring rally resumption. Current rise from 77.69 is still expected to extend further to retest 88.46 high.

No change in the view in EUR/GBP. Recovery from 0.8838 should have completed at 0.9127, below mentioned 0.9174 resistance. Staying below 4 hours 55 EMA, fall from 0.9799 should still be in progress and break of 0.8838 low will confirm that such decline has resumed. More importantly, sustained trading below the trend line support will confirm that whole rise from 0.7693 has finished at 0.9799 and deeper decline should be seen to 0.8234 support next.

More Forex Technical Analysis Reports Here.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 116.50; (P) 117.57; (R1) 118.91; More.

EUR/JPY's break of 119.72 minor resistance indicates that a short term bottom is in place and some consolidation should now be seen, with risk of recovering further to 4 hours 55 EMA (now at 121.11). Though, upside should be limited below 123.69 cluster resistance and bring fall resumption. As discussed before, whole consolidation from 113.63 could have already completed at 131.03 already. Fall from there is still expected to extend retest 113.63 low on resumption.

In the bigger picture, whole decline from 169.96 is expected to develop into a five wave sequence, with first wave completed at 147.03, second at 156.84, third at 113.63. Price actions from 113.63 is treated as the fourth wave consolidation and might have completed at 131.03 already. Break of 115.88 support will add much credence to the case that down trend from 169.96 is resuming for 76.4% retracement of 88.97 to 169.96 at 108.08. On the upside, while another rise cannot be ruled out for the moment. Upside is expected to be limited below 141.73 cluster resistance (50% retracement of 169.96 to 113.63 at 141.79) and bring down trend resumption.

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Published on  Fri, Jan 16 2009, 07:58 GMT

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Mid−Day Forex Technical Report − Euro Steady after ECB Rate Cut, But for How Long?

Thu, Jan 15 2009, 15:11 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Euro Steady after ECB Rate Cut, But for How Long?

Euro remains in tight range after ECB cut interest rates by another 50bps to 2.00% today on unanimous vote. In the post meeting press conference, Trichet said that demand in the Eurozone will be dampened by the financial market turmoil for a protracted period of time and uncertainties remain exceptionally high. Inflationary pressures have diminished significantly. Risks to price stability in medium term is broadly balanced even though inflation rate could fluctuate sharply in near term. The steadiness in Euro, is probably because Trichet has mentioned that ECB's meeting in Feb is not important. March is expected to be the 'important' one as more new information will become available. This is taken as a signal that ECB will be on hold in Feb. However, this could just mean another big cut in March if the coming data are as bad as economists expect. Hence, after all, risk of Euro should remain on the downside. Also released today, Final Eurozone HICP was unrevised at -0.1% mom, 1.6% yoy in Dec. Final Germany HICP was unrevised at 0.4% mom, 1.1% yoy in Dec.

On the other hand, dollar remains in tight range after another round of data from US. Jobless claims was back above 500k at 524k. Empire state manufacturing index improved from downwardly revised -27.88 to -22.2. PPI dropped -1.9% mom, -0.9% yoy in Dec, first annual drop in seven years. Core PPI rose 0.2% mom, 4.3% yoy. Dollar index edges higher to 84.81 but settles back into today's range quickly. Though, short term outlook will remain bullish as long as 83.44 support holds and current rise is still expected to extend to retest 88.46 high.

Released earlier, Japan's domestic CGPI plunged -1.2% in December, slightly better than market expectation of -1.5% and -1.9% in November. Moreover, the nation's private sector machinery orders dropped -16.2% in November, worse than consensus of -8% and -4.4% in October, as corporate reduced investment due to economic crisis. In Australia, employment dropped -1.2K in December, less than -20K as expected and a revised -16.2K in November. However, full time positions declined severely by -43.9K, the biggest drop in 5 years, and unemployment rate increased to from 4.4% to 4.5%.

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USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.1132; (P) 1.1192; (R1) 1.1249; More

USD/CHF strengthens mildly in early US session and is back pressing 1.1277 resistance. Rise from 1.0366 might be resuming and at this point, intraday bias remains on the upside as long as 1.1093 minor support holds. Above 1.1277 will bring further rally to 61.8% retracement of 1.2296 to 1.0366 at 1.1559. Though upside is expected to be limited there to break resumption of whole fall from 1.2296. On the downside, below 1.1093 will turn intraday outlook neutral again. Further break below 1.0864 will flip intraday bias back to the downside again for retesting 1.0366 low

In the bigger picture, the five wave structure of the decline from 1.2296 to 1.0366 is arguing that whole medium term rebound from 0.9634 has completed already. While a short term bottom is in place at 1.0366, rebound from there should be limited by 61.8% retracement of 1.2296 to 1.0366 at 1.1559 and bring fall resumption. Below 1.0366 will target 1.0010 first and then 0.9634 low. Sustained trading above 1.1559 fibo resistance is needed to invalidate the bearish case and put focus back to 1.2296 high.

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Published on  Thu, Jan 15 2009, 15:11 GMT

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Daily Forex Technical Report − Euro Remains Soft ahead of ECB, 50bps Cut?

Thu, Jan 15 2009, 08:12 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Euro Remains Soft ahead of ECB, 50bps Cut?

Euro remains soft against major currencies ahead of the highly anticipated ECB meeting. Markets are expecting another 50bps cut in the benchmark interest rate from 2.50% to 2.00% today but opinions are divided. Though, recently economic data argue overwhelmingly for a rate cut, if not a deep one. In addition, inflationary pressures have already be easing rapidly with HICP dropping to 1.6% yoy which should now be below ECB's definition of price stability - "below 2%, close to 2%". Such development should give no argument for ECB to hold back considering the risk of deepening recessions in the Eurozone. Also, focus will be on Trichet's press conference on hints on the path of policy easing ahead. Nonetheless, Euro will continue to be pressured against major currencies including dollar, yen, sterling and swissy in short term. Though, the common currency might remain firm against commodity currencies, which are most hit by the current risk aversion theme in the markets.

On the data front, released earlier, Japan's domestic CGPI plunged -1.2% in December, slightly better than market expectation of -1.5% and -1.9% in November. Moreover, the nation's private sector machinery orders dropped -16.2% in November, worse than consensus of -8% and -4.4% in October, as corporate reduced investment due to economic crisis. In Australia, employment dropped -1.2K in December, less than -20K as expected and a revised -16.2K in November. However, full time positions declined severely by -43.9K, the biggest drop in 5 years, and unemployment rate increased to from 4.4% to 4.5%. Germanys' HICP is finalized in Dec at 0.4% mom, 1.1% yoy.

Looking ahead, Eurozone's HICP in Dec is expected to finalize at -1.1% mom, 1.6% yoy in Dec. US initial jobless claim for the week ended Jan 10 is anticipated to have increased to 500 K after experiencing seasonal factors in the previous 2 weeks with 4-week moving average at 512 K. Layoffs from retail, finance and auto industries should be pronounced. December's PPI probably fell -2% over the month in December after November's 2.2% drop and record decline in October (-2.8%). This would the 4th consecutive month of declines as slowdown in demand for capital and consumer goods greatly eased inflationary pressure on intermediate and crude products. Although the Empire State manufacturing index is expected to have picked up slightly to -25 in January from -25.8 in December, the gauge still indicated significant contraction in manufacturing activities. The Philly Fed manufacturing index should show similar trends. January's reading should have come in at -35, slight higher than -36.1 in December.

Technically, dollar index's rally is still in progress. As mentioned before, fall from 88.46 to 77.69 is treated as a three wave correction in the larger up trend only. Current rise from 77.69 is expected to extend to retest this 88.46 high. On the downside, below 83.44 will bring some consolidations but short term outlook will remain bullish as long as 81.18 support holds.

EUR/CHF's decline is still in progress for retesting 1.4315 key long term support. Above 1.4841 minor resistance will bring consolidation, but recovery should be limited below 1.5143 resistance and bring fall resumption.

EUR/GBP's recovery from 0.8838 might have completed after failing 4 hours 55 EMA and 0.9174 resistance. INtraday bias is flipped back to the downside for 0.8838 low first. Below 0.8838 will indicate that fall from 0.9799 has resumed. Decisive break of rising trend line support will confirm that rise from 0.7808 has completed and will bring deeper decline to 0.8234 support next.

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EUR/JPY Daily Outlook

Daily Pivots: (S1) 116.09; (P) 117.91; (R1) 119.27; More.

EUR/JPY turns sideway after diving further to 116.56 but short term outlook will remains bearish as long as 119.72 resistance holds. As discussed before, consolidation from 113.63 could have completed at 131.03 already. Fall from there is expected to extend to 115.88 support first and break will bring retest of 113.63 low. On the upside, above 119.72 will argue that a short term bottom is formed and bring stronger rebound, probably to 4 hours 55 EMA (now at 121.74). But upside should be limited below 124.04 resistance and bring fall resumption.

In the bigger picture, whole decline from 169.96 is expected to develop into a five wave sequence, with first wave completed at 147.03, second at 156.84, third at 113.63. Price actions from 113.63 is treated as the fourth wave consolidation and might have completed at 131.03 already. Break of 115.88 support will add much credence to the case that down trend from 169.96 is resuming for 76.4% retracement of 88.97 to 169.96 at 108.08. On the upside, while another rise cannot be ruled out for the moment. Upside is expected to be limited below 141.73 cluster resistance (50% retracement of 169.96 to 113.63 at 141.79) and bring down trend resumption.

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Published on  Thu, Jan 15 2009, 08:12 GMT

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Mid−Day Forex Technical Report − Dollar Resumes Rally after Poor Retail Sales

Wed, Jan 14 2009, 14:04 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Resumes Rally after Poor Retail Sales

Dollar regains strength in early US session after the release of poorer than expected retail sales. Headline sales in US dropped for the 6th consecutive months by -2.7% mom in Dec, much worse than consensus of -1.2%. Ex-auto sales dropped by -3.1% mom, also much worse than expectation of -1.3%, worst since record began in 1992. Following weakness in European stocks, US markets are set to open lower. As risk aversion remains the driving force in the currency markets, dollar and yen are sent higher following the data. Also released from US, export price dropped -2.3% mom in Dec versus expectation of -2.0% while import price dropped -4.2% mom versus expectation of -5.3%.

Released earlier, Germany Dec GDP rose 1.3% yoy, lower than market expectation of 1.4% and November's 2.5%. Eurozone's industrial production contracted for the 7th consecutive month by 1.6% mom in November (consensus: -1.8%, October: revised to -1.6% from -1.2%), due to decline in output of consumer durables and intermediate goods. On annual basis, the reading plunged 7.7% from the revised -5.7% in October. Japan's machine tool orders dropped 71.9% yoy in December after falling 62.1% in November. Domestic and external orders plunged 74% and 70.3% respectively.

Technically, Dollar's rally resumes by taking out 84.45 and reaches as high as 84.62 so far. Intraday bias remains on the upside as long as 83.44 minor support holds. Current rally from 77.69 is expected to head to retest 88.46 high. Below 83.44 will turn intraday outlook neutral first but short term outlook will remain bullish as long as 81.19 support holds.

Euro continues to show sign of weakness in general. EUR/CHF's fall continues and dive further to as low as 1.4685. Intraday bias remains on the downside as long as 1.4841 minor resistance holds and the current decline from 1.5880 is expected to extend to key long term support at 1.4315. EUR/GBP's recovery from 0.8838 lost steam ahead of 4 hours 5 EMA and mentioned 0.9174 resistance. Short term outlook remains bearish. Below 0.8838 will indicate that fall from 0.9799 has resumed Decisive break of rising trend line support will confirm that rise from 0.7808 has completed and will bring deeper decline to 0.9234 support next.

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EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3088; (P) 1.3231; (R1) 1.3322; More

EUR/USD's fall resumes after brief recovery and dives to as low as 1.3096 in early US session. At this point, intraday bias remains on the downside as long as 1.3343 minor resistance holds. As discussed before, consolidation from 1.2329 has possibly completed at 1.4719 already. Further decline should be seen to 1.2549 support first then retest 1.2329 low. On the upside, above 1.3343 will turn intraday outlook neutral first. But break of 1.3796 resistance is needed to indicate that fall from 1.4719 has completed. Otherwise, short term outlook remains bearish.

In the bigger picture, a medium term bottom no doubt in place at 1.2329 and fall from 1.6038 should have completed. Whether such fall is impulsive or corrective in nature is debatable. But after all, in either case, as long as 1.4867 resistance holds, such decline is still in favor to resume and should target 1.1639 medium term support next. Though, some larger scale consolidation could be seen first. However, above 1.4867 will dampen the bearish view and argue that stronger rally would be seen to retest 1.6038 record high.

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Published on  Wed, Jan 14 2009, 14:04 GMT

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Daily Forex Technical Report − Dollar Retraces as Stocks Hold Key Support.... for the Moment

Wed, Jan 14 2009, 07:56 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar Retraces as Stocks Hold Key Support.... for the Moment

Dollar retraces some of this week's gain as US stock held key near term support. Dow dropped to as low as 8376 yesterday but the decline stalled ahead of key near term support of 8367 mentioned in our weekly report. Note that risk aversion remains the dominant driving force in the currency markets in parallel to ECB rate cut speculations. Dollar bulls took some profit on concern of a strong rebound in stocks which reverse the near term strength in dollar and yen. The development of the US stocks today, a strong break of 8367 in DOW or a strong rebound, would decide the near term direction in dollar and yen. In addition, markets will look into retail sales from US today. Spending on discretionary items such as home electronics and apparel should remain weak in Dec. Headline sales is expected to record the 6th consecutive month of slides by -1.2% mom Ex-auto sales is expected to drop by -1.3% mom too.

Also from US, export price index in December is expected to have plunged -2% mom in December while import price index should have fallen much more by -5.3% mom due to sharp decline in oil price and more rapid economic downturn in the US. Fed’s beige book to be released at 1900 GMT should reveal declining economic growth across the broad in December and early January. Although credit condition may have eased after the Fed’s unprecedented reduction of interest rate to 0-0.25% in December, inflationary pressure remained subdue because of decline in commodity prices.

To be released in European session, Eurozone's industrial production is expected to have dropped -1.8% mom in November (October -1.2%) as deteriorating sentiments and temporary closure of factories would have significantly reduced output. Given the relentless stream of downside surprise on economic activities, Germany GDP growth should have slowed to 1.4% yoy in December after rising 2.5% in the previous month.

Technically speaking, dollar index's break of 84.01 confirms that rise from 77.69 is still in progress even though intraday momentum may be diminishing a bit. A drop below 83.38 will bring some consolidation first. Nevertheless, short term outlook will remain bullish as long as 81.19 support holds and the current rally from 77.69 is expected to extend to retest 88.46 high.

Euro recovers mildly against Sterling but after all, short term outlook in EUR/GBP will remain bearish as long as 0.9174 resistance holds. Firm break of the trend line support at 0.8825 will argue that whole rally from 0.7808 has completed and will pave the wave for deeper decline to next key support level at 0.8234. EUR/CHF's break of 1.4754 low yesterday indicates that whole decline from 1.5880 has resumed and should target key long term low of 1.4315. A break above 1.5039 is needed to invalidate the short term bearish view.

More Forex Technical Analysis Reports Here.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6539; (P) 0.6680; (R1) 0.6784; More

AUD/USD recovers after diving to as low as 0.6576 and with 4 hours MACD crossed above signal line, an intraday low should be in place. Some consolidation would be seen now but upside of recovery should be limited by 0.6957 resistance and bring fall resumption. As discussed before, consolidation from 0.6008 could have completed with three waves up to 0.7267 already. Fall from there is expected to extend to retest 0.6008/85 support zone next. Though, above 0.6957 will dampen this view and argue that another high above 0.7267 might be seen before completing consolidation from 0.6008.

In the bigger picture, price actions from 0.6008 is treated as consolidation to the impulsive decline from 0.9849 only and has possibly completed at 0.7267 already. Sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for at least another five wave medium term decline, targeting 0.4773 (01 low). Above 0.7267 will suggest that such consolidation is still in progress for another rise to 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completion.

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Published on  Wed, Jan 14 2009, 07:56 GMT

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Mid−Day Forex Technical Report − Dollar Firm as Trade Deficit Unexpectedly Narrowed to Five Year Low

Tue, Jan 13 2009, 14:39 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Firm as Trade Deficit Unexpectedly Narrowed to Five Year Low

USD/CAD soars in early US session after the release of trade balance data from both countries. US trade deficit unexpectedly narrowed to -40.4b in Nov, much smaller than expectation of -54.4b and hit a five year low. On the other hand, Canadian trade surplus shrank more than expected to 1.28b in Nov. Fall in oil prices is the main reason behind the surprises in the trade data. USD/CAD extends recently rebound to as high as 1.2312 in early US session and is set to take on 1.2345 near term resistance level. Though the rally lost some team as oil rebounds from day low of 36.1 to above 38.

Dollar remains strong in general with dollar index taking out last week's high of 84.01. This indicates that whole rebound from 77.69 has resumed and should now be targeting a retest of 88.46 high. Fed Bernanke warned in a speech today that fiscal stimulus are "unlikely to promote a lasting recovery" and should be accompanied by "strong measures to further stabilize and strengthen the financial system". Bernanke said the "more capital injections and guarantees" would be needed for stability and normalization of credit markets.

Released earlier, trade deficit in the UK widened to -8.33B pounds in November (consensus: -7.5B pounds; October: -7.63B pounds (revised)), the largest deficit since record began in 1697 as exports outside of EU, especially to the US, declined sharply. DCLG house price plunged by another -5.3% after the revised drop of -7.44% in October. Earlier today, the RICS house price balance eased slightly to -73% in December, compared with market expectation of -74% and November's -76%. In Germany, Wholesale price index dropped -3.0% mom, -3.3% yoy in Dec.

Japan's trade balance came in at a deficit of -93.4B yen in November, compared with consensus of -76.2B yen and a surplus of 145.8B yen in October. Current account surplus in November narrowed for a 9th month to 581.2B yen, -66% from the same period last year. The reading is worse than market expectation of 600B yen and 960.5B in October as export declined by 26.5% while import dropped by 13.7%. Economic watch DI dropped further to 17.6 in Dec.

More Forex Technical Analysis Reports Here.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.1963; (P) 1.2079; (R1) 1.2287; More.

USD/CAD's rebound from 1.1761 extends further to as high as 1.2312 in early US session. The decisive break of inner trend line resistance argues that fall from 1.3005 has completed at 1.1761. At this point, intraday bias remains on the upside as long as 1.2139 minor support holds. Break will confirm this case and bring retest of 1.3005/15 resistance zone. On the downside, below 1.2139 will turn intraday outlook neutral first.

In the bigger picture, there is no confirmation of completion of medium term up trend from 0.9056 yet. Such rise is expected to be developing into a five wave sequence (1.0378, 0.9823, 1.3015, ......) Though, recent development, with weekly MACD crossed below signal line, suggests that consolidation from 1.3015, which should be the fourth wave consolidation, is still in progress. Another fall could be seen to 1.1464 support and below. Though downside is expected to be contained by 50% retracement of 0.9823 to 1.3015 at 1.1419 and bring medium term up trend resumption. Above 1.3005/15 will pave the way towards 61.8% retracement of 1.6196 to 0.9056 at 1.3469 before making a medium term top.

On the downside, however, decisive break of 1.1419 will dampen this view and argue that a medium term top is possibly in place at 1.3015 already and much deeper decline could then be seen back to support zone of 0.9709/1.0378.

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Published on  Tue, Jan 13 2009, 14:39 GMT

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Daily Forex Technical Report − Yen Crosses Dive Further, Euro Weak

Tue, Jan 13 2009, 07:23 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Yen Crosses Dive Further, Euro Weak

Yen crosses continue to be edge lower on risk aversion with Nikkei falling over 4% in Asia. In particular, New Zealand dollar is additionally pressured after Standard & Poor's revised the nation's AA+ foreign-currency credit rating outlook to negative from stable. Aussie is dragged down by Kiwi as well as gold prices. Canadian dollar is also catching up on weakness with crude oil falling to as low as $36.58 today. The greenback, on the other hand, continues to benefit from risk aversion traders and climbs across the board except versus yen.

On the data front, Japan's trade balance came in at a deficit of -93.4B yen in November, compared with consensus of -76.2B yen and a surplus of 145.8B yen in October. Current account surplus in November narrowed for a 9th month to 581.2B yen, -66% from the same period last year. The reading is worse than market expectation of 600B yen and 960.5B in October as export declined by 26.5% while import dropped by 13.7%. Economic watch DI dropped further to 17.6 in Dec.

In the UK, December BRC retail sales contracted -3.3%, the7th consecutive fall, after dropping -2.6% in the previous month. This is the biggest December in 14 years despite the shopping season because recession in the UK is deepening. The RICS house price balance eased slightly to -73% in December (consensus:-74%, November: -76%). In Germany, Wholesale price index dropped -3.0% mom, -3.3% yoy in Dec. To be released later, the DCLG house price in November should have plunged further from -7.4% in October. UK's November trade balance is forecast to show a deficit of -7.5B pounds, following October's deficit of -7.75B pounds.

The US trade deficit is expected to have narrowed to USD -54.5B from USD -57.2B. Both exports and imports should have fallen given poor economies both domestically and in overseas as well as sharp falls in commodity prices. The Fed's budget is expected to show a deficit of USD -36.5B in December as pushed higher by TARP and the Treasury's purchase of MBS, following a surplus of USD 48.26B in December 2007. Canada's trade surplus in November is anticipated to have narrowed to CAD 3.2B from CAD 3.78B in October, with imports and exports contracting to CAD 39.4B and CAD 42.7B, respectively.

Markets will also pay attention to Fedspeaks including Bernanke, Kohn and Lacker.

Technically speaking, Dollar index's rally from 81.19 extends further to as high as 83.78 today and intraday bias remains on the upside as long as 82.70 minor support holds. We're still holding on to the bullish case, i.e. correction from 88.46 has completed with three waves down to 77.69. Break of 84.01 will bring stronger rise to retest 88.46 high. On the downside,below 82.70 will flip intraday bias back to the downside but a break of 81.19 is needed to indicate rebound from 77.69 has completed. Otherwise, short term outlook will remain bullish.

On the other hand, Euro remains broadly weak on anticipation of ECB rate cut on Thursday. On the one hand, EUR/GBP's short term outlook will remain bearish as long as 0.9174 minor resistance holds. Break of trend line support at 0.8801 will confirm that whole rise from 0.7693 has completed and will open up the case for further decline towards 0.8234 support next. On the other hand, as mentioned before, EUR/CHF's recovery should have completed at 1.5143 after failing to sustain above 4 hours 55 EMA. Further fall is expected to retest 1.4754 and break will confirm that whole decline from 1.5880 has resumed for 1.4315 long term support.

More Forex Technical Analysis Reports Here.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 118.08; (P) 119.76; (R1) 120.87; More.

EUR/JPY's fall from 131.03 is still in progress and extends further to as low as 118..05 and at this point, intraday bias remains on the downside as long as 120.90 minor resistance holds. As discussed before, consolidation from 113.63 could have completed at 131.03 already. Further fall is now expected to 115.88 support and break will add much credence to this case and bring retest of 113.63 low. On the upside, above 120.90 will turn intraday outlook neutral first but recovery should be limited below 125.19 resistance and bring another fall.

In the bigger picture, whole decline from 169.96 is expected to develop into a five wave sequence, with first wave completed at 147.03, second at 156.84, third at 113.63. Price actions from 113.63 is treated as the fourth wave consolidation and might have completed at 131.03 already. Break of 115.88 support will add much credence to the case that down trend from 169.96 is resuming for 76.4% retracement of 88.97 to 169.96 at 108.08. On the upside, while another rise cannot be ruled out for the moment. Upside is expected to be limited below 141.73 cluster resistance (50% retracement of 169.96 to 113.63 at 141.79) and bring down trend resumption.

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Published on  Tue, Jan 13 2009, 07:23 GMT

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Mid−Day Forex Technical Report − Yen Soars as Risk Aversion Dominates

Mon, Jan 12 2009, 15:39 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Yen Soars as Risk Aversion Dominates

Risk aversion remains the dominant theme following negative open in the US stock markets. AUD/JPY continues to lead the way down and dropped 4% or over 240 pips as the Aussie is additionally pressured by fall in gold prices. EUR/JPY dives through 120 level while USD/JPY also takes out 90 level. Commodities are also under some pressure with gold down to as low as 821 while crude oil dropped to as low as 37.92. Dollar, on the other hand, ride on risk aversion and have the dollar index climbs further to 83.33 so far. Economic calendar is nearly empty today. Canadian new housing price index dropped -0.3% in Nov, inline with expectations.

UK Prime Minister Brown said that UK government will announce plans to fund selected industrials to stimulate investments. German government finalized the EUR 50b rescue package today, which include EUR 10b increase in public infrastructure investment and possibly higher benefits for lon-term job seekers and familiars. Speaking as head of Bank for International Settlements, ECB Trichet said that central bankers are expecting the global economy to recover in 2010 and pledged to do whatever is appropriate to reinforce confidence in the markets. Though, Trichet declined to comment on Eurozone Monetary Policy. Markets are expecting another 50bps rate cut from ECB this Thursday but opinions are quite divided for the moment.

More Forex Technical Analysis Reports Here.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 89.80; (P) 90.73; (R1) 91.30; More.

USD/JPY's fall from 94.61 extends further to as low as 89.47 in early US session and break of 90.14 cluster support confirms that rebound from 87.13 has completed already. The corrective three wave structure is consistent with the medium term bearish view. At this point, intraday bias remains for a retest of 87.13 low first and break there will indicate the medium term down trend has resumed. On the upside, though, above 91.67 will suggest will turn intraday outlook neutral first and argue that consolidation from 87.13 will extend further before completion.

In the bigger picture, with USD/JPY still staying below 55 days EMA, fall from 110.66 should still be in progress. On resumption, such decline should target 100% projection of 124.13 to 95.77 from 110.66 at 82.3. However, considering bullish convergence condition in daily MACD, another rise above 94.61 will be another alert that whole decline from 110.66 has completed. Focus will then be on 100.54 resistance for confirmation.

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Published on  Mon, Jan 12 2009, 15:39 GMT

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Daily Forex Technical Report − Dollar and Yen Mildly Higher on Risk Aversion

Mon, Jan 12 2009, 08:09 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar and Yen Mildly Higher on Risk Aversion

Dollar and yen are mildly higher today on risk aversion following mild weakness in the global stock markets. Aussie is leading the decline with AUD/JPY and AUD/USD falling over 100 pips so far while NZD/JPY, CAD/JPY and EUR/JPY are all down. But after all, the movements are limited so far and with a light calendar ahead, trading would probably be quite. Focus will remain on development in US stocks and risk aversion. At 1330 GMT, Canada's new housing price index is expected to have dropped 0.3% in November after falling 0.4% a month ago. The Bank of Canada will also publish business outlook survey. In the previous survey (taken during late-August to mid-September), there was mild deterioration in Canada's economy. However, we believe things have turned substantially bad this time with all 3 major indicators: future sales growth expectation, the proportion of firms reporting difficulty meeting an unexpected increase in demand, and inflation expectation, have dropped significantly.

Technically speaking, as discussed before, dollar index's retreat from 84.01 is tentatively treated as completed at 81.19. Further rise is in favor towards 84.01 first. As discussed before, correction from 88.46 should have completed with three waves down to 77.69 already. Break of 84.01 will encourage a retest of this 88.46 high. On the downside, though, below 81.19 will flip intraday bias back to the downside and suggest that fall from 84.01 is resuming. Risk aversion trades is anticipated to be the driving force below dollar's rally. In particular, markets will focus on key near term support of 8367 in DOW and break will confirm that the corrective rebound from 7450 has completed. In such case, yen crosses should be dragged down, especially commodity yen crosses. AUD and CAD should then be dragged down against the greenback too and that should provide the fuel for another rise in the dollar index.

More Forex Technical Analysis Reports Here.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 120.18; (P) 122.73; (R1) 124.30; More.

EUR/JPY edged lower to 120.04 today and at this point, intraday bias remains on the downside as long as 122.06 minor resistance holds. As discussed before, rise from 115.88, as well as consolidation from 113.63 should have completed at 131.03 already. Further decline is now expected to 115.88 support first and then retest 113.63 low. Above 122.06 will turn intraday outlook neutral and bring recovery. But upside should be limited below 125.69 resistance and bring fall resumption.

In the bigger picture, whole decline from 169.96 is expected to develop into a five wave sequence, with first wave completed at 147.03, second at 156.84, third at 113.63. Price actions from 113.63 is treated as the fourth wave consolidation and might have completed at 131.03 already. Break of 115.88 support will add much credence to the case that down trend from 169.96 is resuming for 76.4% retracement of 88.97 to 169.96 at 108.08. On the upside, while another rise cannot be ruled out for the moment. Upside is expected to be limited below 141.73 cluster resistance (50% retracement of 169.96 to 113.63 at 141.79) and bring down trend resumption.

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Published on  Mon, Jan 12 2009, 08:09 GMT

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Weekly Review and Outlook − Euro Weakens Further ahead of ECB Rate Cut

Sun, Jan 11 2009, 10:43 GMT
by ActionForex.com Team

ActionForex.com

Weekly Review and Outlook

Euro Weakens Further ahead of ECB Rate Cut

Euro's weakness was the dominant theme in a week of important events of BoE rate decision and US non-farm payroll. The common currency was broadly lower on speculations of ECB rate cut this week. On the other hand, Pound survived BoE rate cut and rebounded strongly with support from EUR/GBP and GBP/JPY crosses. Dollar was mixed while the dollar index was sent modestly higher with support from weakness in EUR/USD. The Japanese yen was lifted by risk aversion towards the end of the week as global stock markets reversed initial rally.

Selling of Euro intensified last week after the release of weaker than expected Dec HICP which moderated to 1.6% yoy versus expectations of 1.8% yoy. Note again that ECB has the sole mandate of maintaining price stability in the Eurozone and by that, Trichet has defined price stability as "close to 2%, below 2%". With annual HICP inflation now deep below ECB's 2% target, and is expected to stay there for some time, ECB could be forced to cut rates again this week on Jan 15 on the back of deepening recessions in the Eurozone.

Technically speaking, Euro has given up most of the gains in Dec that's fueled by speculations that ECB would be on hold in Jan. More importantly, note that the selling in Euro is most apparent against commodity currencies as well as Sterling. As mentioned during the week, EUR/CAD has completed a double top reversal pattern (1.7499, 1.7492) and dived to as low as 1.5752. Subsequent recovery should have completed at 1.6435 and the fall could be resuming this week to a new low, targeting medium term trend line support around 1.5 psychological level.

Dollar, on the other hand, survived another month of poor job data which saw Dec NFP contracted less than expected by -524k, a mild improvement from Nov's revised -584k. Unemployment rate, though, surged sharply to 7.2% versus expectation of 7.0%. ISM-non manufacturing index also improved unexpectedly from 33 to 40.6 in Dec. The greenback is rather mixed for the moment, pressured by yen on risk aversion but strengthened against Euro. Nevertheless, dollar index's retreat was contained at 81.19 and is tentatively treated as completed with 4 hours MACD crossed above signal line. At this moment, further rally is still in favor. Considering the broader picture of all dollar pairs and yen crosses, it's believed that the next boost for the greenback will likely be by risk aversion which sees commodity yen crosses sold off which in turn pushes up the dollar. A break above 84.01 will target 88.46 next.

Sterling survive another week of poor data and BoE rate cut as well. BoE delivered a 50bps rate cut as markets expected. The bank left the door open for further policy easing as it noted a "significant risk of undershooting the 2% CPI inflation target in the medium term at the existing level of Bank Rate" in the accompanying statement. BoE note that "pace of contraction in activity increased during the fourth quarter of 2008 and that output is likely to continue to fall sharply during the first part of this year." There is also need to "increase the flow of lending to the non-financial sector." Though, recent depreciation of Sterling may help to moderate impact from global slowdown. Focus will turn to minutes to be released on Jan 21. Industrial production and manufacturing production contracted more than expected by -6.9% yoy and -7.4% yoy in Nov respectively. Though, UK PPI moderated less than expected with core PPI unchanged at 5.0% yoy, PPI input down from 8.6% to 4.3% yoy while PPI input down from 5.1% yoy to 4.7% yoy.

EUR/GBP continued recent dive from 0.9799 and is set to take on medium term trend line support at 0.8786. Sustained break of which will confirm that at least whole rally from 0.7693 has completed and much deeper fall should then be seen towards 0.8234 support at least. A break of 0.9174 resistance is need to signal that a short term bottom is formed or outlook will remain bearish now.

Yen crosses continue to track stock markets closely and dived as stock markets fell towards the end of the week. Though, note that GBP/JPY and CAD/JPY still managed to close higher. Also, it remains to be confirmed if 9088 is the top in DOW and another rise could still be seen as long as 8367 support holds. However, break of 8367 will be an important signal that DOW's down trend is resuming. Direction of yen and commodity currencies, and indirectly the dollar, will be heavily dependent on the development in the stock markets.

Currency Heat Map Weekly View

The week ahead

ECB rate decision and press conference is definitely the highlight of the week. Markets are now expecting a 50bps cut to 2.00% even though opinions are still quite divided. Focus will also be on the post meeting conference on whether Trichet will admit the needs for further rate cut on the back of deepening recession in the Eurozone.

On the data front, US retail sales, import prices, Empire state and Philly Fed index, PPI, CPI, TIC capita flow, industrial production, U of Michigan consumer sentiment will be featured. Eurozone HICP final, industrial production, trade balance, UK trade balance, Japan trade balance, Swiss combined PPI, Canada trade balance, new housing price index, Australian employment, will also be released.

More Forex Technical Analysis Reports Here.

EUR/JPY Weekly Outlook

EUR/JPY's sharp fall and break of 123.69 support last week is consistent with the view that rise from 115.88 has completed at 131.03 after touching 131.02 resistance. As mentioned before, such rise is treated as the third leg of consolidation that started at 113.63 and hence, such consolidation has likely completed at 131.03 too. Initial bias will remain on the downside this week and further fall is expected to be seen 115.88 support first and then retest 113.63 low. On the upside above 123.02 will turn intraday outlook neutral and bring recovery but upside should be limited below 125.69 resistance and bring fall resumption. Though, above 125.69 will dampen this immediate bearish case and argue that rise from 115.88 is still in progress.

In the bigger picture, whole decline from 169.96 is expected to develop into a five wave sequence, with first wave completed at 147.03, second at 156.84, third at 113.63. Price actions from 113.63 is treated as the fourth wave consolidation and might have completed at 131.03 already. Break of 115.88 support will add much credence to the case that down trend from 169.96 is resuming for 76.4% retracement of 88.97 to 169.96 at 108.08. On the upside, while another rise cannot be ruled out for the moment. Upside is expected to be limited below 141.73 cluster resistance (50% retracement of 169.96 to 113.63 at 141.79) and bring down trend resumption.

In the long term picture, the three wave corrective structure of the up trend from 88.97 (00 low) to 169.96 suggests that it's merely a correction to the multi decade down trend from 285.56. The impulsive nature of the fall from 169.96 indicates that it's likely resuming the down trend. Focus now will be on whether the whole down trend from 169.96 will extend to retest 88.97 low. Above mentioned 141.74 cluster resistance is needed to invalidate this long term bearish view.

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Published on  Sun, Jan 11 2009, 10:43 GMT

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Mid−Day Forex Technical Report − Dollar Higher after Non−Farm Payroll

Fri, Jan 9 2009, 15:11 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Higher after Non-Farm Payroll

Dollar strengthens in early US session after markets showed little reactions to data that showed another month of deep contraction in the US job markets. Non-farm payroll dropped -524k in Dec, just slightly better than expectation of -550k. Nov's figures was revised down from -533k to -584k. Combined jobless in the past two months still exceed -1m. Unemployment rate surged sharply from revised 6.8% to 7.2%, hitting a five year high. Nevertheless, there is no selling of dollar seen after the release and indeed, the greenback rises against the Euro as dusts settle.

Data released from Canada saw job markets contracted -34.4k in Dec, worse than expected -22k. Unemployment rate also rose to 6.6%, above consensus of 6.5%, hitting a three year high. Though, housing starts came in at 177.3k in Dec, above expectation of 170k. Building permits dropped -11.8% in Nov.

Released earlier, Germany's retail sales surprising rose 0.7% mom in November, higher than market expectation of 0.4% and -2.2% in the previous month. The improvement was brought by huge decline in oil price which boost sentiment. At the same time, Eurozone's retail sales also climbed 0.6% mom while analysts anticipated a flat reading and October's revised figure was -1%. Germany's industrial production contracted 3.1% in November, compared with consensus of -2% and -1.8% (revised) in October.

In the UK, industrial production plunged -2.3% mom in November, lower than market expectation of -0.6% and -1.7% a month ago. The manufacturing component recorded significant drop of -2.9% mom. On yearly basis, manufacturing production was down -7.4%, compared with a revised -5% in October. On the other hand, core PPI rose unexpectedly to 5% yoy in December (consensus: +4.6%, November: +5%). Overall output price index rose 4.7% yoy. Although higher than consensus, it's the lowest annual growth since Dec 2007. Input price index rose 4.3%, also better than analysts' anticipation of 2.8% and November's 8.6% as revised.

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EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3558; (P) 1.3678; (R1) 1.3823; More

EUR/USD's break of 1.3528 minor support indicates that recovery from 1.3313 should have completed at 1.3796 after failing to take out 4 hours 55 EMA. As discussed before, with EUR/USD still staying well within the inner falling channel, fall from 1.4719 should still be in progress. Intraday bias is flipped back to the downside for 1.3313 first. Break will confirm this case and bring deeper fall towards 1.2329 low.

On the upside, focus remains on the mentioned trend line resistance (now at 1.3830). break of the channel resistance will suggest that fall from 1.4719 has completed at 1.3313 already. More importantly, this will leave such fall in three wave corrective manner and indicate that a break above 1.4719 should at least be seen before topping. Break of 1.4360 resistance will confirm the short term bullish case.

In the bigger picture, a medium term bottom no doubt in place at 1.2329 and fall from 1.6038 should have completed. Whether such fall is impulsive or corrective in nature is debatable. But after all, in either case, as long as 1.4867 resistance holds, such decline is still in favor to resume. Though, some larger scale consolidation could be seen first. However, above 1.4867 will dampen the bearish view and argue that stronger rally would be seen to retest 1.6038 record high.

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Published on  Fri, Jan 9 2009, 15:11 GMT

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Daily Forex Technical Report − All Eyes on Non−Farm Payroll

Fri, Jan 9 2009, 07:35 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

All Eyes on Non-Farm Payroll

Focus of the day is US non-farm payroll in December which is anticipated to have reduced by -550K (November: -533K) with severe drop in manufacturing and business services sectors. Although initial jobless claims reported yesterday fell 25K to 467K after a decline of 98K in the week before, it's probably skewed by holiday season. However, other indicators such as continuing claims and December's ADP employment released Wednesday (job loss: -693K vs -450K in consensus) came in much worse than expected. Unemployment rate in December would have risen to 7% for the first time since 1993. Average hourly earnings in December probably increased by 0.2% after gaining 0.4% in November.

Released in early European session, Germany retail sales rose 0.7% mom in Nov, dropped -3.0% yoy. Eurozone retail sales is expected to be unchanged mom in Nov, dropped -1.6% yoy.

Over the last 2 weeks, we have received weaker data in the UKmanufacturing sector: manufacturing PMI and BoE Agents' manufacturing output indicators all deteriorated sharply. Subject to downside risk, November's industrial production probably dropped -0.6% mom after falling -1.7% in October while manufacturing production should have contracted -0.7% mom after plunging -1.4% in the previous month. PPI in December is expected to have moderated further with core PPI came in at -0.3% mom, 4.6% yoy given decline in commodity prices. Producer input and output price inflation are expected to be -2.3% mom/2.8% yoy and -0.7% mom/3.8% yoy respectively. .

In Canada, unemployment is expected to have climbed to 6.5% with 21K more people losing jobs during the month. Property remains sluggish and housing starts should have only increased by 170K units (November: 172K) in December while building permits were down -5% in November.

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USD/JPY Daily Outlook

Daily Pivots: (S1) 90.38; (P) 91.65; (R1) 92.46; More.

USD/JPY recovers mildly after diving to 90.84 and at this point, intraday bias remains on the downside as long as 92.02 minor resistance holds. Break of inner rising trend line support is taken as the first alert that whole rebound from 87.13 has completed after failing to sustain above 93.90 cluster resistance. Break of 90.14 will confirm this case. More importantly, this will leave such rebound in three wave corrective structure which is consistent with the medium term bearish view. Retest of 87.13 low should be seen in this case. On the upside, above 92.02 will turn intraday outlook neutral again and raise the odds the correction from 87.13 is not completed yet.

In the bigger picture, stronger than expected rebound from 87.13 dampens the near term bearish case. Considering bullish convergence conditions in daily MACD, whole fall from 110.66 might be completed and strong rally could be seen to 100.54 resistance and above. Meanwhile, note that there is still no clear indication of completion of whole down trend from 124.13 (07 high) yet. As long as medium term falling trend line resistance (124.13, 100.66, now at 106.29) remains intact, such down trend is still in favor to resume after completing the current rebound. Below 90.14 will leave the rebound from 87.13 with corrective three wave structure and will support the medium term bearish case.

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Published on  Fri, Jan 9 2009, 07:35 GMT

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Mid−Day Forex Technical Report − No Surprise from BoE, Sterling Resumes Rebound

Thu, Jan 8 2009, 13:55 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

No Surprise from BoE, Sterling Resumes Rebound

Sterling resumes recent rebound after BoE delivered a 50bps rate cut as markets expected. The bank left the door open for further policy easing as it noted a "significant risk of undershooting the 2% CPI inflation target in the medium term at the existing level of Bank Rate" in the accompanying statement. BoE note that "pace of contraction in activity increased during the fourth quarter of 2008 and that output is likely to continue to fall sharply during the first part of this year." There is also need to "increase the flow of lending to the non-financial sector." Though, recent depreciation of Sterling may help to moderate impact from global slowdown. Focus will turn to minutes to be released on Jan 21.

As mentioned before, markets already priced in the possibility of ZIRP and deepened recession in UK in the sharp down trend of Sterling in recent months. Short positions are being closed for profit taking as such expectation is gradually becoming facts. Meanwhile, Sterling is lifted in cross activities against Euro and anticipation that ECB is catching up with other central banks of the world for further policy easing.

EUR/GBP dives to as low as 0.8894 after BoE's announcement. Sustained break of 0.9 psychological support (with 50% retracement of 0.8234 to 0.9798 at 0.9016) argues that 0.9799 is indeed a medium term top and focus now turns to trend line support at 0.8758. Break will confirm that whole rally from 0.7963 has completed and will open up the case for deeper decline towards next important medium term support at 0.8234.

Elsewhere, the Japanese yen is seen generally higher on risk aversion following weakness in global stock markets. Yesterday's ADP employment report raised concern of a very poor Non-Farm Payroll and unemployment rate figures tomorrow and triggered weakness in the global stock markets. The anticipated stock rally in early Jan might be shorter than originally expected but as long as DOW stays above 8367, upside of yen could be limited. However, a break of 8367 will likely trigger massive risk aversion trades that pushes yen higher and commodity currencies lower.

Also, Swiss Franc is mildly firmer against dollar and Euro on news that Lebanon fired at least three rockets into Israel. Geopolitical tension might give Swiss Franc another lift if the situation escalates. Note that EUR/CHF's recovery might be completed at 1.5143 after failing to sustain above 4 hours 55 EMA. Risk is now on the downside for EUR/CHF to retest 1.4753 low first.

On the data front, US jobless remains below 500k for another week, at 467k. Switzerland's unemployment rate rose to 2.8% in December, inline with market expectation. CPI contracted -0.5% mom in December, after falling -0.7% in the previous month. On annual basis, inflation rose merely by 0.7%, the lowest yearly growth ever. Eurozone business climate hit record low of -3.17 in December. Also, consumer confidence plunged to 23-year low at -30. Final 3Q08 GDP was unrevised at -0.2% mom, 0.6% yoy. Unemployment rate rose to 7.8%, the highest since December 08, in November. In Germany, December's trade surplus narrowed to 9.7B euro, lower than consensus of 14.5B euro and revised 16.4B euro in October because contraction in export (-10.6%) is much faster than decline in import (-5.6%). Moreover, the country's current account in November dropped to 8.6B euro from revised 14.3B euro in November.

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EUR/JPY Mid-Day Outlook

Daily Pivots: (S1) 125.48; (P) 126.57; (R1) 127.49; More.

EUR/JPY dives to as low as 124.09 today and the break of inner trend line support serves as another indicate that rise from 115.88 has completed. At this point, intraday bias is on the downside as long as 127.63 resistance holds. Break of 123.69 will affirm the case that rise from 115.88, which is treated as third leg of consolidation from 113.63, is completed after touching 131.02 resistance. Deeper fall should then be seen to 115.88 support first. On the upside, though above 127.63 will dampen this view and suggest that another rise to retest 131.03 could be seen before topping.

In the bigger picture, whole decline from 169.96 is expected to develop into a five wave sequence, with first wave completed at 147.03, second at 156.84, third at 113.63. Price actions from 113.63 is treated as the fourth wave consolidation. Having said that, upside of such consolidation is expected to be limited below 141.73 cluster resistance (50% retracement of 169.96 to 113.63 at 141.79). Break of 113.63 will confirm that whole down trend has resumed for 76.4% retracement of 88.97 to 169.96 at 108.08.

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Published on  Thu, Jan 8 2009, 13:55 GMT

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Daily Forex Technical Report − Focus on BoE Rate Decision

Thu, Jan 8 2009, 08:12 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Focus on BoE Rate Decision

BoE interest rate announcement is the highlight today where markets expect 50bps cut to an all time low of 1.50%. Indeed, any rate cut will send the benchmark interest rate into uncharted territory. There are some speculations that BoE will surprise the markets by cutting deeper by 75bps or 100bps but as policy rates approaches zero, it's believed that BoE will tends to make small reduction each time. The tricky part of the picture is Sterling's strong rebound despite wide expectation of a "full-blown" recession in the UK and that BoE enter the era of Zero Interest Rate Policy sooner or later. We want to emphasize that markets are forward looking. ZIRP is priced in in the pound for some time already and it's indeed time to close out short positions based on such expectation as such expectation gradually becomes facts. Hence, while some knee-jerk reactions might be seen after today's BoE announcement, the pound's rebound against Euro and Yen is likely to carry on after initial volatility.

EUR/GBP is still struggling around 0.9 psychological support (with 50% retracement of 0.8234 to 0.9798 at 0.9016). Intraday bias remains on the downside as long as 0.9174 minor resistance holds and further decline is still in favor. Decisive break of the fibo support will build up the case that 0.9799 is a medium term top and put focus down to trend line support at 0.8758. A break above 0.9174 will provide the sign of stabilization instead and bring recovery.

On the data front, Australia's trade surplus narrowed to A$ 1.448B (consensus: A$ 2.05B) in November from A$ 2.952B in October with exports dropping 4% while import rising 2%. Lower trade surplus indicated Australia's economy is still sluggish and reinforces RBA to adopt aggressive monetary easing policy.

Swiss unemployment rate rose from 2.7% to 2.8% in Dec. CPI is expected to continue the down trend and drop from 1.5% to 1.0% yoy in Dec.

Germany trade surplus shrank sharply more than expected from 15.8B to 9.7B in Nov with sharp -10.6% mom drop in exports and -5.6% mom drop in imports. Economists forecast November factory orders would have slid 1.6% mom. Though less significant than -6.1% in October and -8.3% in September, the year-on year rate would come in at -19%, compared with -17.3% in October.

Eurozone business climate and consumer confidence in December are anticipated to have slipped further to -2.72 and -26 respectively. As we have received poor employment data in Germany yesterday, it's reasonable to predict a worse employment situation in the Eurozone and economists forecast its unemployment rate to have risen to 7.8% in November from 7.7% a month ago. Moreover, Q3 final GDP is expected to have contracted 0.2%.

Later in the US, after last week's decline to 492K due to holiday season, initial jobless claims for the week ended Jan 3 should have increased by 540K units while the 4-week average should come in at 544K. Another highlights of today will be a speech by President-elect Barack Obama on his proposed economic stimulus plan.

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GBP/JPY Daily Outlook

Daily Pivots: (S1) 137.97; (P) 139.76; (R1) 141.58; More

GBP/JPY retreats after rebounding to 141.52 and with 4 hours MACD dragged below signal line, an intraday top should be in place. Some consolidation should now be seen but pull back should be contained by 135.39 support and bring rise resumption. Prior break of 139.19 resistance confirm that a short term bottom is in place at 129.71, after missing 129.32 key long term support. Further rise should be seen towards 165.02 key medium term resistance on resumption. Below 135.39 will bring deeper fall but still, short term outlook is neutral at worst as long as 129.71 low holds.

In the bigger picture, recent development suggests that fall from 215.87 has completed the five wave sequence at 129.71 (184.47, 197.42, 139.02, 165.02, 129.71) with the fall from 165.02 in form of a diagonal triangle (or falling wedge). Bullish convergence conditions in daily MACD and RSI are supporting the case that a medium term bottom is in place right above 129.32 key long term support too. Further rally is now expected to target 165.02 at least before resuming the long term down trend. However, a break of 129.32 71 low will dampen this view and argue that the long term down trend is still in progress.

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Published on  Thu, Jan 8 2009, 08:12 GMT

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Mid−Day Forex Technical Report − Dollar Weakens Further after Poor Job Data

Wed, Jan 7 2009, 13:56 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Weakens Further after Poor Job Data

Dollar's retreat extends further today in early US session after release of poor employment data. ADP employment report showed the job markets in the non-agricultural private sector shrank -693k in Dec, much worse than expectation of -450k and being the largest contraction since records begain in 2001. Challenger report showed US planned job cuts jumed a 274.5% comparing to a year ago. These two reports raise concern that Friday's non-farm payroll report, which is expected to show -500k contraction, will even be worse.

Released earlier, Germany's unemployment rose for the first time since Jan 2006 with the number of unemployed people increased by 18K in December, compared with market expectation of 10 K and a revised job addition of 4K in November. Unemployment rate remained at 7.6% for the 4th straight month (consensus: 7.5%, November: 7.6% revised). In the Eurozone, November's PPI slowed to 3.3% yoy, lower than 4.3% as economists forecast and 6.3% in October. On monthly basis, PPI fell 1.9% in November, the sharpest drop since the gauge began in 1981, due to rapid decline in prices in energy, non-durable goods as well as intermediate goods.

Earlier in Asian session, New Zealand's trade deficit narrowed to NZD 520M in November, better than consensus of NZD 775 M and the revised NZD996M in October, because growth in imports (+5.2% yoy) dropped more rapidly than exports (+9.4% yoy) due to depreciation in NZD. In nominal terms, imports and exports came in at NZD 4.21B (consensus: NZD 4.54B, October: NZD 4.82B) and NZD 3.69B (consensus: NZD 3.71B, October: NZD 3.83B), respectively.

In Australia, retail sales showed improvement and rose 0.4% mom in November after RBA's rate cuts and decline in commodity prices. The better-than-expected reading (consensus: -0.4%, October: 1%) was brought by increase in food spending which added 0.7% during the month. However, other components such as sales at department stores and spending on clothing dropped.

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GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.4618; (P) 1.4804; (R1) 1.5106; More

GBP/USD's rise from 1.4350 extends further to as high as 1.5129 and at this point, intraday bias remains on the upside as long as 1.4805 minor support holds. Nevertheless, current rally is expected to be limited below 1.5722 resistance and bring resumption of medium term down trend. Below 1.4805 will flip intraday bias back to the downside for retesting 1.4350 low.

In the bigger picture, interpretations of the fall from 2.0158 is that first wave has completed at 1.7445, second at 1.8668, third at 1.4557 and fourth wave consolidation should have completed at 1.5722. The current fall from 1.5722 might represent the last leg in this five wave sequence and is targeting mentioned 1.3680 (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667). On the upside, though, break of 1.5227 resistance will be the first alert that such medium term fall from 2.0158 has completed and a medium term bottom is formed. Some large scale rebound should be seen in such case.

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Published on  Wed, Jan 7 2009, 13:56 GMT

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Daily Forex Technical Report − Dollar Mixed as Markets Driven by Euro Crosses

Wed, Jan 7 2009, 07:41 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar Mixed as Markets Driven by Euro Crosses

Movements in Euro crosses continue to drive the currency markets. While dollar retreats mildly after Fed warned of 'distinct possibility of a prolonged contraction' in the US economy, overall outlook of the greenback is mixed. Note that dollar's weakness is mainly seen against Sterling, Aussie and Canadian dollar. Technically speaking, intraday levels in EUR/USD, USD/JPY and USD/CHF are still holding which supports further upside in the greenback. On the other hand, developments in AUD/USD, USD/CAD and to a lesser extent GBP/USD, are supporting further downside in dollar against these currencies. The movements in these pairs are heavily influenced by directions in respective Euro crosses.

The most important development to note today should be in Euro crosses. In particular, EUR/GBP is now pressing 0.9 psychological support (with 50% retracement of 0.8234 to 0.9798 at 0.9016) and decisive break of which will build up the case that 0.9799 is a medium term top and put focus down to trend line support at 0.8741. A break above 0.9304 is needed to indicate fall from 0.9799 has completed or risk will remain on the downside. EUR/AUD recovers mildly but is now very close to an important support level of 1.8481.

Dollar index turns into sideway trading after surging to 84.01. While intraday outlook is turned neutral for the moment, consolidation should be relatively brief as long as 82.55 minor support holds and recent rally should resume to 161.8% projection of 77.69 to 81.62 from 79.63 at 85.99 first. Break will bring retest of 88.46 high. Below 82.55 will put near term trend line support at 81.63 into focus.

The Fed released the minutes for FOMC meeting on Dec 15-16 yesterday. The officials believe the economy will continue to be weak for some time and there's substantial downside risk on economic growth. The minutes reinforced application of various quantitative measures and said that the Fed's balance sheet 'would need to be maintained at a high level' as there is 'distinct possibility of a prolonged contraction'.

New Zealand's trade deficit narrowed to NZD 520M in November, better than consensus of NZD 775 M and the revised NZD996M in October, because growth in imports (+5.2% yoy) dropped more rapidly than exports (+9.4% yoy) due to depreciation in NZD. In nominal terms, imports and exports came in at NZD 4.21B (consensus: NZD 4.54B, October: NZD 4.82B) and NZD 3.69B (consensus: NZD 3.71B, October: NZD 3.83B), respectively.

In Australia, retail sales showed improvement and rose 0.4% mom in November after RBA's rate cuts and decline in commodity prices. The better-than-expected reading (consensus: -0.4%, October: 1%) was brought by increase in food spending which added 0.7% during the month. However, other components such as sales at department stores and spending on clothing dropped.

Looking ahead, Germany will report unemployment level in December which is expected to have increased 10 K, with unemployment rate standing at 7.5%. The Eurozone's PPI in November probably fell 0.7% mom after dropping 0.8% mom in November. December's ADP employment in the US is anticipated to show -450K private job loss. Since November, ADP has published employment data using a new way of calculation which should track more closely the non-farm payroll data (December data to be released Friday).

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AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7087; (P) 0.7177; (R1) 0.7322; More

AUD/USD's recent rally resumes by taking out 0.7200 and reaches as high as 0.7265 so far. Further rally is still expected as long as 0.7033 support holds. Rise from 0.6075, which is treated as third leg of consolidation from 0.6008, could extend further to 38.2% retracement of 0.9849 to 0.6008 at 0.7475. Though, upside is expected to be limited there to complete the consolidation. On the downside, below 0.7033 will turn intraday outlook neutral again. Further break of 0.6760 support will be an early alert that such consolidation has completed and will turn short term outlook bearish for a retest of 0.6008 low.

In the bigger picture, whole fall from 0.9849 made a bottom at 0.6008 and turned into sideway consolidation since then. However, note that the impulsive nature of the fall from 0.9849 to 0.6008 indicate that price actions from 0.6008 is developing into correction/consolidation only. The long term down trend is still expected to resume after completing the consolidation. Sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for at least another five wave medium term decline, targeting 0.4773 (01 low). But, note that as long as 0.6008 low holds, consolidation from could still extend further. Above 0.7140 will target 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completing the consolidation.

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Published on  Wed, Jan 7 2009, 07:41 GMT

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Mid−Day Forex Technical Report − Dollar Firm after Mixed Data

Tue, Jan 6 2009, 15:56 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Firm after Mixed Data

Dollar remains generally firm in early US session after a mixed bag of economic data. Though again, the strength is mainly seen against Euro and Yen. ISM non-manufacturing index unexpectedly improved to 40.6 in Dec but is still deep in contraction region below 50. Employment component also improved slightly from 31.3 to 34.7 while price paid dropped slightly from 36.6 to 36.0 only. However, factory orders dropped much more than expected by -4.6% in Nov while pending home sales also dropped much more than expected by -4.0% in Nov. Dollar index reaches as high as 84.01 and is still firm for further rally to retest 88.46 high. Focus now turns to FOMC minutes of the Dec 15-16 meeting which should reveal more information on Fed's quantitative easing campaign.

Canadian dollar is lifted mildly by rebound in crude oil prices which breaches $50 level earlier today. Though momentum in the Loonie is limited as oil retreats in early US session. Canadian PPI dropped sharply by -2.6% mom in Nov, with yoy rate down from 9.5% to 5.9%.

Euro remains pressured across the board after release of lower than expected inflation reading fuels speculations of rate cut from ECB on Jan 15. Flash HICP estimate in Dec dropped more than expected from 2.1% to 1.6% yoy, versus consensus of 1.8%. This is the first time that inflation fell below ECB's 2% target since Aug 2007 and is the lowest rate in two years. Eurozone Services PMI for Dec is revised slightly higher to 42.1 but provides no support to the common currency.

On the other hand, Sterling is supported by unexpected improvement in Dec Services PMI from 40.1 to 40.2. Released earlier, Nationwide consumer confidence dropped to 47. Dec. Nationwide house price dropped more than expected by -2.5% mom, -15.9% yoy in Dec.

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GBP/JPY Mid-Day Outlook

Daily Pivots: (S1) 134.16; (P) 135.85; (R1) 138.89; More

GBP/JPY's rally continues today and reaches as high as 138.21 so far. At this intraday remains on the upside as long as 135.39 minor support holds, targeting 139.19 resistance first. Break there will confirm that a short term bottom is at least in place at 129.71 after missing 129.32 key long term support. In such case, strong rally should be seen towards 165.02 key medium term resistance. On the downside, below 135.39 will turn intraday outlook neutral first but downside should be contained well above 129.71 low and bring rally resumption.

In the bigger picture, as mentioned before, the fall from 215.87 is treated as a five wave sequence (184.47, 197.42, 139.02, 165.02) and the fifth is expected to be contained by mentioned 128.92/129.32 support zone ( 61.8% projection of 197.42 to 139.02 from 165.02 at 128.92). We have noted that the diagonal triangle (or falling wedge) look of the fall from 165.02 as well as bullish convergence conditions in daily MACD and RSI are both supporting this case. Break of 139.19 resistance will confirm this case and strong rebound should then be seen towards first medium term resistance at 165.02 at least. On the downside, however, sustained break of 128.92/129.32 will pave the way to 100% projection target at 106.62.

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Published on  Tue, Jan 6 2009, 15:56 GMT

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Daily Forex Technical Report − Euro Remains Pressured ahead of Inflation Release, Busy Calendar Ahead

Tue, Jan 6 2009, 07:19 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Euro Remains Pressured ahead of Inflation Release, Busy Calendar Ahead

Euro remains pressured as markets are awaiting the highly anticipated HICP inflation flash estimate in Dec from Eurozone. ECB comments took a drastic turn with ECB member Constancio and Vice President Papademos voicing out support for rate cuts should inflation ease further. HICP is expected to ease from 2.1% yoy to 1.8% yoy in Dec which is consistent with ECB's definition of price stability of 'below 2%, close to 2%' and that should give much room for ECB to cut rates to revive the deepening recession in the Eurozone. Meanwhile, as Papademos said, ECB might not allow inflation to "fall significantly below 2 percent for a protracted period of time," and thus deeper than expected fall in inflation would probably force the ECB to cut rates sooner than expected on Jan 15. After all, at least, traders continue to take profits on Euro long positions that's built up during the sharp rally in Dec. Also to be released from Eurozone, finalized service PMI in December probably contracted further to 42 from 42.5 while that in Germany should have improved to 46.4 from 45.1.

Technically speaking, Euro's decline versus commodity currencies is even more severe than against dollar and yen. Note that EUR/CAD has taken out mentioned double top neck line support of 1.6750 yesterday (tops at 1.7499 and 1.7492) and is risking a retest of 1.4821 support level. EUR/AUD should be heading towards lower end of medium term range at 1.8487.

From UK, Nationwide consumer confidence dropped to 47. Dec. Nationwide house price dropped more than expected by -2.5% mom, -15.9% yoy in Dec. Sterling retreats mildly against dollar and yen but remains supported by selling in EUR/GBP. main focus is indeed on Dec Services PMI and unexpected improvement there will likely give the pound another boost against Euro and yen. As mentioned before, a short term top is in place in EUR/GBP at 0.9799, with bearish divergence condition in 4 hours MACD and RSI. At this point, intraday bias will remain on the downside as long as 0.9459 minor resistance holds and further fall should be seen to 50% retracement of 0.8234 to 0.9798 at 0.9016, which is close to 0.9 psychological level. Though, downside is expected to be contained there and bring up trend resumption.

Elsewhere, dollar index continues to press mentioned 83.11 cluster resistance. US ISM non-manufacturing probably fell to 37, another 11-year low, in December. We believe it's possible to have downside surprise given the weaker-than-expected manufacturing ISM report released last week. The employment index remains in focus as it gives a preview on Friday's payroll data. November's pending home sales is forecast to have plunged 1% yoy in November. Factory order would have recorded the 5th sharp decline in November with drop in non-durable components. FOMC minutes from the Dec 15-16 meeting is another focus as we will likely learn more about the Fed’s quantitative easing campaign. In Canada, decline in energy price would have dragged November PPI down to negative territory of -1% mom.

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EUR/USD Daily Outlook

Daily Pivots: (S1) 1.3467; (P) 1.3715; (R1) 1.3883; More

EUR/USD falls further to as low as 1.3504 today and at this point, intraday bias remains on the downside as long as 1.3712 minor resistance holds. As discussed before, break of .3629 cluster support is consistent with the view that rise from 1.2423 has completed already. Further fall should be seen to 61.8% retracement of 1.2329 to 1.4719 at 1.3242 first. Break will bring retest of 1.2329 low. On the upside, above 1.3712 will turn intraday outlook neutral first. But a break of 1.4360 resistance is needed to confirm that fall from 1.4719 has completed. Otherwise, short term risk remains on the downside.

In the bigger picture, a medium term bottom no doubt in place at 1.2329 and fall from 1.6038 should have completed. Whether such fall is impulsive or corrective in nature is debatable. But after all, in either case, as long as 1.4867 resistance holds, such decline is still in favor to resume. Though, some larger scale consolidation could be seen first. However, above 1.4867 will dampen the bearish view and argue that stronger rally would be seen to retest 1.6038 record high.

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Published on  Tue, Jan 6 2009, 07:19 GMT

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Mid−Day Forex Technical Report − Euro and Yen Selling Dominates the Markets

Mon, Jan 5 2009, 15:51 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Euro and Yen Selling Dominates the Markets

While some's focus may be on dollar's rally today, it should be Euro's weakness that should be paid most attention to. As mentioned before, Euro's rally in Dec was fueled by speculation that ECB will pause rate cutting in Jan but markets are getting increasingly doubtful on this. More Euro long positions are closed after ECB Vice-President Papademo's comment that deflation is becoming a convern and ECB will "do what is necessary, in terms of the timing and in terms of the size (of interest rate policy action) to ensure that price stability is preserved." There is also continuous profit taking ahead of tomorrow's flash HICP release from Eurozone.

Euro's selling in crosses, including against EUR/GBP, EUR/AUD, EUR/CAD is indeed pushing theses currencies slightly higher against the greenback. On the other hand, yen's broad based weakness is also helping those higher yield currencies on improved risk appetite. Dollar is also supported by news that US President-elect Obama's fiscal stimulus package will help US recover quickly from recession.

Nevertheless, the weakness in Euro and Yen alone are enough to send the dollar index higher to as high as 83.16 so far, touching mentioned 83.11 cluster resistance (50% retracement of 88.46 to 77.69 at 83.07) as expected. The development so far is consistent to our view that sharp fall from 88.46 is merely a three wave correction and has completed at 77.69. Sustained break of 83.11 will add more credence to this case and pave the wave to retest 88.46 high. Meanwhile, below 81.38 minor support will turn intraday outlook neutral first.

Data released today saw US construction spending dropping -0.6% in Nov, better than expected -1.3%. Eurozone Sentix Investor confidence in January recovered to -34.4( consensus: -44)from a record low of -42.3 in December, after ECB's interest rate cut as well as the government's stimulus plans. In the UK, construction PMI in December plummeted to 29.3 (consensus: 30.5, November: 31.8), the lowest level since the survey started in 1997. Although Switzerland's SVME PMI in December unexpectedly rose to 36.9 from historical low of 35.2 in November, it signaled the 4th month of contraction and indicated the country's industrial activities deteriorated rapidly particularly in the last 2 months of 2008. The improvement in December was brought by the output component while all others recorded decline last month.

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EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3843; (P) 1.3915; (R1) 1.3990; More

EUR/USD's decline from 1.4719 resumed today and dives to as low as 1.3553 so far. Break of mentioned 1.3629 cluster support is consistent with the view that rise from 1.2423 has completed already. At this point, intraday bias remains on the downside as long as 1.3944 minor resistance holds. As discussed before, correction from 1.2329 low is possibly completed too and deeper fall could now be seen to retest this low first. On the upside, above 1.3944 will mix up the short term outlook again and open up the scenario that fall from 1.4719 is corrective in nature.

In the bigger picture, a medium term bottom no doubt in place at 1.2329 and fall from 1.6038 should have completed. Whether such fall is impulsive or corrective in nature is debatable. But after all, in either case, as long as 1.4867 resistance holds, such decline is still in favor to resume. Though, some larger scale consolidation could be seen first. However, above 1.4867 will dampen the bearish view and argue that stronger rally would be seen to retest 1.6038 record high.

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Published on  Mon, Jan 5 2009, 15:51 GMT

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Daily Forex Technical Report − Aussie Firm as Stocks Rally

Mon, Jan 5 2009, 06:29 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Aussie Firm as Stocks Rally

Return of risk appetite is still the main theme as another week starts. Aussie and Kiwi are generally higher, lifted by rally in Asian stock markets while the Japanese yen weakens. Markets are pretty steady elsewhere with the greenback staying in range against European majors. The economic calendar is rather light today which features Swiss SVME PMI, Eurozone Sentix investor confidence, UK construction PMI and US construction spending. As mentioned before, in early part of Jan, commodity currencies will likely remain firm on stocks rise but such effects would fade as stock complete the corrective rally.

Switzerland's SVME PMI in December is going to show further contraction in the country's manufacturing sector with another record low of 34.5, after plunging to 35.2 in November, as companies continue to cut back production. Eurozone's Sentix investor confidence in January is expected slip to another record low at -44, after falling to -42.3 in December, suggesting much concerns on the nation's economic condition and labor market. In the UK, economists anticipate construction PMI in December to have dropped to 30.5, another weaker reading after 31.8 in November.

In the US, November construction spending is expected to have deteriorated further to 1.3% from -1.2% in October. While the residential component should have dropped sharply as suggested by poor housing starts and housing permits reported earlier.

BoJ Governor Shirakawa said during the weekend that central banks would like to keeping thinking of ways to cope with the "financial crisis " with monetary policy. BoJ is always watching yen's strength closely. San Francisco Fed Yellen said that Fed must ensure it has an "exit strategy to wind down the facilities in a timely and effective way" when they're no longer needed. The Sunday Time's Shadow BoE MPC voted 6-3 to keep rates unchanged at 2.00%.

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AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6979; (P) 0.7047; (R1) 0.7179; More

AUD/USD rises further to 0.7159 today and break of 0.7140 confirms that rise from 0.6075 is resuming. At this point, intraday bias remains on the upside as long as 0.7041 minor support holds and further rally could be seen towards 38.2% retracement of 0.9849 to 0.6008 at 0.7475. Nevertheless, as mentioned before, rise from 0.6075 is treated as third leg of consolidation from 0.6008 and therefore should be limited by 0.7475 fibo resistance and bring medium term down trend resumption. On the downside, below 0.7041 will turn intraday outlook neutral first. Further break of 0.6760 support will be an early alert that such consolidation has completed and will turn short term outlook bearish for a retest of 0.6008 low.

In the bigger picture, whole fall from 0.9849 made a bottom at 0.6008 and turned into sideway consolidation since then. However, note that the impulsive nature of the fall from 0.9849 to 0.6008 indicate that price actions from 0.6008 is developing into correction/consolidation only. The long term down trend is still expected to resume after completing the consolidation. Sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for at least another five wave medium term decline, targeting 0.4773 (01 low). But, note that as long as 0.6008 low holds, consolidation from could still extend further. Above 0.7140 will target 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completing the consolidation.

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Published on  Mon, Jan 5 2009, 06:29 GMT

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Weekly Review and Outlook − Commodity Currencies to Extend Gain on Improved Risk Appetite

Sun, Jan 4 2009, 09:14 GMT
by ActionForex.com Team

ActionForex.com

Weekly Review and Outlook

Commodity Currencies to Extend Gain on Improved Risk Appetite

One of the most important developments in thin holiday trading of the past two weeks is the strong rebound in commodity currencies, which is particular apparent in the Australian dollar. That could be attributed both to rebound in commodity prices last week, as well as return of risk appetite as also seen in the stock markets. Aussie was the biggest winner last week, having over 5% gain in AUD/JPY, over 4% gain against Euro and Sterling and nearly 4% against the greenback. The Canadian dollar, to a lesser extend, also rode on rebound in crude oil prices and closed the week higher in general. Another important development is the reversal in EUR/GBP and GBP/JPY which argues that the pound should have at least made a short term bottom in these crosses after persistent weakness in Q4. Dollar strengthened against major rivals Euro and Yen that sent the dollar index higher but was pressured against commodity currencies.

Currency Heat Map Weekly View

Having said that, the main focus as the year starts will indeed be on the development in the stock markets. DOW's strong rally on the first trading day in Jan sent it through prior resistance of 9026 and reached as high as 9034. The rebound from Nov's low of 7450 is likely resuming for 9653 resistance. Having said that, we'd expect that rally in stock markets in early part of Jan to provide further boost to the commodity markets. Judging from the reactions in forex markets so far, Aussie, Kiwi and Loonie will likely benefit most from rally in stocks and commodities. Sterling will likely gain on short covering rally too. Yen, Swissy and Euro will be the main losers as risk aversion recedes while the greenback will remain mixed.

Nevertheless, note that the DOW's rise from 7450 is treated as a correction in the larger down trend for the moment and will likely be limited by mentioned 9653 resistance (38.2% retracement of 13136 to 7450 at 7622). This is consistent with the view that current rally in AUD/USD and AUD/JPY are merely part of consolidations that started at 0.6008 and 55.11 respectively. Hence, the above mentioned trend is expected to reverse in latter part of Jan. A strong break of 9653 in DOW is needed to change this view.

As for the dollar index, technically speaking, rebound from 77.69 has resumed after taking out 81.62 resistance. As mentioned before, we still favor the case that the sharp fall from 88.46 is merely a correction in the larger up trend and should have completed at 77.69 after meeting 61.8% retracement of 71.31 to 88.46 at 77.86. Focus remains on 83.11 cluster resistance (50% retracement of 88.46 to 77.69 at 83.07) and sustained break will confirm this case and bring rally to retest 88.46 high. A break below 79.63 support is needed to invalidate this view or otherwise, short term outlook in dollar will remain bullish, even though strength will mainly be manifested against Euro and Yen in near term.

Elsewhere, EUR/GBP should have made a short term top at 0.9798 with bearish divergence condition in 4 hours MACD and RSI. Sustained trading below the short term rising trend line (now at 0.9511) will confirm that case that rise from 0.8234 has completed and bring deeper correction to 50% retracement of 0.8234 to 0.9798 at 0.9016, which is close to 0.9 psychological level before resuming the up trend. On the upside, a break above 0.9799 high is now needed to confirm upside momentum, otherwise, short term risk will remain on the downside.

The Week Ahead

As mentioned above, the development of risk appetite/risk aversion will be the main focus this week. Having said that attention will be paid to a number of important economic data out of US including ISM non-manufacturing index and Non-Farm Payrolls. Markets expect some mild improvement in the services sector with the ISM index up from 33.0 to 34.3 in Dec. Job markets are expected to show further deterioration by another -475k contraction with unemployment rate climbing further from 6.7% to 6.9%. However, the most important thing to note is markets' reaction as both stocks and dollar seem to be quite indifferent to poor economic data recently. FOMC minutes will also be released on Tuesday.

From Eurozone, main focus will be on Dec Flash HICP which is expected to drop further from 2.1% to 1.8%, below ECB's target of 2%. Trichet has made it clear that the the 'sole' needle of the compass of ECB is price stability and by that it means HICP inflation "below 2%, close to 2%". Markets opinion on whether ECB will cut rates in Jan is divided even though Trichet has signaled a pause. Other data include finalized services PMI, unemployment and retail sales.

BoE is widely expected to cut rates again by 50bps to 1.50% on Thursday. Other data to focus on include Services PMI, manufacturing production and industrial production as well as PPI.

Other key events include Swiss SVME PMI, CPI , Canadian PPI, Ivey PMI as well as job report.

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GBP/JPY Weekly Outlook

GBP/JPY dived further to as low as 129.71, just inch above mentioned key long term support of 129.32 and rebounded strongly. Break of short term trend line resistance is taken as the first indication that fall from 165.02 has completed. Also, considering that we have been expecting such decline to conclude at 129.32 level, short term outlook is turned neutral for the moment. On the upside, break of 134.35 resistance will add much credence to the case that a short term bottom is at least formed. Further break of 139.19 resistance will confirm this case and bring strong rise towards 165.02 key medium term resistance. On the downside, while another fall cannot be ruled out, break of mentioned 128.92/129.32 support zone is now needed to confirm downside momentum. Otherwise, short term outlook remains neutral at worst.

In the bigger picture, as mentioned before, the fall from 215.87 is treated as a five wave sequence (184.47, 197.42, 139.02, 165.02) and the fifth is expected to be contained by mentioned 128.92/129.32 support zone ( 61.8% projection of 197.42 to 139.02 from 165.02 at 128.92). We have noted that the diagonal triangle (or falling wedge) look of the fall from 165.02 as well as bullish convergence conditions in daily MACD and RSI are both supporting this case. Break of 139.19 resistance will confirm this case and strong rebound should then be seen towards first medium term resistance at 165.02 at least. On the downside, however, sustained break of 128.92/129.32 will pave the way to 100% projection target at 106.62.

In the longer term picture, as discussed before, the corrective nature of the rise from 129.32 (95 low) to 251.09 suggests that it's merely a consolidation in the longer term down trend. The strength of the decline from 251.09 is also consistent with the view that it's resumption of the multi-decade down trend. Such decline should develop into a five wave structure. Note that the decline from 215.87 is not treated as the fifth wave, but the third wave inside the third wave that started at 241.35. Hence, while a medium term bottom is expected around 129.32 low, the down trend is still expected to continue after completing the anticipated consolidation.

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Published on  Sun, Jan 4 2009, 09:14 GMT

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Mid−Day Forex Technical Report − Range Trading Continues in Mixed Markets

Fri, Jan 2 2009, 15:59 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Range Trading Continues in Mixed Markets

Markets remain mixed in the first day of 2009. Dollar index edges mildly higher to 81.84 but lacks followthrough buying. US stocks are nearly flat despite rally in Asian and European Equities. Gold and Crude oil retreat mildly earlier today but pare some losses in early US session. US ISM manufacturing index dropped more than expected from 36.2 to 32.4 in Dec, worst reading since 1980. Price paid component dropped further to 18. Employment component also continued deterioration to 29.9.

Finalized reading of Eurozone's December manufacturing PMI dropped to record low at 33.9, worse than market expectation of 34.5 and 35.6 in November. In Germany, the reading came in at 32.7 (consensus: 33.5; November: 35.7). The poor figures signaled that Q4 GDP in the 15-nation region should have contraction by much more than 0.2% qoq and gave the ECB pressure to lower interest rate further from 2.75%. In the UK, December manufacturing PMI (finalized) improved slightly to 34.9 from 34.4 in November. However, it's still the 8th consecutive monthly decline. Concerning the property market, the Halifax housing price dropped 2.2% in December, worse than -1.6% as expected but better than -2.6% in previous month. On annual basis, the gauge dropped -16.2%, compared with -16.6% expected by economists and -14.9% in November.

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USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.2056; (P) 1.2212; (R1) 1.2321; More.

USD/CAD continues to stay in established range of 1.1985 and 1.2389 as triangle consolidation continues. Though, short term outlook remains unchanged. Further rally is still in favor. Also, fall from 1.3005 should have completed at 1.1818. Break of 1.2514 resistance will confirm this case and bring retest of 1.3005/15 resistance zone. On the downside, though, below 1.1985 will indicate that fall from 1.3005 is probably resuming towards 1.1464 support instead.

In the bigger picture, firstly, there is no confirmation of completion of medium term up trend from 0.9056 yet. Though, recent development suggests that consolidation from 1.3015 is still in progress with risk of another fall to retest 1.1464 support before resuming the medium term up trend towards 61.8% retracement of 1.6196 to 0.9056 at 1.3469. However, decisive break of 1.1464 support will be an important alert that whole rise from 0.9056 has possibly completed. Deeper correction should then be seen in such case.

Published on  Fri, Jan 2 2009, 15:59 GMT

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Daily Forex Technical Report − Markets in Range as 2009 Starts, Focus on Manufacturing Data

Fri, Jan 2 2009, 07:53 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Markets in Range as 2009 Starts, Focus on Manufacturing Data

Markets are staying in range as 2009 starts with the greenback mildly firmer. Main focus remains on any follow through price actions to Wednesday's reversal in Euro and Sterling. Note again that EUR/USD and EUR/JPY have showed signs of topping at 1.4719 and 131.03. More importantly, EUR/GBP should have made a short term top at 0.9799 too. On the other hand, the pound showed strong rebound in GBP/JPY as well as in GBP/USD. It will be interesting to see if there's any reversal of fortune between the two major currencies.

Manufacturing data is the main focus today. From Eurozone, finalized PMI Manufacturing index is expected to come in at 34.5, down from prior 35.6. Despite the aggressive rate cut by the BoE, UK’s PMI in December continued to fall to 33.5, according to market expectation, from 34.4. Also from UK, the Halifax housing price index is expected to show further decline in house prices, down from 14.9% yoy to -16.6% yoy in Dec.

US ISM manufacturing index is expected to deteriorate further to 35.5 in December, another new low since 1982 after falling to 36.2 in November. Price paid index is expected to drop further from 25.5. to 20.5. Also, the employment component will likely stay deep in contraction region below 50.

More Forex Technical Analysis Reports Here.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 130.43; (P) 131.84; (R1) 133.70; More

GBP/JPY's recovery from 129.85 is limited by 4 hours 55 EMA and retreats mildly. With 134.36 minor resistance intact, intraday outlook remains neutral for the moment. However, while some more fall cannot be ruled out, we're still expecting downside to be contained by mentioned 128.92/129.32 support zone to conclude the decline from 165.02. Break of 134.36 resistance will indicate that a short term bottom is at least formed and bring strong rally to 139.19 resistance first. However, sustained break of 128.92/129.32 will argue GBP/JPY is rebuilding downside momentum for further decline.

In the bigger picture, while decline from 215.87 should be near to completion. The fall from 215.87 is treated as a five wave sequence, with first wave completed at 184.47, second at 197.42, third at 139.02, fourth at 165.02. In other words, decline from 165.02 is probably the fifth wave in such sequence. Note that firstly, the structure of the fall from 165.02 suggests that it might be in form of a diagonal triangle (or falling wedge). Secondly, bullish convergence conditions are seen in daily MACD and RSI. Both are supporting the view that it's a fifth wave. Also note that 129.32 key long term support is in proximity to 61.8% projection of 197.42 to 139.02 from 165.02 at 128.92.

Having said that, we'd expect the decline from 215.87 to make a medium term bottom after meeting 128.92/129.32 support zone. Break of 139.19 will be consistent with this case and bring strong rebound towards first medium term resistance at 165.02 at least. On the downside, however, sustained break of 128.92/129.32 will pave the way to 100% projection target at 106.62.

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Published on  Fri, Jan 2 2009, 07:53 GMT

41a61394-3452-46b7-b87d-7b4200e17c6c

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Daily Forex Technical Report − Dollar Rebounded in Thin Markets, Euro Reversing?

Tue, Dec 30 2008, 06:43 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar Rebounded in Thin Markets, Euro Reversing?

Markets continue to be volatile in thin holiday trading. Dollar staged a strong rebound overnight and remains firm in Asia as concerns on the Middle East tension faded and focus turns back to a light economic calendar. Eurozone will report M3 money supply growth in Nov which is expected to continue to slow from 8.7% yoy to 8.6% yoy. Germany's preliminary HICP is also expected to slow further from 1.4% yoy to 1.2% yoy in Dec. In the US, S&P/CS composite-20 housing prices in October should have dropped -17.8% yoy following the -17.4% decline in the previous month. December Chicago PMI is anticipated to come in at extremely low level of 33 (November: 33.8) particularly due to the auto production shutdown. Although the market expects Consumer Confidence to come in at 45.5 in December, another improvement after making a trough of 38.8 in October, the reading still indicates poor sentiment and deteriorating employment condition may pose downside risk.

Looking at Dollar Index, with 79.43 support intact, we're still favoring the case that fall from 88.46 is merely a correction in the larger up trend and has completed at 77.69. Focus remains on 83.11 cluster resistance (50% retracement of 88.46 to 77.69 at 83.07), and decisive break there will affirm this case and bring retain the long term bullish scenario. However, a break of 79.43 will dampen this case and put 77.69 back into focus.

Elsewhere, noticeable weakness is seen in Sterling so far this week with GBP/USD taking out 1.4466 low to as low as 1.4378 so far. GBP/JPY also weakens to as long as 130.07 and remains pressured. However, note that EUR/GBP is displaying some loss of intraday momentum after hitting record high of 0.9795. Note that both EUR/USD and EUR/JPY reversed sharply yesterday after failing prior highs. Also, EUR/CHF is still in persistent weakness and is expected to head lower to retest 1.4315 low. Markets' focus may be turning to closing of Euro long positions that built up since the start of Dec.

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EUR/JPY Daily Outlook

Daily Pivots: (S1) 125.08; (P) 127.39; (R1) 128.57; More.

EUR/JPY's rebound from 123.69 was limited below 131.03 high and retreated sharply. Though, the cross is still staying in range and intraday outlook remains neutral for the moment. As discussed before, rise from 115.88, which is treated as third leg in the consolidation from 113.63, could have completed after meeting 131.02 resistance. Break of 123.69 support will reaffirm this case and indicates that fall from 131.03 is resuming for retesting 113.64 low. However, on the upside, above 131.03 will indicate that rise from 115.88 is still in progress and will target 38.2% retracement of 169.96 to 113.63 at 135.14 next.

In the bigger picture, whole decline from 169.96 is expected to develop into a five wave sequence, with first wave completed at 147.03, second at 156.84, third at 113.63. Price actions from 113.63 is treated as the fourth wave consolidation. Having said that, upside of such consolidation is expected to be limited below 141.73 cluster resistance (50% retracement of 169.96 to 113.63 at 141.79). Break of 113.63 will confirm that whole down trend has resumed for 76.4% retracement of 88.97 to 169.96 at 108.08.

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Published on  Tue, Dec 30 2008, 06:43 GMT

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Mid−Day Forex Technical Report − Swiss Franc Dominance Continues, Sterling and Dollar Hit Hard

Mon, Dec 29 2008, 14:17 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Swiss Franc Dominance Continues, Sterling and Dollar Hit Hard

Swiss Franc continues to rise across the board on safe haven flow triggered by concern on escalating tension in the Middle East. Meanwhile, Sterling remains the weakest one, even worst than the greenback, on view that BoE will soon follow Fed to enter Zero Interest Rate Policy and quantitative easing. GBP/CHF leads the top mover chart and dives to as low as 1.5229 while EUR/GBP continues to make new record high at 0.9793 and is heading to parity. Dollar also remains weak as pressured by strength in Euro, Swissy as well as commodities. However, note that while Aussie is lifted by rise in gold prices, Canadian dollar remains in tight range despite rebound in crude oil.

Looking ahead, as mentioned before, Swissy will continue to be firm across the board. EUR/CHF's decline from 1.5880 is expected to continue further to retest 1.4135 low. USD/CHF is set to take out 1.0410 low and extends weakness to 1.0010 support. Meanwhile, CHF/JPY's strong rebound from 74.99 resumes today and is set to take on next key medium term level of 50% retracement of 105.08 to 74.99 at 90.03, which is close to 90 psychological level.

On the other hand, 79.43 remains the key near term support at 79.43. As long as this support holds, we're still favoring the case that 88.46 is merely a correction in the larger up trend and has completed at 77.69. Decisive break of 83.11 cluster resistance (50% retracement of 88.46 to 77.69 at 83.07), without making a new low below 77.69 will affirm this case and bring retain the long term bullish scenario. However, a break of 79.43 will dampen this case and put 77.69 back into focus.

Swiss KOF leading indicator dropped more than expected to -0.39 in Dec, hitting a 5 year low, staying negative for the second consecutive months and was the 17th consecutive months of decline. The business sentiment barometer indicate that the Swiss economic growth will slow sharply in 2009 and enters recession.

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USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0656; (P) 1.0708; (R1) 1.0749; More

USD/CHF's decline from 1.1135 is still in progress and at this point, intraday bias remains on the downside. Break of 1.0410 will indicate that whole fall from 1.2296 has resumed to next target of 1.0010 (61.8% projection of 1.2248 to 1.0410 from 1.1135 at 0.9999) which is close to 1.0000 psychological support. On the upside, above 1.0604 will indicate that an intraday low is in place and argue that consolidation from 1.0410 might still be in progress. Though, short term outlook will remain bearish as long as 1.1246 resistance holds.

In the bigger picture, the depth and steepness of the decline from 1.2296 indicates that medium term rise from 0.9634 has topped out. Prior break of 1.0623/51 cluster support (61.8% retracement of 0.9634 to 1.2296 at 1.0651) suggests that USD/CHF is developing another long term down trend that should target 1.0010 first and then this year's low of 0.9634. On the upside, break of 1.1246 is needed to indicate fall from 1.2296 has completed. Otherwise, medium term outlook remains bearish in case of recovery.

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Published on  Mon, Dec 29 2008, 14:17 GMT

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Daily Forex Technical Report − Euro and Swissy Up on Safe Haven Flow

Mon, Dec 29 2008, 07:23 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Euro and Swissy Up on Safe Haven Flow

The post Christmas thin markets are dominated by safe haven flow on escalation of conflicts in Middle East. Swiss Franc rallies across the board and takes Euro along with it. In particular, EUR/GBP scores another record high of 0.9663 today, while GBP/CHF also dives to new low at 1.5503. While dollar remains pretty steady against other major currencies like Yen, Sterling and Aussie, dollar index is dragged down by weakness against Euro and Swissy and is back pressing 80 level. Gold rises to as high as 870 so far while crude oil is firm above $38 level. Israeli warplane pounded the Hamas-ruled Gaza for the third consecutive day on Monday and more attacked could be planned after over 300 were killed.

Technically speaking, dollar index's rebound from 77.69 has made an intraday top at 81.62 with 4 hours MACD dragged down by subsequent retreat. Intraday outlook is turned neutral for the moment. Focus now turns to 79.43 minor support. At this moment, we're still favoring the case the fall from 88.46 is merely a correction in the larger up trend. Having said that, current retreat from 81.62 should be contained above 79.43 and bring another rise. Also, note that to solidify this case, we'd like to see the dollar index breaks 83.11 cluster resistance (50% retracement of 88.46 to 77.69 at 83.07) without making a new low below 77.69. That will significantly increase the odds that fall from 88.46 to 77.69 is in corrective 3 wave structure and thus, retain the long term bullish scenario. However, a break of 79.43 will dampen this case and put 77.69 back into focus.

EUR/GBP's rally is still in progress. Break of mentioned 161.8% projection of 0.7808 to 0.8660 from 0.8234 at 0.9613 sets the stage for further rise to 200% projection at 0.99.38 and then the psychologically important parity level. On the downside, a break below 0.9437 is needed to indicate a short term top is formed. Otherwise, short term outlook remains bullish for mentioned targets.

EUR/CHF's fall from 1.5880 is still in progress and dips further to 1.4943 so far. As discussed before, rebound from 1.4315 should have completed at 1.5880. Current fall is expected to extend further to retest this low and Swissy is expected to be stronger comparing to Euro for a while. Above 1.5196 will suggests some consolidation in EUR/CHF first but upside should be limited below 1.5519 resistance and bring another fall.

Looking ahead, Swiss KOF leading indicator is the main focus today. This business sentiment indicator is expected to remain in negative territory for the second months and deteriorate further from -0.05 to -0.25 in Dec. It has been in steady decline since peaking at 2.10 in Jul 2007.

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EUR/JPY Daily Outlook

Daily Pivots: (S1) 127.05; (P) 127.38; (R1) 127.66; More.

EUR/JPY's fall from 131.03 was contained at 1223.69, slightly above 4 hours 55 EMA and rebounds to as high as 128.70 so far. With 4 hours MACD crossed back above signal line, an intraday low should be in place and outlook is turned neutral. As mentioned before, rise from 115.88, which is treated as third leg in the consolidation from 113.63, could have completed after meeting 131.02 resistance. Break of 123.69 will reaffirm this case and indicates that fall from 131.03 is resuming for retesting 113.64 low. However, on the upside, above 131.03 will indicate that rise from 115.88 is still in progress and will target 38.2% retracement of 169.96 to 113.63 at 135.14 next.

In the bigger picture, whole decline from 169.96 is expected to develop into a five wave sequence, with first wave completed at 147.03, second at 156.84, third at 113.63. Price actions from 113.63 is treated as the fourth wave consolidation. Having said that, upside of such consolidation is expected to be limited below 141.73 cluster resistance (50% retracement of 169.96 to 113.63 at 141.79). Break of 113.63 will confirm that whole down trend has resumed for 76.4% retracement of 88.97 to 169.96 at 108.08.

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Published on  Mon, Dec 29 2008, 07:23 GMT

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Mid−Day Forex Technical Report − Dollar Indifferent to Mixed US Data, Swissy Climbs Further

Wed, Dec 24 2008, 14:20 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Indifferent to Mixed US Data, Swissy Climbs Further

Markets remain steadily in range after a mixed bag of US data. On the positive side, durable goods orders dropped less than expected by -1.0% in Nov while ex-transport orders even managed 1.2% rise. However, Personal income dropped more than expected by -0.2% in Nov even though personal spending dropped less than expected by -0.6%. Headline PCE moderated further to 1.4% yoy while core PCE slowed to 1.9% yoy in Nov. Jobless claims climbed to 586k. From Canada Oct GDP contracted -0.1% mom versus expectation of -0.3%.

Technically speaking, not much is worth noting as markets are staying in range in general. Though, Swissy continues to be a stronger one in a quiet markets. EUR/CHF dives further to as low as 1.5012 after taking out mentioned 1.5163 support. As discussed before, break of this support level argues that whole rebound from 1.4315 has completed at 1.5880. Having said that, deeper decline is expected to be seen towards retesting this low. And as mentioned before, the Swissy might be taking over Euro's leading strength against other majors.

Happy holidays to our readers. We'll be back on Dec 29.

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USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0830; (P) 1.0887; (R1) 1.0944; More

USD/CHF's break of 1.0743 minor support argues that rebound from 1.0410 has completed at 1.1135. Intraday bias is flipped back to the downside for retesting this low first. As discussed before, as long as 1.1246 resistance holds, sharp fall from 1.2296 is still in favor to extend further. Break of 1.0410 will target 1.0010 medium term support next. On the upside, above 1.0843 will flip intraday bias back to the upside and put focus back to 1.1246 resistance.

In the bigger picture, the depth and steepness of the decline from 1.2296 indicates that medium term rise from 0.9634 has topped out and dampens the longer term bullish scenario too. Prior break of 1.0623/51 cluster support (61.8% retracement of 0.9634 to 1.2296 at 1.0651) suggests that USD/CHF is developing another long term down trend that should target 1.0010 first and then this year's low of 0.9634. On the upside, break of 1.1246 is needed to indicate fall from 1.2296 has completed. Otherwise, medium term outlook remains bearish in case of recovery.

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Published on  Wed, Dec 24 2008, 14:20 GMT

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Daily Forex Technical Report − Quiet Markets Await US Data

Wed, Dec 24 2008, 07:28 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Quiet Markets Await US Data

With holidays coming close, market activity continue to decrease. Majors and crosses are bounded in tight range. Focus will turn to a bunch of economic data from US today including Nov Personal Income and spending, durables and conference board consumer confidence. Consumer confidence in Nov is forecasted to drop -0.7% after falling -1% in Oct. Durable goods orders should have fallen -3% in Nov, the 4th consecutive monthly decline after dropping -6.2% in October. Excluding transportation, it's also anticipated to be down by -3% with decline across most industries. Nov's personal consumption expenditure is expected to be flat (mom) as indicated by weak auto sales and retail consumption. As unemployment has been increasing, personal income should remain sluggish in Nov (consensus: 0%) after rising slightly by 0.3% in the previous month while personal spending should have contracted further by -0.7%.

Markets expect jobless claim for the week ended Dec 20 to have lowered to 545K from 554K in the previous week. However, there's still risk that the reading would come higher than expected as shutdown in auto plants might have boosted claims last week and its impact will spread over the next few weeks. Continuing claims for the week ended Dec 13 should probably remain at high level after recording a reading of 4.384M in early Dec.

In Canada, October's GDP should have contracted -0.2% mom after surprisingly rising 0.1% in September.

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AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6769; (P) 0.6810; (R1) 0.6842; More

AUD/USD dips further to 0.6760 today, taking out an inner trend line support. At this point, intraday bias remains on the downside as long as 0.6929 minor resistance holds and further decline should be seen towards 0.6486 support. As discussed before, price actions from 0.6008 are treated as consolidation in the larger down trend with rise from 0.6075 as the third leg. Such rise from 0.6075 could have completed at 0.7140 already and break of 0.6486 will confirm this case. Also, this will suggest that consolidation from 0.6008 has completed too. Further fall should then be seen to retest 0.6008 in such case.

On the upside, though, above 0.0.6929 will flip intraday bias back to the upside and break of 0.7140 will indicate that rise from 0.6075 is still in progress for 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completion.

In the bigger picture, whole fall from 0.9849 made a bottom at 0.6008 and turned into sideway consolidation since then. However, note that the impulsive nature of the fall from 0.9849 to 0.6008 indicate that price actions from 0.6008 is developing into correction/consolidation only. The long term down trend is still expected to resume after completing the consolidation. Sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for at least another five wave medium term decline, targeting 0.4773 (01 low). But, note that as long as 0.6008 low holds, consolidation from could still extend further. Above 0.7140 will target 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completing the consolidation.

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Published on  Wed, Dec 24 2008, 07:28 GMT

455f9652-63de-41c1-820a-e2dd18c09470

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Mid−Day Forex Technical Report − Swissy Strengthens in Consolidation Markets

Tue, Dec 23 2008, 15:31 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Swissy Strengthens in Consolidation Markets

Markets remain steady after another round of poor data from US. Existing home sales dropped sharply by -8.6% in Nov, making another record low since record began in 1968. New home sales dropped -2.9% to 17 year low of 407k. House price index dropped -1.1% in Oct. Though, final reading of U of Michigan consumer sentiment was revised up to 60.1 in Dec. Q3 GDP growth was finalized at -0.5% while personal consumption growth was revised lower to -3.8%.

In the UK, the third quarter current account deficit came in at 7.7B pound, better than consensus of 11.9B pound but worse than the upwardly revised 6.4B pound in Q2. The UK’s Q3 GDP was revised down to -0.6% qoq as services sector contracted -0.5% on the quarter, the greatest decline in 18 years. Manufacturing output also plunged 1.4% over the quarter. The Eurozone reported October current deficit of 4.8B euro, slightly lower than the revised 4.2B euro in September.

Swiss Franc is so far the biggest winner today topping the top movers chart with GBP/CHF, USD/CHF, CHF/JPY and EUR/CHF. In particular, EUR/CHF has now taken out mentioned 1.5163 support which adds more credence to the case that rebound from 1.4315 has already completed at 1.5880. Further fall is now in favor to retest this low and Swissy may start to displaying stronger momentum in other crosses comparing to Euro crosses.

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USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.2208; (P) 1.2210; (R1) 1.2210; More.

USD/CAD continues to be bounded in tight range today and intraday outlook remains neutral for the moment. As discussed before, fall from 1.3005 might have completed at 1.1818 already. Break of 1.2514 resistance will confirm this case and bring retest of 1.3005/15 resistance zone. On the downside, though, below 1.1818 will indicate that fall from 1.3005 has resumed for 1.1464 support.

In the bigger picture, firstly, there is no confirmation of completion of medium term up trend from 0.9056 yet. Though, recent development suggests that consolidation from 1.3015 is still in progress with risk of another fall to retest 1.1464 support before resuming the medium term up trend towards 61.8% retracement of 1.6196 to 0.9056 at 1.3469. However, decisive break of 1.1464 support will be an important alert that whole rise from 0.9056 has possibly completed. Deeper correction should then be seen in such case.

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Published on  Tue, Dec 23 2008, 15:31 GMT

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Daily Forex Technical Report − Markets in Consolidation, Focus on US Home Sales

Tue, Dec 23 2008, 07:24 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Markets in Consolidation, Focus on US Home Sales

Pre-holiday trading continues to be quiet today. Dollar index continues to stay in tight range below 81.62 as consolidation continues. Focus will turn to another round of home sales data from US today which is expected to show further deterioration in the housing sector. November existing home sales are anticipated to dropped -1% to 4.93M units from 4.98M units in October, while new home sales probably declines -3.6% to 415K in November from 433K in October. Although the 30-year fixed mortgage has been dropped -100 bps, it failed to stimulate purchase. October housing prices should have dropped another -1.3% mom.

The final readings for Q3 GDP and personal consumption are expected to be -0.5% and -3.7% respectively, same as preliminarily reported. The final December reading for the University of Michigan index of consumer sentiment likely dropped to 58.6 from 59.1 initially estimated. The gauge should have increased from 55.3 in November as decline in gasoline prices and lower mortgage rates were expected to improve personal finance and helped sentiment.

In European session, Eurozone will report current account in October after recording a deficit of 6B euro in September. In the UK, current account for Q3 is expected to be in a deficit of -11.9B pound and the finalized Q3 GDP is expected to remain at -0.5% qoq. However, there's chance for downward revisions as the business investment data released last week was below expectation.

Released overnight, New Zealand's GDP in Q3 declined 0.4% (consensus: -0.5%) from -0.2% in Q2. Household spending which contributed 60% of the nation's economy, dropped to the lowest level in 21 years. This is the third consecutive quarter of economic contraction and should probably increase the prospect for another rate cut in January.

Technically speaking, overall outlook remains unchanged. Dollar index is still expect to climb further as long as 79.43 minor support holds and should channel 83.11 cluster resistance (50% retracement of 88.46 to 77.69 at 83.07). One point to note is that EUR/CHF dips further to 1.5199 and is closer to mentioned 1.5163 support. Break of this support will confirm that rebound from 1.4315 has completed at 1.5880 after touching an important fibo resistance level and will trigger switch in balance of strength in Euro and Swissy.

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AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6793; (P) 0.6843; (R1) 0.6886; More

Outlook in AUD/USD remains unchanged. Price actions from 0.6008 are treated as consolidation in the larger down trend with rise from 0.6075 as the third leg. Such rise from 0.6075 could have completed at 0.7140 already and break of 0.6486 will confirm this case. Also, this will suggest that consolidation from 0.6008 has completed too. Further fall should then be seen to retest 0.6008 in such case. On the upside, though, above 0.7140 again will indicate that rise from 0.6075 is still in progress for 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completion.

In the bigger picture, whole fall from 0.9849 made a bottom at 0.6008 and turned into sideway consolidation since then. However, note that the impulsive nature of the fall from 0.9849 to 0.6008 indicate that price actions from 0.6008 is developing into correction/consolidation only. The long term down trend is still expected to resume after completing the consolidation. Sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for at least another five wave medium term decline, targeting 0.4773 (01 low). But, note that as long as 0.6008 low holds, consolidation from could still extend further. Above 0.7140 will target 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completing the consolidation.

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Published on  Tue, Dec 23 2008, 07:24 GMT

792856f3-cd46-46bb-8170-d1b3b6ace258

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Mid−Day Forex Technical Report − Range Trading Continues in Pre−Holiday Markets

Mon, Dec 22 2008, 15:04 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Range Trading Continues in Pre-Holiday Markets

The forex markets are generally staying in range as a holiday shortened week starts. Sterling spike lower follow comments from BoE Deputy Governor Gieve that interest rates are "blunt" instruments and additional tools are necessary to complement monetary policies. He also admitted that BoE didn't understand the severity of the problem of "crazy borrowing" in the boom years. EUR/GBP tried to test record high but upside was limited after data showed Eurozone industrial orders dropped more than expected by -4.7% mom, -15.1% yoy in Oct. Germany important prices dropped more than expected by -3.4% mom, -1.3% yoy in Nov while Germany Gfk consumer confidence came in at 2.1, in line with expectations.

Japan reported a record trade deficit of -223.4B yen in November, compared with market expectation of 257.5B yen and October's 63.9B yen. Exports in November dropped -26.7% yoy, the biggest decline ever while imports plunged -14.4%, compared with consensus of -8.4%. The Finance Ministry proposed a record budget deficit that amounts to 88.55T yen for next fiscal year, 6.6% higher that than in the current one which ends next March. It includes 10T yen for laid-off works and tax relief and another 10T yen for the banking system, 3T yen for purchasing commercial papers.

PBoC of China cut rates for the fifth time in three months by another 27bps to 5.31% in an unscheduled meeting today.

New Zealand's current account deficit in Q3 widened to NZD 5.99B (consensus: NZD 6B) from NZD3.91B. In the 12 months ended September 30, the figure expanded to record high of NZD 15.51B from a revised NZD 14.98B in the year through Jun 30 because imports costs outweighed export costs. Imports gained 2.4% yoy due to surging oil price. In 3Q08, import prices recorded the biggest gain in 24 years.

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GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.4753; (P) 1.4970; (R1) 1.5129; More

GBP/USD dips further to 1.4688 today and at this, intraday bias remains on the downside for retesting 1.4466 low. Though, downside is expected to be contained there and bring another as consolidation from there continues. Above 1.5185 minor resistance will flip intraday bias back to the upside for 1.5722 first. Break will target 1.6671 resistance.

In the bigger picture decline from 2.0158 has completed the five wave sequence already, with first wave completed at 1.7445, second at 1.8668, third at 1.4557 and fourth at 1.5534 and fifth at 1.4466. In other words, a medium term bottom is likely in place at 1.4466 too and some larger scale consolidation would now be seen. Nevertheless, note that fall from 2.0158 is treated as the third wave of a five wave sequence from 2.1161 only. Hence, consolidation from 1.4466 is expected to be limited by 1.6671 cluster resistance (38.2% retracement of 2.0158 to 1.4466 at 1.6640) and bring at least another medium term fall before making an important low. Though, on the downside, firm break of 1.4466 is needed to confirm that long term down trend has resumed. Otherwise, another rebound could still be seen as consolidation continues.

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Published on  Mon, Dec 22 2008, 15:04 GMT

cee683be-9c44-4793-a314-96b27480524f

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Daily Forex Technical Report − Yen Mildly Softer after Japan Announced Record Budget Deficit to Stimulate the Economy

Mon, Dec 22 2008, 07:18 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Yen Mildly Softer after Japan Announced Record Budget Deficit to Stimulate the Economy

The forex markets are generally quiet today. Though, yen is a little softer following rally in Japanese Nikkei. BoJ has just reintroduced the Zero Interest Rate Policy by lowering interest rates to 0.1% last week. The Finance Ministry proposed a record budget deficit that amounts to 88.55T yen for next fiscal year, 6.6% higher that than in the current one which ends next March. It includes 10T yen for laid-off works and tax relief and another 10T yen for the banking system, 3T yen for purchasing commercial papers.

The response to US carmaker loans package is mild so far with most Asian stock indices dipping mildly. Dollar is a touch weaker that main point to better risk appetite but the moves are nothing meaningful for the moment. Oil edges higher to above $43 but remains far below near term resistance at $50.5. Gold recovers mildly.

On the data front, Germany Gfk consumer sentiment was unchanged at 2.1 as expected. Import prices in Germany dropped more than expected by -3.4% mom in Nov but slightly slower than prior -3.6%. Japan reported a record trade deficit of -223.4B yen in November, compared with market expectation of 257.5B yen and October’s 63.9B yen. Exports in November dropped -26.7% yoy, the biggest decline ever while imports plunged -14.4%, compared with consensus of -8.4%. New Zealand’s current account deficit in Q3 widened to NZD 5.99B (consensus: NZD 6B) from NZD3.91B. In the 12 months ended September 30, the figure expanded to record high of NZD 15.51B from a revised NZD 14.98B in the year through Jun 30 because imports costs outweighed export costs. Imports gained 2.4% yoy due to surging oil price. In 3Q08, import prices recorded the biggest gain in 24 years.

More Forex Technical Analysis Reports Here.

USD/JPY Daily Outlook

Daily Pivots: (S1) 88.54; (P) 89.18; (R1) 89.93; More.

USD/JPY's recovery from 87.13 continues today and some more upside might still be seen. Nevertheless, another decline is still expected as long as 91.57 resistance holds. Below 88.39 will flip intraday bias back to the downside first. Further break of 87.13 low will target 100% projection of 124.13 to 95.77 from 110.66 at 82.30. On the upside, though, break of 91.57 will suggest that fall from 110.66 might be finished and stronger rebound is underway.

In the bigger picture, fall from 110.66 is still in progress. Such decline is expected to develop into a five sequence with first wave completed at 90.92, second at 100.54. Fall from 100.54 might be developing into a highly sub-divided wave three and should be targeting 100% projection of 124.13 to 95.77 from 110.66 at 82.3. Having said, while a break of 91.57 resistance will indicate that a short term low formed, subsequent rebound should be limited below 100.54 resistance and bring at least on more fall to complete the decline from 110.66. Though, break of 100.54 will dampen this view and serve as an indication that whole decline from 110.66 has completed.

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Published on  Mon, Dec 22 2008, 07:18 GMT

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Weekly Review and Outlook − Forex Markets in an Highly Uncertain State after a Violent Week

Sun, Dec 21 2008, 09:29 GMT
by ActionForex.com Team

ActionForex.com

Weekly Review and Outlook

Forex Markets in an Highly Uncertain State after a Violent Week

The forex markets are in a highly uncertain state after all the violent moves seen last week. Dollar is weak without a doubt when you saw the dollar index dropping more than 7% from 83.64 to intra week low of 77.69 after Fed cut the federal fund rates more than expected to a target range of 0-0.25% and formally entered into quantitative easing. But is it that weak? We doubt so as GBP/USD, AUD/USD, USD/CAD are still kept in range while the USD/JPY was just mildly lower.

The weakness of dollar was mainly manifested in strength in Euro and Swiss Franc which saw both currencies surging across the board. Euro was boosted by ECB's comments that suggested it will pause the rate cut cycle in Jan to wait-and-see the effect of prior rate cuts first. EUR/GBP accelerated to a record high of 0.9554. EUR/CAD took out key resistance at 1.7 and reached as high as 1.7499 while EUR/AUD is also back pressing 2.1126 high. EUR/JPY did rebounded strongly and breached 131 level briefly. But is the common currency really that strong? Yes against Sterling and commodity currencies, but in doubt against dollar, yen and swissy.

Euro gave back much gains after ECB announced to widen the so called rate corridor and that's viewed as intended to discourage banks from parking money with the ECB. After all, EUR/JPY is still bounded in range of 113.63 and 131.03 and there is no change to the view that it's merely in consolidation. More importantly, such consolidation could have ended at 131.03. EUR/CHF, only other hand, as mentioned during the week, reversed after hitting an important resistance level and could have peaked at 1.5880. EUR/USD's rally, though strong, was still limited by 1.4867 structural resistance.

What about the yen? Markets had little reaction to BoJ's rate cut to 0.1%. Despite all the intervention talk, the Japanese currency was just mixed. GBP/JPY even managed to take out prior low of 133.09 during the week while USD/JPY's rebound clearly lacked momentum. EUR/JPY retreated sharply after hitting 131.03 on initial strength.

After all, the markets are in a highly uncertain state and here are some points to note for the rest of the year and probably in early Jan too to clear out the messy picture.

1. Dollar index's sharp decline from 88.46 was supported by mentioned 61.8% retracement of 71.31 to 88.46 at 77.86, inside key support zone of 75.88 and 80.38. Based on the fact that most dollar pairs are still viewed as in consolidation, we favor the case that such fall is merely a correction in the larger up trend only. To solidify this case, we'd like to see the dollar index breaks 83.11 cluster resistance (50% retracement of 88.46 to 77.69 at 83.07) without making a new low below 77.69. That will significantly increase the odds that fall from 88.46 to 77.69 is in corrective 3 wave structure and thus, retain the long term bullish scenario. Ideally, the break of 83.11 should be accompanied by at least a retest of 1.4466 in GBP/USD, 1.3015 in USD/CAD and 0.6008 in AUD/USD.

2. However, failure below 83.11, followed by a break of 77.69 will argue that fall from 88.46 is impulsive in nature. If accompanied by a break of 1.4867 in EUR/USD, that will suggest that the greenback's trend has totally reversed and it's indeed developing another long term down trend.

3. So far, we're still favoring the case that EUR/USD's rise is merely a corrective rebound. A break of 1.3629 support will add much credence to this case. Meanwhile, attention will also be paid to 118.07 in EUR/JPY as well as 1.5163 in EUR/CHF and break of which will add much doubts to Euro's general strength.

4. Again 118.07 in EUR/JPY will be an important level for yen traders. Break of which will significantly increase the chance then yen in staging another round of massive rally.

5. 1.5163 in EUR/CHF will also be important in a way that even if Euro could maintain strength in generally, break of this support will argue that the focus is indeed shifting from Euro to the Swissy.

More Forex Technical Analysis Reports Here.

Currency Heat Map Weekly View

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Published on  Sun, Dec 21 2008, 09:29 GMT

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Mid−Day Forex Technical Report − Euro's Weakness Continues as a Short Term Top Formed

Fri, Dec 19 2008, 13:38 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Euro's Weakness Continues as a Short Term Top Formed

Euro continues to pare this week's gain today and weakens sharply across the board. While there are various stories about the reversal of fortune in Euro, it's believed that the main reason is due to ECB's announcement of widening the rate corridor yesterday. Note that Euro is the main beneficiary of dollar's weakness since the start of the month due to fund flows from US to the Eurozone. However, ECB's announcement, which involved lowering the deposit rate from 2.00% to 1.50%, 100bps below the benchmark interest rates currently at 2.50% and raising the marginal lending rate from 3.00% to 3.50%, 100bps above the benchmark rates, is viewed as an intention to discourage capital inflows to park with ECB. Traders, thus, take profit on Euro longs on concern of reversal in the trend.

Technically speaking, a short term top is confirmed to be formed at 1.4719 in EUR/USD. While some more downside is expected in near term, there is no confirmation of EUR/USD's rally yet. Focus will turn to 1.3408 support for guidance. Similarly, dollar index's break of 80.44 confirms that a short term bottom is in place at 77.69 after drawing support from 61.8% retracement of 71.31 to 88.46 at 77.86. We're favoring the case that fall from 88.46 is merely a correction in the larger up trend. However, a break of 83.11 cluster resistance (50% retracement of 88.46 to 77.69 at 83.07) is needed to firstly confirm the completion and corrective nature of such decline first.

On the data front, Canadian CPI dropped -0.3% mom, rose 2.0% yoy in Nov versus consensus of -0.5% mom, 1.8% yoy. Core CPI rose 0.7% mom, 2.4% yoy versus consensus of -0.2% mom, 1.5% yoy. Germany PPI dropped -1.5% mom, rose 5.3% yoy versus consensus of -1.0% mom, 5.9% yoy. Japan's all industry index dropped 0.5% mom in October, above market expectation of -0.8% following a revised reading of -0.1% in September. In the UK, December Gfk consumer confidence unexpectedly improved to -33 from -35 as tax reduction and lower energy costs stimulated spending desires.

Bank of Japan cut the overnight lending rate from 0.3% to 0.1% on 7-1 vote and announced plan to buy corporate debts to help corporate raise funds during deepening recession. Tado Noda was the sole member to dissent. Basic loan rate was also lowered by 20bps to 0.3% by unanimous vote.

More Forex Technical Analysis Reports Here.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.4042; (P) 1.4380; (R1) 1.4580; More

EUR/USD's break of 1.4008 minor support with 4 hours MACD dragged below signal line confirms that a short term top in place at 1.4719, after meeting mentioned target of 61.8% retracement of 1.6038 to 1.2329 at 1.4621. Intraday bias is flipped back to the downside for 4 hours 55 EMA (now at 1.3685) first. On the upside, above 1.4306 will indicate that fall from 1.4719 has completed and flip intraday bias back to the upside for retesting 1.4719 high.

In the bigger picture, whole fall from 1.6038 has made a medium term bottom at 1.2329. Strong rebound from there has met mentioned resistance zone of 1.4621 fibo resistance and 1.4867 already. With a short term top in place, focus now turns to 1.3408 cluster support (61.8% retracement of 1.2549 to 1.4719 at 1.3378). Break there will indicate that rise from 1.2549, as well as that from 1.2329 has finished. In such case, deep decline could be seen to retest 1.2329 low. On the upside, note that sustained trading above 1.4867 will target 1.6038 record high again.

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Published on  Fri, Dec 19 2008, 13:38 GMT

1c3530ad-dbec-42f6-8724-c21deadf75c4

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Daily Forex Technical Report − BoJ Cuts 20bps, Has Euro Topped?

Fri, Dec 19 2008, 07:03 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

BoJ Cuts 20bps, Has Euro Topped?

The forex markets are rather steady today so far as little response is paid to BoJ's rate cut. the Bank of Japan cut the overnight lending rate from 0.3% to 0.1% on 7-1 vote and announced plan to buy corporate debts to help corporate raise funds during deepening recession. Tado Noda was the sole member to dissent. Basic loan rate was also lowered by 20bps to 0.3% by unanimous vote. Yen remains mixed after the decision. Note that firstly, more upside cannot be ruled out in EUR/JPY and CHF/JPY as supported by the theme of intervention. Secondly, USD/JPY's recovery is not convincing yet as the downtrend is still intact. Thirdly, GBP/JPY, AUD/JPY and CAD/JPY are staying in range despite all the volatility elsewhere. There is not broad based direction in the Japanese currency for the moment.

Elsewhere, Euro continues to consolidate against dollar and sterling. The pull back in the common currency is believed to be triggered by news of ECB lowering the deposit rate from 2.00% to 1.50%, 100bps below the benchmark interest rates currently at 2.50%. ECB also raised the marginal lending rate from 3.00% to 3.50%, 100bps above the benchmark rates. . Trichet said that this action is "necessary" for stabilizing the financial markets. Though, markets perceive that as a way to discourage capital inflows into Euro.

Technically speaking, firstly, dollar index drew some support from 61.8% retracement of 71.31 to 88.46 at 77.86 inside an important support zone of 78.59 to 80.38. Some stabilization is seen as expected with 4 hours MACD crossed above signal line. Further break of 80.44 resistance will confirm that a short term bottom is formed at 77.69. As mentioned before, the critical factor to determine dollar's outlook will be on whether another fall will be seen after the current rebound to make the whole fall from 88.46 a five wave impulsive sequence, or will such fall complete in three wave corrective manner. This should be decided in the next few weeks and will set the tone for 2009.

Secondly, EUR/USD and EUR/JPY has both met upside target in the rebound already and near term focus will turn back to some intraday support levels for confirmation that at least short term top is formed there. Thirdly, attention will also be paid to 1.5163 support in EUR/CHF for confirmation that it's rebound has completed at 1.5880 and thus the switching over of relative strength in the Euro and the Swissy.

On the data front, Japan's all industry index dropped 0.5% mom in October, above market expectation of -0.8% following a revised reading of -0.1% in September. In the UK, December Gfk consumer confidence unexpectedly improved to -33 from -35 as tax reduction and lower energy costs stimulated spending desires.

Looking ahead, Germany will report November PPI which is expected to have plunged 0.8% from 0% a month ago. Later at 1200GMT, Canada will report CPI for November is anticipated to moderate further to 1.8% yoy from 2.6% in October. Decline in energy prices and constrained demand brought by global economic downturn continued to drag down price levels. On monthly basis, the gauge should have contracted -0.5%.

More Forex Technical Analysis Reports Here.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 125.01; (P) 128.01; (R1) 130.38; More.

EUR/JPY's rise extended further to as high as 131.03, meeting mentioned target of 131.02 resistance briefly. Though, retreat from there drags down 4 hours MACD and suggests that an intraday top is in place. Intraday outlook is turned neutral for the moment. As discussed before, price actions from 113.63 is still treated as consolidation in the larger down trend only with rise from 115.88 as the last leg. Above 131.03 will indicate that such rise is still in progress and will target 38.2% retracement of 169.96 to 113.63 at 135.14 next.

However, with 131.02 target met, a break below 124.21 will firstly indicate that rise from 155.88 has completed. Secondly, it will serve as an early signal that consolidation from 113.63 has finished too. Further break of 118.07 support will add much credence to this case and bring retest of 113.63 low.

In the bigger picture, as discussed before, whole down trend from 169.96 is still expected to continue after completing consolidation from 113.63. Break of this low will confirm that such fall has resumed and should target 76.4% retracement of 88.97 to 169.96 at 108.08. However, note that as long as 113.63 low holds, consolidation from there might still continue. But upside is expected to be limited below 141.73 cluster resistance (50% retracement of 169.96 to 113.63 at 141.79) to complete the correction.

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Published on  Fri, Dec 19 2008, 07:03 GMT

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Mid−Day Forex Technical Report − Dollar Recovers Mildly as Markets Digest Recent Sharp Losses

Thu, Dec 18 2008, 15:25 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Recovers Mildly as Markets Digest Recent Sharp Losses

Dollar recovers mildly in early US session as markets digest recent sharp losses. Economic data from US doesn't trigger much volatility neither. Philly Fed index unexpectedly improved from -39.3 to -32.9 in Dec. Leading indicators dropped less than expe3cted by -0.4% in Nov. Jobless claims improved from record high of 575k to 554k. Canadian retail sales dropped less than expected by -0.9% in Oct but ex-autos contracted more than consensus by -1.1%. Canadian leading indicators dropped -0.4% in Nov.

Technically speaking, dollar index is now inside an important support zone of 75.88 and 80.38 and has just met 61.8% retracement of 71.31 to 88.46 at 77.86. As discussed before, some support is expected at the current level. Above 80.44 minor resistance will be an indication of stabilization and some consolidation would be seen in such case. Though, the critical factor to determine dollar's outlook will still be on whether another fall will be seen after the anticipated rebound to make the whole fall from 88.46 a five wave impulsive sequence, or will such fall complete in three wave corrective manner. This should be decided in the next few weeks and will set the tone for 2009.

Looking ahead, main focus will turn to BoJ rate decisions in the coming Asian session. Currently standing at 0.3%, policy rates in Japan were originally expected to hold steady for the rest of the year. However, FOMC's decision on Dec 16 to lower rates to 0-0.25% may push BoJ to restore ZIRP earlier than anticipated.  Apart from cutting rates, we believe BoJ will also adopt the so-called rinban operations – outright purchase of Japanese Government Bonds (JGB). Buying of long-term government bond helps pull down yield cross the curve and thus reduce costs of borrowing for companies and individuals. Also, volatility in the yen will be triggered by any rumors on government intervention.

Released earlier, Germany ifo business climate hit record low at 82.6 in Dec, compared with consensus of 84 and Nov's 85.8. Business expectations index also plummeted to 76.8 from 77.6. October retail sales dropped to 2.9% (consensus: 2%) from 6.4% in the previous month. Eurozone also recorded trade surplus of 0.9B euro in October. Though significantly lower than 4.2B euro in October 07, the figure beat market forecast and revised October figure of -4.5B euro. In the UK, PSNCR in November came in at 10.3B pound (consensus: 11.65B pound; October: -4.91B pound) while retail sales surprisingly climbed 0.3% mom in November, compared with market expectation of -0.6% and -0.1% in the previous month. The rise was brought by 3.95% surge in sales of household goods. Swiss trade surplus widened to CHF 2.15B in November from 1.95B in the previous month as 13.4% decline in imports outweighed the 10.1% decline in export. Retail sales unexpectedly rose 2.9% yoy in Oct. Japan's revised November machine orders dropped 62.1% yoy with domestic and foreign order plunging 60.5% and 63.6% respectively.

More Forex Technical Analysis Reports Here.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 86.46; (P) 87.84; (R1) 88.59; More.

USD/JPY's recovery from 87.13 breaches 89.24 minor resistance briefly, suggesting that an intraday low in in place. Intraday outlook is turned neutral for the moment and some recovery could be seen. Nevertheless, upside is expected to be limited below 91.57 resistance and bring fall resumption. Below 87.13 will target 100% projection of 124.13 to 95.77 from 110.66 at 82.30.

In the bigger picture, medium term down trend from 124.13 is still in progress with next target at 100% projection of 124.13 to 95.77 from 110.66 at 82.3. Price actions that started from 79.75 (95 low) has completed in form of a triangle that ended with five waves to 124.13. In other words fall from 124.13 is just part of an even larger scale down trend which could extend further to retest 79.75 low. On the upside, above 91.57 will indicate that a short term bottom is in place and bring stronger rebound. Still, medium term outlook will remain bearish as long as 100.54 resistance holds.

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Published on  Thu, Dec 18 2008, 15:25 GMT

7b521df4-f358-4095-80c3-f7a320e70a2c

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Daily Forex Technical Report − Swiss Franc to Take Over Euro's Leading Strength?

Thu, Dec 18 2008, 08:04 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Swiss Franc to Take Over Euro's Leading Strength?

Dollar index extended the sharp decline to as low as 78.22 before recovering mildly. The broad based weakness in the greenback is still overwhelming in the markets but after all as the greenback is now sitting in side an important support zone of 75.89 to 80.38, some support should be seen in near term as the greenback approaches 61.8% retracement of 71.31 to 88.46 at 77.86. It's unclear on whether dollar's up trend has totally finished but some noticeable rebound should be seen on oversold condition in near term. The critical factor to determine dollar's outlook will indeed be on whether another fall will be seen after the anticipated rebound to make the whole fall from 88.46 a five wave impulsive sequence, or will such fall complete in three wave corrective manner. This should be decided in the next few weeks and will set the tone for 2009.

Euro remains one of the biggest beneficiary of dollar's recent reverse in fortune with EUR/USD surging to as high as 1.4437 so far. EUR/GBP continues to make new record high everyday and is set to continue strength as recent up trend accelerates further towards 161.8% projection of 0.7808 to 0.8660 from 0.8234 at 0.9613. EUR/CAD has already taken out mentioned 1.7 psychological resistance and will likely continue the rise towards next projection level of 100% projection of 1.3285 to 1.6322 from 1.4716 at 1.7753. After all, the common currency will remain strong in general.

One important development that some traders might miss is the strength in Swiss Franc. Indeed, the Swissy is so far the top winner this month, even gaining more than Euro. Note that GBP/CHF has cleared out an important all time low of 1.7537 and dived to as low as 1.6557 so far. EUR/CHF reversed sharply this week, right after hitting an important fibonacci level of 1.6827 to 1.4315 at 1.5867 and 55 weeks EMA at 1.5848. The development is taken as an alert that EUR/CHF's rebound from 1.4315 might be completed at 1.5880. Break of 1.5163 support will add much credence to this case. In other words, beware that even if Euro will continue it's strength, the Swissy might be taking over the leading role gradually.

Elsewhere, the Japanese yen retreats mildly on speculations of intervention. Japan FM Nakagawa said that the country will "take necessary steps if needed" to limit yen's advance and protect the overseas earnings of Japanese exporters.

Released today so far, Japan machine orders dropped -62.1% yoy in Nov. Swiss Trade surplus unexpectedly widened to 2.15B in Nov.

Looking ahead, Germany Ifo business climate is anticipated to remain in downward trend in December. Consensus figure of 84 showed the 6th consecutive decline since Jun 08. Trade deficit is expected to have narrowed to -4.5B euro, better than -5.6B in the previous month.

In the UK, economists forecast improvement in public sector finance with net cash requirement (PSNCR) expanded to 11.65B pound in November from -4.91B pound in October. On the hand, November retail sales in the nation should have contracted further to -0.6% mom from -0.1%.

Swiss retail sales in November should have dropped to 1.9% mom from 6.4%.

The US Labor Department will release initial jobless claims for the week ended Dec 13. Consensus of 558K addition indicates a decline from the seasonally-quirked (post-Thanksgiving week in Dec 6) figure in the previous week. November leading indicated is expected to come in at -0.5%, the 4th decline in 5 months, due to plunging building permits and stock market. As economic activities have slowed down very sharply since the second half of 2008, December Philly Fed should have weakened further to -40.5 from -39.3 last month.

In Canada, leading indicators in November should have dropped 0.4% while retail sales is expected to have contracted 1% mom in November after rising 1.1% in October.

More Forex Technical Analysis Reports Here.

USD/CHF Daily Outlook

Daily Pivots: (S1) 1.0539; (P) 1.0893; (R1) 1.1070; More

USD/CHF's fall extended further to as low as 1.0637, breaking key support of 1.0693 and touching key cluster support zone of 1.0623/51 (61.8% retracement of 0.9634 to 1.2296 at 1.0651) before recovering mildly. Nevertheless, intraday bias remains on the downside as long as 1.0905 minor resistance holds. Decisive break of 1.0623/51 will target 1.0010 support next. On the upside, though, above 1.0905 will signal that an intraday bottom is at least formed after drawing support from a key support zone. In such case, stronger recovery should be seen towards 1.1246 resistance first.

In the bigger picture, the depth and steepness of the decline from 1.2296 indicates that medium term rise from 0.9634 has topped out and dampens the longer term bullish scenario too. Though, it's still a bit early to conclude that USD/CHF's bullish trend from 0.9634 has totally finished as the last line of defense of 1.0623/51 (61.8% retracement of 0.9634 to 1.2296 at 1.0651) still holds. We'd prefer to wait and see how the development after hitting this support zone to decide on the longer term view in USD/CHF. Nevertheless, firstly, medium term risk will remain on the downside as long as 1.1246 resistance holds. Secondly, firm break of 1.0623 will add much favor to the case that USD/CHF is developing another long term down trend which should at least target this year's low of 0.9634.

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Published on  Thu, Dec 18 2008, 08:04 GMT

2df81d20-98b6-48c2-9adb-7442a9718c89

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Daily Forex Technical Report − Sterling Tumbles, Dollar Stabilizes but Remains Weak

Wed, Dec 17 2008, 13:39 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Sterling Tumbles, Dollar Stabilizes but Remains Weak

Sterling tumbles to yet another new record low against Euro and gives back much gain against the greenback following worse than expected data from UK. Claimant count jumped 75.7k in Nov, fastest pace since 1991, and surpassed 1 million mark to 1.07 million, highest level since Jul 2000. ILO unemployment rate rose from 5.8% to 6.0% in Oct. BoE MPC minutes showed 9-0 vote to cut rates by 100bps on Dec 4. More importantly, the committee discussed the possibility of a larger cut but decided against it as "given the uncertainty inherent in the transmission mechanism, it was difficult to be certain that rates needed to be cut by more or faster than that." UK CBI distribution trade dropped further to as -55 in Dec versus expectation of -45.

EUR/GBP, surges sharply to above 0.92 level today, taking out mentioned 100% projection of 0.7808 to 0.8660 from 0.8234 at 0.9086. More importantly, the break of the upper channel resistance suggests that rally in EUR/GBP is accelerating and should now be targeting 161.8% projection level at 0.9613 next.

Elsewhere, dollar recovers mildly, with dollar index drawing support from 50% retracement of 71.31 to 88.46 at 79.88 and 80 psychological. Nevertheless, the downtrend against Euro, Swissy and Yen remains intact and further weakness is still expected in short term.

Other data released today saw US current account deficit narrowed mildly to -174.1b in Q3. Canadian whole sales dropped more than expected by -1.8% mom in Oct. Eurozone HICP was finalized at 2.1% yoy in Nov. Germany HICP was finalized at 1.4% yoy in Nov. Japanese Leading indicator is finalized at 85.2 in Oct.

More Forex Technical Analysis Reports Here.

GBP/JPY Mid-Day Outlook

Daily Pivots: (S1) 137.32; (P) 138.20; (R1) 139.59; More

GBP/JPY's recovery from 133.09 was limited below 140.71 resistance and weakens again today. 4 hours MACD's cross below signal line indicates that an intraday top is formed and dampens the immediate bullish case. Intraday outlook is turned neutral for the moment. On the upside, above 140.71 will indicate that rise from 133.09 has resumed. Also this will affirm the case that a short term bottom is in place at 133.09 and bring rally towards 148.57 resistance next. Break there will confirm this case. On the downside, though, below 133.09 will indicate recent down trend is still in progress for key long term support at 129.32 before completion.

In the bigger picture, there is no confirmation that fall from 215.87 has completed yet and such decline is still expected to extend to test 129.32 long term support. However, note that downside momentum is diminishing as seen in bullish convergence condition in daily MACD and RSI. A break above 148.57 resistance will confirm that a short term bottom is at least formed. In such case, stronger rebound should be seen to 165.02 resistance but upside should be limited there and and bring resumption of the long term down trend.

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Published on  Wed, Dec 17 2008, 13:39 GMT

92ba3b56-3a75-4ad3-b98f-44d7c769c01e

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Daily Forex Technical Report − Dollar Selloff Continues as Global Markets Respond to Fed's Cut

Wed, Dec 17 2008, 07:37 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar Selloff Continues as Global Markets Respond to Fed's Cut

Dollar's sell off continues as global markets respond to Fed's historical rate cuts to bring the federal funds rate down from 1.00% to a target range of 0-0.25% and will keep rates at this "exceptionally low levels" for some time to come. In a rather lengthy paragraph, Fed explained the quantitative easing measure that it will adopt including "a number of open market operations and other means that sustain the size of the Federal Reserve's balance sheet at a high level." In addition to purchasing large quantities of agency debt and mortgage-backed securities, Fed will also consider the potential benefits of purchasing longer-term Treasuries. While it's perceived that Fed has formally announced that it's going into quantitative easing, it's believed that it's different from what the Japanese did. The US style is focused on the assets side while the Japanese style is focused on the debt side.

Technically, dollar index dived through mentioned target of 50% retracement of 71.31 to 88.46 at 79.88 and breached 80 psychological level briefly. It's also now inside medium term support zone of 75.89 and 80.38 and hence, some support will likely be seen in near term. A break of 81.78 minor resistance will be the first sign of stabilization. Euro, on the other hand, remains generally firm and reached new record high in EUR/GBP at 0.9047. Though, the common currency is retreating in EUR/AUD and EUR/CAD crosses as commodity currencies are catching up with the rally against dollar.

Released today, Japanese Leading indicator is finalized at 85.2 in Oct. Germany HICP is finalized at 1.4% yoy in Nov. Eurozone HICP is expected to be finalized at 2.1% yoy in Nov. UK events will dominate the calendar today with MPC minutes and employment data featured. US current account and Canadian Wholesale sales will also be featured.

More Forex Technical Analysis Reports Here.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.5305; (P) 1.5476; (R1) 1.5748; More

GBP/USD's break of 1.5534 resistance confirms that a short term bottom is at least formed at 1.4466 with bullish convergence condition in 4 hours MACD. Further rebound is now expected as long as 1.5204 minor support holds, targeting 1.6671 medium term resistance but upside will likely be limited there as consolidation from 1.4466 goes. On the downside, below 1.5204 will flip intraday bias back to the downside for retesting 1.4466 low.

In the bigger picture, break of 1.5534 resistance suggests that decline from 2.0158 has completed the five wave sequent already, with first wave completed at 1.7445, second at 1.8668, third at 1.4557 and fourth at 1.5534 and fifth at 1.4466. In other words, a medium term bottom is likely in place at 1.4466 too and some larger scale consolidation would now be seen before resuming the long term down trend. Though, upside of the consolidation is expected to be limited by 1.6671 cluster resistance (38.2% retracement of 2.0158 to 1.4466 at 1.6640. On the downside, firm break of 1.4466 is needed to confirm that long term down trend has resumed. Otherwise, another rebound could still be seen as consolidation continues.

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Published on  Wed, Dec 17 2008, 07:37 GMT

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Mid−Day Forex Technical Report − Dollar Lower after Poor CPI and Housing, FOMC Next

Tue, Dec 16 2008, 14:02 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Lower after Poor CPI and Housing, FOMC Next

Dollar weakens further in early US session after data shows deepening recession in housing markets as well as faster than expected fall in consumer inflation. Housing starts dropped sharply by -18.9% in Nov to 625k annualized rate, lowest on record. Building permits dropped -15.6% to 616k, also lowest on record. Headline CPI dropped sharply by -1.7% mom in Nov, sharpest decline since record began in 1947. Year-over-year rate was down from 3.7% to 1.1%. Core CPI was flat mom 9n Nov with yoy rate down from 2.2% to 2.0%.

Markets' focus will turn to FOMC rate decision later today. At least 50bps rate cut is expected from Fed today and markets will look into the statement for details of Fed's plan on quantitative easing. More on FOMC and Quantitative Easing here

ECB President Trichet said today there he feel there is a "limit" to the decrease in rates." Also, ECB wants to "concentrate at this stage on getting what we already decided to be really operational." The comments reaffirm recent speculations that ECB will pause cutting rates in January and wait for more data before making further decisions. Eurozone's December manufacturing and service PMIs plunged to 34.5 and 42 from November's 35.6 and 42.5 respectively. Although the readings are slightly better than consensus, these record low figures reinforced the sluggish business activities in the 15 nations. Separately, Germany reported worse-than-expected PMI of 33.5 for manufacturing component but better-than-expected PMI of 46.4 for services component. In Q3, employment in Eurozone dropped -0.1%. On yearly basis, the gauge fell to 0.8% from the revised 1.3% in Q2.

BoE Governor King signaled that the bank will keeping cutting rates as he expects UK inflation may drop below 1% in 2009. UK CPI dropped -0.1% mom in November, higher than consensus of -0.3% and October's -0.1%. On yearly basis, CPI fell to 5-month low at 4.1% while market expected it to come in at 3.9%. On the other hand, RPI in November was -0.8% mom, lower than consensus of -0.7% and October's -0.3%.

Switzerland's industrial production dropped 5.2% in 3Q08, much lower than consensus of -2.3% and revised +9.3% in Q2. On annual basis, the reading came in at +0.7%, compared with market expectation of 3.4% and revised 6.4% in Q2.

In the monetary policy minutes released overnight, the RBA lowered its forecast on inflation to 2.5% from 3% in the 12 months through Jun 09. As the RBA's target lies between 2-3%, the reduced forecast may lead the central bank to take a less aggressive approach in cutting interest rates in coming meetings. Japan's tertiary industry index in October surprisingly rose to 0.4% (consensus: -0.2%) from the revised -0.7% in September.

More Forex Technical Analysis Reports Here.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 90.14; (P) 90.75; (R1) 91.24; More.

USD/JPY's break of 90.04 minor support indicates that recovery from 88.54 should have completed. Intraday bias is flipped back to retest this low first. Break will indicate that medium term fall has resumed for 100% projection of 124.13 to 95.77 from 110.66 at 82.3 then. On the upside, above 93.90 will suggest that recovery from 88.54 is still in progress. But still, upside is expected to be limited below 93.90 resistance and bring fall resumption.

In the bigger picture, correction from 90.92 was limited below 103.06 cluster resistance (61.8% retracement of 110.66 to 90.92 at 103.12) and medium term down trend from 124.13 resumed after 90.92 low is taken out. As mentioned, next downside target will be 100% projection of 124.13 to 95.77 from 110.66 at 82.3. Also, note that the current development clears out the long term picture too. Price actions that started from 79.75 (95 low) has completed in form of a triangle that ended with five waves to 124.13. In other words fall from 124.13 is just part of an even larger scale down trend which could extend further to retest 79.75 low. On the upside, above 93.90 will indicate that a short term bottom is in place and bring stronger rebound. Still, medium term outlook will remain bearish as long as 100.54 resistance holds.

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Published on  Tue, Dec 16 2008, 14:02 GMT

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Daily Forex Technical Report − Dollar Pressured in a Busy Day with FOMC, US CPI, EZ PMIs and UK CPI

Tue, Dec 16 2008, 07:19 GMT
by ActionForex.com Team

ActionForex.com

Dollar's sharp decline continues ahead of a busy day that features FOMC rate decision and release of consumer inflation as well as new residential construction data from the US. Fed is widely expected to cut rates by at least 50 bps to bring the federal funds rate to lowest levels in decades of 0.50%. There are some speculations that Fed will indeed opt for a deeper cut with interest rate futures pricing in more than 60% chance of a 75bps cut. But whether it's 50bps or 75bps, it shouldn't matter much as it's just a matter of time when Fed will adopt Zero Interest Rate Policy. The focus is indeed on any details that the Fed would outline in the accompanying statement on the plan for "qualitative easing".

On the data front, building permits in November should have further reduced to 0.7M from 0.73M last month while November's housing start should have also lowered to 0.5M from 0.79M. Headline CPI is expected to moderate sharply from 3.7% yoy to 1.5% yoy in Nov while core CPI is expected to drop from 2.2% yoy to 2.1% yoy.

Technically speaking, dollar index's sharp decline from 88.46 is still in progress. Medium term rise from 71.31 is viewed as completed with five waves up to 88.46 (80.38, 75.89, 87.87, 83.11, 88.46). Head and shoulder reversal pattern there (ls:87.87, h: 88.46, rs: 87.68) confirmed that 88.46 is a medium term top. Deeper correction is now expected to 50% retracement of 71.31 to 88.46 at 79.88 which is close to 80 psychological level. On the upside, though a break above 84.03 minor resistance will suggest that a short term bottom is possibly formed and bring recovery as consolidation continues. Also, note that so far, dollar's weakness is mainly seen against European majors, in particular the broadly strong Euro. Commodity currencies and yen remains steady against the greenback this week so far.

Euro is still the strongest major currencies so far with EUR/USD taking out 1.37 level to as high as 1.3736 so far. EUR/GBP reached new record high of 0.9020 before retreating mildly. EUR/AUD should have completed triangle consolidation that started at 2.1161 and is set to retest this high. EUR/CAD, on the other hand, surged to as high as 1.6977 as expected and is just inch before long term resistance at 1.6984 and 1.7 psychological resistance.

Flash PMIs will be the main focus from the EUrozone today. After big disappointments in November as well as further economic deterioration, economists expect Eurozone's December manufacturing and service PMIs to come in at 34.3 (November: 35.6) and 41.2 (November: 42.5) respectively. Moreover, December PMI in Germany is also expected to have lowered to 34.5 from 35.7 for manufacturing component and 44 from 45.1 for services component. Eurozone will also report employment for the third quarter.

Due to decline in commodity prices and sluggish demand, UK's CPI should have plunged 0.3% in November after falling 0.2% in October. On annual basis, the gauge is expected to have risen to 3.9%, lower than 4.5% in the previous month. The nation's RPI is anticipated to come in at -0.7% and 3.1% on monthly and yearly basis. Both readings indicated continuous decline in price levels.

Switzerland's Q3 industrial production is expected to have dropped 2.3% after rising 8.9% in second quarter.

In the monetary policy minutes released overnight, the RBA lowered its forecast on inflation to 2.5% from 3% in the 12 months through Jun 09. As the RBA's target lies between 2-3%, the reduced forecast may lead the central bank to take a less aggressive approach in cutting interest rates in coming meetings. Japan's tertiary industry index in October surprisingly rose to 0.4% (consensus: -0.2%) from the revised -0.7% in September.

More Forex Technical Analysis Reports Here.

USD/CHF Daily Outlook

Daily Pivots: (S1) 1.1516; (P) 1.1641; (R1) 1.1718; More

USD/CHF's sharp decline from 1.2248 is still in progress and reaches as low as 1.1547 so far. At this point, intraday bias remains on the downside as long as 1.1688 minor resistance holds. Further fall should be seen towards next key medium term cluster support at 1.1416. On the upside, above 1.1688 will turn intraday outlook neutral first but break of 1.1874 is needed to indicate that fall from 1.2248 has completed. Otherwise, risks remain on the downside,

In the bigger picture, break of 1.1746 cluster support is an early alert that medium term rise in USD/CHF has topped out. Though, there is no confirmation yet. Focus now turns to 1.1416 cluster support (38.2% retracement of 1.0010 to 1.2296 at 1.1423). As long as this cluster support holds, medium term rise from 0.9634 is still in favor to resume. Break of 1.2248/2296 will target long term resistance zone of 38.2% retracement of 1.8305 to 0.9634 at 1.2946 and 1.3283 resistance (05 high). However, note that upside momentum is seen diminishing with bearish divergence condition in daily RSI. Firm break of 1.1416 cluster support will argue that rise from 0.9634 is over and bring deeper correction towards next medium term support at 1.0693.

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Published on  Tue, Dec 16 2008, 07:19 GMT

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Mid−Day Forex Technical Report − Euro Extends Strength, Dollar Extends Weakness

Mon, Dec 15 2008, 14:50 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Euro Extends Strength, Dollar Extends Weakness

Euro is leading rally against dollar today, riding on its status as the high yield currency among G3, in particular after expected Fed rate cut later this week. EUR/USD rises to as high as 1.3585 in early US session and remains firm. EUR/GBP made new record high at 0.9020. On the other hand, dollar's broad based selloff continues and accelerates after dollar index gets rid of 83.11 support and dives to as low as 82.55. The greenback is additionally pressured by crude oil's rebound that pushes it briefly through 50 level.

Focus will remain on any news about US automaker bailout plan as well as tomorrow's FOMC rate decision. While the market has already priced in a 50 bps rate cut to 0.5%. CBOT futures signaled increasing chance for a reduction of 75 bps. Moreover, investors are expecting the Fed will announce more details on the ‘unconventional’ monetary policies that Chairman Ben Bernanke mentioned early December. But after all, the greenback will likely remains pressured, at least in near term.

Data released in US saw Empire state manufacturing index dropped to record low of -25.76 in Dec but is slightly better than expectation of -27. TIC capital flow dropped sharply to 1.5b in Oct. Industrial production dropped more than expected by -0.6% in mom in Nov with capacity utilization falling further to 75.4%.

Switzerland’s combined PPI in November came in at -1.4% MoM, much lower than consensus of -0.7% and -0.6% in October. Major reason for the sharp fall was decline in oil prices. On annual basis, the reading also slowed down to 1.1% (consensus: 1.9%) from 2.9%.

In UK, December's Rightmove house prices dropped -2.3% MoM and -6.3% YoY, slightly better than November's -2.9% and -7.1%, respectively. Also, the agency said house prices will fall by 10% more next year. BOE released a quarterly bulletin which indicated many households faced difficulties in accessing credits. The articles also stated that investment in dwellings will remain weak for some time.

Japan's Tankan big manufacturing sentiment fell to -24 in Q4, worse than market expectation of -23 and Q3's -3. This is the biggest quarterly decline since 1974 and the outlook survey indicates further deterioration in sentiment to -36 in 1Q09. Furthermore, Q4 Tankan capex came in at 0.2% (consensus: -0.5%, Q3: +1.7%) while Tankan non-manufacturing was inline with forecast at -9. The awful Tankan report prompts some speculations that BoJ will cut rates again this week.

More Forex Technical Analysis Reports Here.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3274; (P) 1.3345; (R1) 1.3438; More

EUR/USD's rise continues in early US session and reaches as high as 1.3585 so far, taking out mentioned 100% projection of 1.2329 to 1.3290 from 1.2549 at 1.3510. At this point, intraday bias remains on the upside as long as 1.3430 minor support holds. Focus now turns to 1.3768 cluster resistance. On the downside, below 1.3430 minor support will turn intraday outlook neutral first. But another rise is still in favor as long as 1.3250 support holds.

In the bigger picture, note firstly that EUR/USD has now taken out mentioned medium term trend line resistance (1.6038, 1.4867). Secondly, dollar has topped out in medium term with head and shoulder top pattern completed in dollar index. Sustained break of 1.3768 cluster resistance (38.2% retracement of 1.6038 to 1.2329 at 1.3746) will indicate that whole fall from 1.6038 has made a medium term bottom at 1.2329 and will then encourage stronger rally targeting 55 weeks EMA (now at 1.4222). On the downside, sustained trading below 1.3080 resistance turned support is needed to reaffirm the case that price actions from 1.2329 are merely consolidation in the medium term down trend.

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Published on  Mon, Dec 15 2008, 14:50 GMT

f3355baf-5ace-43a6-8999-98c254e5eb44

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Daily Forex Technical Report − Dollar Weakens Further as Stocks Rise

Mon, Dec 15 2008, 07:29 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar Weakens Further as Stocks Rise

Dollar weakens again as the week starts on improved risk appetite on hope for renewed hope for automaker bailout from US government as well as various announcements from Japan, China and Korea to stimulate the economy in the global financial crisis. Dollar index dips mildly is pressing 83 level. Canadian dollar is supported by recovery in crude oil price and lead the rise against dollar today. Meanwhile, European majors are generally firm against both the greenback and the yen.

Technically speaking, the case that dollar is already topped out in medium term continues to build up. Dollar index is now marginally below mentioned 83.11 support. Further decline is still expected in short term as long as 84.02 minor resistance holds and sustained trading below 83.11 will confirm that whole medium term rise from 71.31 has completed, after completing the mentioned head and shoulder top. In such case, deep correction could be seen to 75.88/80.38 support zone. USD/CHF's break of 1.746 cluster support also serves as an early alert that it's medium term rise from 1.0010 has topped out too. Also, EUR/USD soars to as high as 1.3499 so far remains firm.

Released in Asian, Japan's Tankan big manufacturing sentiment fell to -24 in Q4, worse than market expectation of -23 and Q3's -3. This is the biggest quarterly decline since 1974 and the outlook survey indicates further deterioration in sentiment to -36 in 1Q09. Furthermore, Q4 Tankan capex came in at 0.2% (consensus: -0.5%, Q3: +1.7%) while Tankan non-manufacturing was inline with forecast at -9. The awful Tankan report prompts some speculations that BoJ will cut rates again this week.

In UK, December's Rightmove house prices dropped -2.3% MoM and -6.3% YoY, slightly better than November's -2.9% and -7.1%, respectively. Also, the agency said house prices will fall by 10% more next year. BOE released a quarterly bulletin which indicated many households faced difficulties in accessing credits. The articles also stated that investment in dwellings will remain weak for some time. Later in European session, Switzerland's Nov combined PPI is expected to moderate further from 2.9% yoy to 1.9% yoy.

In US session, Empire state manufacturing in December should have dropped further to -27, after falling to -25.43 in November. October's net LT TIC flows should have declined to US$40B from US$66.2B in the previous month. Due to recession and global economic slowdown, US' capacity utilization in November should be reduced to 76% from 76.4% in October while November's industrial production is anticipated to have plunged to -0.5% from 1.3% in October. Considering the housing market, US' NAHB housing market index for January is forecast to come in at 9, same as previous reading.

More Forex Technical Analysis Reports Here.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.3274; (P) 1.3345; (R1) 1.3438; More

EUR/USD's rally extends further to 1.3499 today and is now pressing medium term falling trend line resistance (1.6038, 1.4867, now at 1.3467). At this moment, intraday bias remains on the upside as long as 1.3250 minor support holds and further rise should be seen to 100% projection of 1.2329 to 1.3290 from 1.2549 at 1.3510. Though, as price actions from 1.3239 is still treated as correction in the medium term down trend only, the current rise is still expected to be limited below 1.3768 cluster resistance and bring down trend resumption. Below 1.3250 will flip intraday bias back to the downside for 4 hours 55 EMA (now at 1.3033) first.

In the bigger picture, as discussed before, the strength of the fall from 1.6038 reinforces the case that whole decline from 1.6038 is developing into a five wave impulsive fall with first wave completed at 1.3881, second at 1.4867, third at 1.2329. Consolidation from 1.2329 might represent the fourth wave consolidation. Hence, another decline is still expected before making a medium term bottom. Below 1.2329 will target next long term fibonacci level of 50% retracement of 0.8223 to 1.6038 at 1.2131 or even further to 1.1639 key medium term support.

On the upside, however, sustained break of 1.3768 cluster resistance (38.2% retracement of 1.6038 to 1.2329 at 1.3746) will invalidate this view and indicate that whole decline from 1.6038 has made a medium term bottom. In such case, stronger rally should be seen, targeting 55 weeks EMA (now at 1.4222).

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Published on  Mon, Dec 15 2008, 07:29 GMT

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Weekly Review and Outlook − Euro Strengthened in Volatile Markets, Dollar Sharply Lower ahead of FOMC

Sun, Dec 14 2008, 09:01 GMT
by ActionForex.com Team

ActionForex.com

Weekly Review and Outlook

Euro Strengthened in Volatile Markets, Dollar Sharply Lower ahead of FOMC

While the headlines might be dominated by the automaker bailout drama, risk aversion or dollar's loss of its safe haven status last week, it's Euro's strength and momentum that should be paid most attention to and most closely watched. Dollar's index's sharp decline to as low as 83.22 last week was inline with the head and shoulder top scenario that indicates a medium term top is at least in place at 88.46. However, Dollar's weakness was indeed not too severe except version the yen which saw USD/JPY dived to 13 year low of 88.54 before rebounding. GBP/USD, AUD/USD and USD/CAD are still kept by near term levels only, without significant technical breakthrough. On the other hand, while much volatility was seen in yen crosses, most of the are still held by near term low and thus there is no confirmation of a another round of massive yen buying yet.

The Euro, on the other hand, was supported by the speculations that ECB will pause the policy easing cycle in Jan and surged across the board. Indeed, the top movers chart was occupied mostly by Euro crosses last week. EUR/GBP regained momentum and soared to near record high of 0.8996, just inch below 0.9 psychological level. EURJPY managed to hold well above 115.88 support despise yens' intra week strength and the cross indeed closed nearly 3% higher. The view that another rise is to be seen in EUR/JPY to complete the consolidation from 113.63 still holds. EUR/CAD's rise accelerated further to as high as 1.6735 and is set to taken on 1.7 psychological level. Meanwhile, EUR/AUD is on the verge of break out from triangle consolidation which should send the cross through 2.1126 high.

While strength in Euro in crosses is still expected to continue in the short term, the tricky part of the overall outlook is on the relative strength in dollar, euro and yen. Firstly, as mentioned during the week, while it's highly likely that dollar index has completed a head and shoulder medium term top (ls: 87.87, h: 88.46, rs: 87.68), it's still not 100% confirmed until 83.11 support is decisively taken out. Strong rebound from current level will argue that it's merely unfolding as triangle consolidation instead. Secondly, at this moment, EUR/USD's rise from 1.2549 is still viewed as part of and a-b-c consolidation that started at 1.2329 only and if this is correct, EUR/USD's rally should be near to an end. However, thirdly, as mentioned above, EUR/JPY's development is still inline with the view that another strong rise is to be seen before completing the consolidation from 113.63.

Having said that, the key is whether dollar index will dive through 83.11 or rebound and whether that is Euro led or yen led.

• Another sharp fall in dollar index, accompanied by strong rally in EUR/USD and EUR/JPY will suggest that the Euro is gathering strong momentum and in such case, strong rally should be seen in EUR/JPY. Also, it will be likely that EUR/USD is indeed bottomed out at 1.2329 and 1.3768 resistance will likely be taken out by a strong medium term rally.
• Sharp fall in dollar index, accompanied by sharp decline in USD/JPY and EUR/JPY will probably drag the EUR/USD down, which is consistent with the consolidation case in EUR/USD. While Euro crosses might remain firm, this will be taken as a signal that another round of massive yen buying is underway.
• Strong rebound in dollar index, accompanied by steadiness in USD/JPY and sell off in EUR/JPY will suggest that markets are back to the prior state where safe haven flows are going into dollar and yen again and should see other major currencies, including Euro, dragged down by such flows.
• Strong rebound in dollar index, accompanied by sell of in EUR/USD and rebound in USD/JPY will indicate that dollar is gaining back momentum and should see the greenback retest prior highs against other major currencies.

The Week Ahead

FOMC rate decision will take center stage on Tuesday. A 50bps cut in the federal funds rate from 1.00% to 0.50% is fully priced in. Interest rate futures are pricing in more than 70% chance that Fed will cut by 75bps to 0.25%. Another main focus will be the development in the Automaker bailout drama. The $14bill was passed in House by voted down in Senate last week. White House evaluating different options for preventing a collapse in the auto industry and could have some announcements this week. Other focus include CPI, regional fed survey from New York State and Philadelphia , industrial production, NAHB housing market index, new residential construction and TIC capital flow.

From Eurozone, main focus will be on Germany Ifo and Eurozone PMIs. Nov HICP final will also be released. From UK, MPC minutes will be the main focus with CPI , employment, retail sales featured. Swiss combined PPI, industrial production, retail sales will be released. BoJ is widely expected to keep rates unchanged at 0.3% this week. Quarterly tankan survey will also be released. From Canada, main focus is on retails sales and CPI.

More Forex Technical Analysis Reports Here.

USD/JPY Weekly Outlook

USD/JPY's medium term down fall resumed last week and dived to as low as 88.54. Though, subsequent strong recovery and break of 91.15 minor resistance indicates that an intraday low is in place. Initial outlook is neutral this week and some consolidation could be seen. Still, upside is expected to be limited below 93.90 resistance and bring fall resumption. Below 88.54 will target 100% projection of 124.13 to 95.77 from 110.66 at 82.3 then.

In the bigger picture, correction from 90.92 was limited below 103.06 cluster resistance (61.8% retracement of 110.66 to 90.92 at 103.12) and medium term down trend from 124.13 resumed after 90.92 low is taken out. As mentioned, next downside target will be 100% projection of 124.13 to 95.77 from 110.66 at 82.3. Also, note that the current development clears out the long term picture too. Price actions that started from 79.75 (95 low) has completed in form of a triangle that ended with five waves to 124.13. In other words fall from 124.13 is just part of an even larger scale down trend which could extend further to retest 79.75 low. On the upside, above 93.90 will indicate that a short term bottom is in place and bring stronger rebound. Still, medium term outlook will remain bearish as long as 100.54 resistance holds.

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Published on  Sun, Dec 14 2008, 09:01 GMT

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Mid−Day Forex Technical Report − Yen Stabilizes from Earlier Volatility

Fri, Dec 12 2008, 14:44 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Yen Stabilizes from Earlier Volatility

The forex markets are pretty steady in early US session even though stocks open sharply lower after the failure of the automaker bailout bill in Senate. DOW dropped sharply by over 200 pts while crude oil falls to $43.32 so far. The japanese yen continues to stay in today's range, digesting earlier sharp gains in Asian session. Dollar, on the other hand, lost steam in its recovery and is still struggling around 83 level. On the other hand, Euro remains supported speculations that ECB will pause policy easing in Jan. EUR/USD remains firm in spite of massive risk aversion trades throughout the day. EUR/GBP even climbs to new record high of 0.8943.

Headline retail sales in US dropped -1.8% mom in Nov with ex auto sales dropping -1.6%, slightly better than expectation of -1.9% and -1.8% respectively. Though prior month's contract was revised lower to -2.9% and -2.4% respectively. Nov PPI dropped -2.2% mom , rose 0.4% yoy in Nov versus expectation of -2.0%mom, 0.2% yoy. Core PPI rose 0.1% mom, 4.2% yoy, inline with expectation.

ECB Mersch said that unprecedented rate cuts do not "indicate a new rhythm". and echoed Stark's comment that there will not be considerable and significant information available before "February, march" and ECB's action will be "information driven".

Eurozone's PPI in October dropped -1.2% MoM , worse than consensus of -1% but improved from revised -1.8% in September. On annual basis, the reading came in at -5.3%, significantly lower than -3.6% as anticipated by the market and the revised -2.7% in September. Sharp fall in production of intermediate, capital and durable consumer goods were the main reasons for the decline.

Released overnight, New Zealand's October retail sales dropped -1.3%, the largest fall in more than 4 years and worse than 0% as expected and +0.1% in the previous month. The decline was led by plunge in motor vehicles sales and other big-ticket purchases as people spent less amid fear of unemployment. In Japan, capacity utilization surprisingly plunged to -3.9% in October, much lower than initial estimate of 1.6%. Revised industrial production for October was -3.1% MoM, inline with market expectation and that in September. On yearly basis, the reading of -7.1% was much lower than -5% in consensus and in September. Japan's November consumer confidence was 28.4, better than consensus but deteriorated from 29.8 in the previous month.

More Forex Technical Analysis Reports Here.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 90.75; (P) 91.81; (R1) 92.47; More.

USD/JPY recovers after diving to as low as 88.54 earlier today. But still intraday bias remains on the downside as long as 91.15 minor resistance holds. Strong break of 90.92 low confirms that decline from 110.66 has resumed for next target of 100% projection of 124.13 to 95.77 from 110.66 at 82.3. On the upside, while some recovery might be seen, break of 93.90 resistance is needed to indicate that a bottom is in place. Otherwise, short term risks remain on the downside.

In the bigger picture, correction from 90.92 was limited below 103.06 cluster resistance (61.8% retracement of 110.66 to 90.92 at 103.12) and medium term down trend from 124.13 resumed after 90.92 low is taken out. As mentioned, next downside target will be 100% projection of 124.13 to 95.77 from 110.66 at 82.3. Also, note that the current development clears out the long term picture too. Price actions that started from 79.75 (95 low) has completed in form of a triangle that ended with five waves to 124.13. In other words fall from 124.13 is just part of an even larger scale down trend which could extend further to retest 79.75 low. On the upside, break of 100.54 is now needed to be the first signal that down trend from 124.13 has completed.

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Published on  Fri, Dec 12 2008, 14:44 GMT

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Daily Forex Technical Report − Yen Soars after Sentate Voted Down Automaker Bailout Bill

Fri, Dec 12 2008, 06:44 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Yen Soars after Sentate Voted Down Automaker Bailout Bill

The Japanese yen soars on risk aversion on news that the US Senate voted down on the $14b automaker bailout bill. The bill collapsed after United Auto Workers refused to accede to Republican's demand for swift wage cuts to bring their pay into line with Japanese carmakers. MSCI Asia Pacific index dropped 3.5% with Nikkei down more than 5%. Yen strength is seen across the board and most apparent against the dollar with USD/JPY dives through 90 level to 13 year low of 88.54.

Note that while dollar is under tremendous pressure against yen, the Dollar index is indeed recovering mildly ahead of 83.11 support. Sharp fall in yen crosses and drop in commodity prices trigger weakness in the commodity currencies, including Aussie, Kiwi and Loonie against the greenback and thus provide some support to dollar index. However, note that European majors remain relative firm against dollar. Hence, firstly, yen crosses will likely remain pressured throughout the day. Secondly however, dollar may not benefit from risk aversion as much as it did in recent months. Dollar's rebound will not be confirmed until there is sharp retreat in EUR, GBP and CHF.

On more point to note is that as mentioned a few times before, it's often hard to distinguish a head and shoulder pattern and a triangle until the pattern is 100% confirmed. It's highly likely that a medium term top is in place in dollar index after the mentioned head and shoulder top formed (ls: 87.87, h: 88.46, rs: 87.68). Short term outlook will remain bearish as long as 85.51 resistance holds. Decisive break of 83.11 support will be the final confirmation of this case and bring medium term correction to 75.89/80.38 support zone. However, strong rebound from the current level, followed by break of 85.51 will raise the odds that dollar index is indeed unfolding as a triangle consolidation only.

Released overnight, New Zealand's October retail sales dropped -1.3%, the largest fall in more than 4 years and worse than 0% as expected and +0.1% in the previous month. The decline was led by plunge in motor vehicles sales and other big-ticket purchases as people spent less amid fear of unemployment. In Japan, capacity utilization surprisingly plunged to -3.9% in October, much lower than initial estimate of 1.6%. Revised industrial production for October was -3.1% MoM, inline with market expectation and that in September. On yearly basis, the reading of -7.1% was much lower than -5% in consensus and in September. Japan's November consumer confidence was 28.4, better than consensus but deteriorated from 29.8 in the previous month.

Looking ahead, Eurozone industrial is expected to contract -1.0% mom, -3.6% yoy in Oct. US retail sales is expected to contract for the fifth consecutive months by -1.9% mom in Nov. Ex-auto sales is expected to drop for the fourth consecutive months by -1.8%. Headline PPI is expected to drop sharply from 5.2% yoy to 0.2% yoy in Nov with core PPI down slightly from 4.4% to 4.2%. Finalized Michigan index probably fell further to 54.8 from November whose finalized reading of 55.3 was revised down from 57.9 in the preliminary report. Canada's capacity utilization for Q3 should come in at 78.5%, slightly lower than 78.9% in Q2.

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USD/JPY Daily Outlook

Daily Pivots: (S1) 90.75; (P) 91.81; (R1) 92.47; More.

USD/JPY falls sharply to as low as 88.54 today and the strong break of 90.92 low confirms that decline from 110.66 has resumed. At this point, short term outlook will remain bearish as long as 91.15 resistance holds. The current decline is expected to extend further to next target of 100% projection of 124.13 to 95.77 from 110.66 at 82.3. On the upside, while some recovery might be seen, break of 93.90 resistance is needed to indicate that a bottom is in place. Otherwise, short term risks remain on the downside.

In the bigger picture, correction from 90.92 was limited below 103.06 cluster resistance (61.8% retracement of 110.66 to 90.92 at 103.12) and medium term down trend from 124.13 resumed after 90.92 low is taken out. As mentioned, next downside target will be 100% projection of 124.13 to 95.77 from 110.66 at 82.3. Also, note that the current development clears out the long term picture too. Price actions that started from 79.75 (95 low) has completed in form of a triangle that ended with five waves to 124.13. In other words fall from 124.13 is just part of an even larger scale down trend which could extend further to retest 79.75 low. On the upside, break of 100.54 is now needed to be the first signal that down trend from 124.13 has completed.

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Published on  Fri, Dec 12 2008, 06:44 GMT

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Mid−Day Forex Technical Report − Dollar's Fall Continues, EUR/USD Powers Through 1.32

Thu, Dec 11 2008, 14:17 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar's Fall Continues, EUR/USD Powers Through 1.32

Dollar's free fall continues in early US session, diving sharply against Euro, Japanese Yen and Canadian Dollar after poor data out of US. Initial jobless claims unexpected surged to 26 years high of 573K, much worse than expectation of 525K. Continuing claims also had the larges jump since 1974, by 335k to 4.4m. Trade deficit came in larger than expected at -57.2b as exports dropped -2.2%. Import prices dropped -6.7% mom in Nov while export price dropped -3.2% mom. Both were sharply than consensus. Also released in US session, Canadian trade surplus shrank less than expected to 3.78b in Oct. New housing price index dropped more than expected by -0.4% in Oct.

Dollar index drops sharply to as low as 84.02 so far, inch above mentioned initial target of 100% projection of 88.46 to 84.78 from 87.68 at 84.00. Further decline is still expected as long as 85.02 minor resistance holds. As discussed before, a head and shoulder top patter should be completed (ls: 87.87, h: 88.46, rs: 87.68) and deeper fall should be seen to 83.11 support first. Break will be final confirmation of this case and bring medium term correction to 75.89/80.38 support zone.

Euro's strength is also apparent across the board, with EUR/USD surging to as high as 1.3250 so far. EUR/GBP extends recent rally to as high as 0.8897. Decisive break of 61.8% projection of 0.7808 to 0.8660 from 0.8234 at 0.8761 now sets the stage for rally to 100% projection at 0.9086. Though, note that Sterling and Aussie are the relatively weaker ones as both are being sold off in crosses.

In the monthly bulletin published today, ECB expects 'global economic weakness and very sluggish domestic demand are seen as persisting in the next few quarters' but 'a subsequent recovery should then gradually take place, supported by the fall in commodity prices and assuming that the external environment improves and the financial tensions weaken'. Moreover, there are chances that the central bank will pause rate cut at the January meeting. Executive Board member Jurgen Stark said that the ECB may not need to cut policy rate next month as the committee may want to wait for some new information for assessing price stability which is not available until February and March.

SNB announced to cut the 3-month Libor by 50 bps to 0.5%, the lowest in 4 years. From the accompanying statement, it’s likely the more easing policies (other than rate cut) will come in 2009. More on SNB here.

In the UK, David Blanchflower, the first Bank of England official to predict the recession, is going to step down in May. CBI distribution trade unexpectedly improved from -38 to -35 in Nov.

Australia's employment fell -15 .6K in November, worse than a -15K drop as market expected and growth of 34.3K in October. Unemployment rate rose to 4.4% from 4.3% last month.

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EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2926; (P) 1.2998; (R1) 1.3093; More

EUR/USD's rally extends further to as high as 1.3272 today and at this point, intraday bias remains on the upside as long as 1.3080 minor support holds. Current rise from 1.2549 is expected to extend further to above 1.3290, possibly to 100% projection of 1.2329 to 1.3290 from 1.2549 at 1.3510. However, note that price actions from 1.2329 is still viewed as consolidation in the larger medium term down trend only, upside is still expected to be limited below 1.3768 cluster resistance (38.2% retracement of 1.6038 to 1.2329 at 1.3746) and bring down trend resumption. On the downside, below 1.3080 will turn intraday outlook neutral first.

In the bigger picture, as discussed before, the strength of the fall from 1.6038 reinforces the case that whole decline from 1.6038 is developing into a five wave impulsive fall with first wave completed at 1.3881, second at 1.4867, third at 1.2329. Consolidation from 1.2329 might represent the fourth wave consolidation. Hence, another decline is still expected before making a medium term bottom. Below 1.2329 will target next long term fibonacci level of 50% retracement of 0.8223 to 1.6038 at 1.2131 or even further to 1.1639 key medium term support. On the upside, sustained break of 1.3768 cluster resistance (38.2% retracement of 1.6038 to 1.2329 at 1.3746) is needed to invalidate this view and indicate that whole decline from 1.6038 has made a medium term bottom.

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Published on  Thu, Dec 11 2008, 14:17 GMT

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Daily Forex Technical Report − Euro Leads Rebound against Dollar, SNB to Cut Again

Thu, Dec 11 2008, 07:00 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Euro Leads Rebound against Dollar, SNB to Cut Again

Dollar's decline continues today even though the $14b automaker rescue bill is passed in House and is set to vote in Senate on Thursday. One important thing to note is that dollar's fall is lead by strengthen in European majors, in particular the Euro which is topping this week's top movers chart. Swissy follows Euro's strength despite expectation of another 50bps cut by SNB later today. Sterling is catching up in early US session as EUR/GBP retreats mildly. However, strength in Australian dollar and Canadian dollar is not apparent so far as both are still kept below this week's high against the greenback. Yen crosses remains pretty steady so far except the apparent strength in EUR/JPY.

Technically, the dollar index is now sustaining below the neckline support which indicates that a head and shoulder top pattern is completed (ls: 87.87, h: 88.46, rs: 87.68). In other words, the rise from 71.31 could have concluded at 88.46 and a medium term is formed there. From a short term angle, dollar index should remain pressured and should be targeting 100% projection of 88.46 to 84.78 from 87.68 at 84.00 first. Decisive break of 83.11 support will be the final confirm of this case and bring medium term correction to 75.89/80.38 support zone. However, note that we won't rule out the possibility that recent price actions are developing into triangle consolidation yet. Though, risks remain on the downside as long as 85.49 minor resistance holds.

At 0830 GMT, SNB announce rate decision and economists expect the board to reduce the 3-month Libor by 50 bps to 0.5%, making it the lowest level in 4 years. After the 100 bps cut on Nov 20, the benchmark rate has been reduced by culmulative 175 bps since Oct 8. There are increasing speculations that SNB will be the first central bank in Europe to take its benchmark rate to zero.

In the UK, CBI distribution trade is expected to have dropped 44 in December, exacerbating -38 decline in November.

Later in US session, US jobless claims should have increased 525K, higher than 509K in the previous week. Concerning trade balance, the world's largest economy is anticipated to record a deficit of -$53.5B in October, improved slightly from a deficit of -$56.47B in September. Both export and import price index should have fallen -1.5% and -4.9% respectively in November.

On the other hand, Canada is expected to record a trade surplus of CAD 3.45B, the contracted figure was brought by reduction of export to CAD 41.6B from CAD 45.51B and an increase of imports to CAD 38.1B from CAD 38.02B. Canada will also report Oct new housing price index which is expected to have declined 0.1%.

Australia's employment fell -15 .6K in November, worse than a -15K drop as market expected and growth of 34.3K in October. Unemployment rate rose to 4.4% from 4.3% last month.

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USD/CHF Daily Outlook

Daily Pivots: (S1) 1.1914; (P) 1.1999; (R1) 1.2071; More

USD/CHF's fall from 1.2248 extends further as expected as reaches as low as 1.1892 so far. As discussed before, break of 1.1924 support confirms that corrective rise from 1.1828, being part of the consolidation that started at 1.2296, has completed at 1.2248 already. Intraday bias remains on the downside as long as 1.1999 minor support holds and further decline should be seen to1.1828 low and below. Though, downside is expected to be contained by 1.1746 cluster support (50% retracement of 1.1208 to 1.2296 at 1.1752) and bring strong rebound. On the upside, above 1.1999 will turn intraday outlook neutral first.

In the bigger picture, there is not confirmation of completion of medium term rise from 0.9634 yet. Current price actions from 1.2286 is treated as consolidation in such medium term up trend only and should complete above mentioned 1.1746 cluster support. On resumption, the medium term up trend should target long term resistance zone of 38.2% retracement of 1.8305 to 0.9634 at 1.2946 and 1.3283 resistance (05 high). However, note that upside momentum is seen diminishing with bearish divergence condition in daily RSI. Decisive break of 1.1746 cluster support will dampen this view and put focus to 1.1416 medium term resistance turned support. Beak there will argue that the rise from 0.9634 is over and bring deeper correction.

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Published on  Thu, Dec 11 2008, 07:00 GMT

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Mid−Day Forex Technical Report − Dollar Sold off, Head and Shoulder Top Completed?

Wed, Dec 10 2008, 15:28 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Sold off, Head and Shoulder Top Completed?

US stocks open higher on optimism that lawmakers will prove the $15b automaker bailout after it's agreed in principle by White House and Democrats. It's generally expect that such a package will give the car industry a lifeline and avoid a massive layoff. Dollar and Japanese yen respond by trading lower broadly on improved investors sentiments. Technically speaking, dollar index is now trying to get rid of the mentioned neckline support (now at 85.75). Further decline is still expected as long as 86.47 minor resistance holds. And as mentioned before, sustained trading below the trend line support will add much credence to the case that a medium term top is in place and deep fall should then be seen 83.11 support and below. This will remain the main focus in short term.

Data released in US session saw Wholesale inventories dropped -1.1% in Oct, much worse than expectation of -0.1% and being the largest drop since 2001. Switzerland's ZEW economic expectation in December improved to -76.2 from -88.5 in November and -91.1 in October, boosted by the recent aggressive 100bps cut by SNB. Germany's November WPI dropped 3.3% mom (October: -1.5%), below market estimates of -1.4% and the lowest level since the gauge began in 1968, as demand for raw materials plunged sharply amid global recession. On annual basis, prices declined 0.8%, worse than consensus of +1.5% and October's +3.6%. The UK's NIESR GDP estimates for November plunged -1% after contracting -0.5% in October, indicating deeper contraction in the nation's economy.

Japan's CGPI fell to one-year low at 2.8%, inline with consensus but worse than the revised 5% in the previous month, because of decline in commodity prices and reduction in demand. On monthly basis, the figure came in at 1.9%, more than market expectation of -1.7% and October's revised -1.4% in November. Core machinery orders dropped 4.4% MoM and 15.5% YoY in October, worse than consensus of -3.9% and -15%, as corporate reduced investments in recessionary times. In Australia, the Westpac consumer confidence improved 7.5% in December from November. Treasurer Wayne Swan said the uptick is encouraging and heartening given the global economic condition.

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USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.1980; (P) 1.2078; (R1) 1.2149; More

USD/CHF's fall from 1.2248 continues as expected and dips below 1.2 level again. As discussed before, corrective rise from 1.1828 is probably completed at 1.2248 already. Below 1.1924 support will confirm that rebound from 1.1828 is merely part of consolidation that started from 1.2296 and will bring deeper fall to 1.1828 support or below to complete such consolidation. Though, downside is expected to be contained by 1.1746 cluster support (50% retracement of 1.1208 to 1.2296 at 1.1752) and bring strong rebound. On the upside, above 1.2176 will flip intraday back to the upside for retesting 1.2296 high.

In the bigger picture, medium term rise from 0.9634 is still in progress and should be targeting long term resistance zone of 38.2% retracement of 1.8305 to 0.9634 at 1.2946 and 1.3283 resistance (05 high). While some interim pull back might be seen, a break below 1.1208 is needed to indicate that a medium term top is formed. Otherwise, outlook will remain bullish.

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Published on  Wed, Dec 10 2008, 15:28 GMT

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Daily Forex Technical Report − Asian Stocks Firm as Auto Bailout Deal Agreed, Dollar and Yen Soft

Wed, Dec 10 2008, 05:51 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Asian Stocks Firm as Auto Bailout Deal Agreed, Dollar and Yen Soft

Dollar and yen trade with a soft tone in Asia today as Asian stocks rally for the fourth day, supported by news that Democrats and White House agreed on a $15b bailout deal for the big three automakers in US. Congress could vote on the plan as early as Wednesday, which includes appointed of a "car czar" who could force the automakers into Chapter 11 bankruptcy if they don't come up with a business plan by Mar 31. MSCI Asia Pacific index climbs mildly to 83.65. Dollar index is mildly down to 85.67 level. Crude oil and Gold recover mildly to 43.49 and 779.5 respectively.

Technically speaking, main focus remains on where Dollar index is completing a head and shoulder top (ls: 87.87, h: 88.46, rs: 87.68) reversal pattern, or it's just unfolding as triangle consolidation. Dollar index continues to press neckline support (now at 85.67) but there isn't follow through selling for a breakthrough yet. As mentioned before, sustained trading will add much credence to the case that a medium term rise from 71.31 has concluded at 88.46 already. Further break of 83.11 will confirm this case and bring deep medium term correction to 75.89/80.38 support zone. However, note that it's usually hard to predict whether the pattern is a head and shoulder or a triangle before it's completed. Even after a break of the neck line support, any strong rebound above 83.11, followed by break of 87.68 will indicate that medium term up trend in the dollar index is still in force. In short term, though, favor is on the downside as long as 86.47 minor resistance holds.

On the data front, Japan's CGPI fell to one-year low at 2.8%, inline with consensus but worse than the revised 5% in the previous month, because of decline in commodity prices and reduction in demand. On monthly basis, the figure came in at 1.9%, more than market expectation of -1.7% and October's revised -1.4% in November. Core machinery orders dropped 4.4% MoM and 15.5% YoY in October, worse than consensus of -3.9% and -15%, as corporate reduced investments in recessionary times.

In Australia, the Westpac consumer confidence improved 7.5% in December from November. Treasurer Wayne Swan said the uptick is encouraging and heartening given the global economic condition.

The UK's NIESR GDP estimates for November plunged -1% after contracting -0.5% in October, indicating deeper contraction in the nation's economy.

Later today, Germany will report November WPI which should have dropped -1.4% mom but rose 1.5% yoy from October. Switzerland's ZEW economic expectation for December is anticipated to remain weak after falling to -88.5 in November. US October wholesale inventories should have fallen 0.1%, same as last month. Also, the Fed will announce November's budget which should have recorded a deficit of US$175.2B, compared with a deficit of US$237.1B in October.

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EUR/USD Daily Outlook

Daily Pivots: (S1) 1.2816; (P) 1.2909; (R1) 1.3018; More

After brief retreat, EUR/USD's rise from 1.2549 resumes and edges higher to 1.3000. Nevertheless, it's still struggling around mentioned inner trend line resistance. Note that price actions from 1.2329 is viewed as developing into triangle consolidation and should be near to completion. While another rise cannot be ruled out, upside should be limited below 1.3080 resistance and bring down trend resumption. Below 1.2799 will indicate that an intraday top is in place. Further break of 1.2549 will be an important signal that the triangle consolidation has completed and should bring retest of 1.2389/2329 support. Decisive break there will confirm that medium term down trend has resumed for 50% retracement of 0.8223 to 1.6038 at 1.2131 next.

However, above 1.3080 will invalidate the triangle scenario and bring strong rise to 1.3290 and above. Though, in such case, upside is still expected to be limited below 1.3768 cluster resistance and bring down trend resumption.

In the bigger picture, as discussed before, the strength of the fall from 1.6038 reinforces the case that whole decline from 1.6038 is developing into a five wave impulsive fall with first wave completed at 1.3881, second at 1.4867, third at 1.2329. Consolidation from 1.2329 might represent the fourth wave consolidation. Hence, another decline is still expected before making a medium term bottom. Below 1.2329 will target next long term fibonacci level of 50% retracement of 0.8223 to 1.6038 at 1.2131 or even further to 1.1639 key medium term support. On the upside, sustained break of 1.3768 cluster resistance (38.2% retracement of 1.6038 to 1.2329 at 1.3746) is needed to invalidate this view and indicate that whole decline from 1.6038 has made a medium term bottom.

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Published on  Wed, Dec 10 2008, 05:51 GMT

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Mid−Day Forex Technical Report − Canadian Dollar Lower after 75bps Cut, Dollar Recovers Further

Tue, Dec 9 2008, 15:24 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Canadian Dollar Lower after 75bps Cut, Dollar Recovers Further

Canadian dollar is sharply lower in early US session following deeper than expected rate cut from BoC. The Bank of Canada cut policy rates by 75bps to a 50 year low of 1.50% today, versus expectation of 50bps. In the accompanying statement, BoC noted that the outlook of the global economy is deteriorating significantly and recession could be broader and deeper than anticipated. Though, the depreciation of the Canadian dollar, could help offset some of the effects of weaker global demand and lower commodity prices. Also, BoC hinted further policy easing should be seen as the bank will monitor the development to judge "what extent" further policy stimulus will be required. USD/CAD rebounds sharply after drawing support from a near term trendline. After all, we're still holding the technical view that USD/CAD's medium term up trend is still in progress and would expect to see a retest of 1.3005/15 resistance in near term.

Elsewhere, dollar index continues it's rebound today after drawing support from the neckline support mentioned before. Most major currencies are generally lower against the greenback as well as the Japanese yen as US stock markets pare some of yesterday's gain. Crude oil and gold are bounded in tight range. Though, we're still cautious on the outlook on dollar until we see a break of 87.68 in dollar index or a break of 1.2549 in EUR/USD.

On the data front, UK's manufacturing production dropped -1.4% mom, -4.9% yoy, worse than expectation of -0.6% mom, -3.2% yoy. Industrial production also fell more-than-expected by -1.7% mom and -5.2% yoy. UK trade deficit came in at -7.75B pound, wider than consensus. DCLG house prices plunged 7.4% yoy in October, indicating a sharper deterioration in the nation's house price than economists forecasted. RICS house prices balance fell 76%, better than consensus of -83% and the revised 81%, in November. Though the pace of the decline has been slowed down, sales plunged to a record low as financial crisis and recession have depressed demand for property. November BRC retail sales dropped 2.6%, consistent with market expectation.

Germany ZEW economic confidence rose to -45.2 from a reading of -53.5 in November, better than consensus expectations of -55.0. In Eurozone, the gauge rose to -46.1 in December from -54 last month, versus consensus of -59. Germany trade surplus surprisingly widened to 16.4B euro. Swiss unemployment rate rose from 2.6% to 2.7% in Nov as expected. Japan's finalized 3Q GDP came in at an annualized -1.8% showing the nation is deeper in recession. On quarterly basis, 3Q GDP declined 0.5%, still more severe than initial figure of -0.2% and 2Q's -0.1%. Leading indicators dropped to 85 as expected in Oct. Machine tools orders dropped by -62.6% in Nov.

RBA Governor Stevens said the Australian economy will feel the effects of both fiscal and monetary measures taken recently. There is room for further monetary policy measures if needed, depending on strength of public accounts and inflation development. Australia November NAB business confidence dropped to -30 (October: -29), the lowest point since the gauge began in 1989. Moreover, the business conditions index fell 6 months to -17, a level back not seen since 1992.

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USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.2380; (P) 1.2567; (R1) 1.2687; More.

USD/CAD's drew some support from mentioned inner rising trend line and rebound strongly. Intraday bias is flipped back to the upside and further rise should be seen to retest 1.3005/3015 resistance zone. As discussed before, price actions from 1.3015 is probably developing into ascending triangle with fall from 1.3005 represent the last leg. Decisive break of 1.3015 will confirm that medium term up trend has resumed for 61.8% retracement of 1.6196 to 0.9056 at 1.3469.

On the downside, below 1.2054 will flip intraday bias back to the downside. Though, such decline is still expected to be contained above 1.2125 support and bring strong rebound. However, a break below 1.2125 will dampen this view and indicates that deeper decline should be seen to retest 1.1464 support before completing the consolidation.

In the bigger picture, preferred interpretation of the up trend from 0.9056 is that first wave rally is completed at 1.0248. Subsequent second wave consolidation was in form of triangle and finished at 0.9823. Rise from 0.9823 is treated as third wave rally and should have completed at 1.3015 already. Subsequent consolidation from 1.3015 is probably in form of triangle. Sustained break of 1.3015 will confirm that medium term up trend has resumed for 61.8% retracement of 1.6196 to 0.9056 at 1.3469. Though, note that sustained break of 1.1464 will indicate that the fifth wave is possibly completed In other words, whole rise from 0.9056 has possibly completed too. Deeper correction should then be seen in such case.

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Published on  Tue, Dec 9 2008, 15:24 GMT

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Daily Forex Technical Report − Dollar Index Recovers Mildly after Hitting Neckline Support

Tue, Dec 9 2008, 07:02 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar Index Recovers Mildly after Hitting Neckline Support

Dollar and yen recover mildly today but there is not confirmation that this week's sell off is completed yet. In particular, much focus in now on the development in dollar index as it's still holding on to the mentioned neckline support. As discussed before, recent price actions in the dollar index are probably developing into a head and shoulder top reversal pattern (ls: 87.87, h: 88.46, rs: 87.68) and sustained break of the neckline support will add much credence to the case that whole rally from 71.31 has topped out. However, strong rebound from the current level, followed by break of 87.68 resisteance will invalidate this case and retain dollor's short term bullish outlook.

Elsewhere, EUR/USD and AUD/USD, the two relatively stronger pair, are now pressing inner trend line resistance at 1.2966 and 0.6667. In particular, as discussed before, price actions in EUR/USD from 1.2329 are viewed as developing into triangle consolidation. Having said that, while EUR/USD might penetrate the upper trendline resisteance briefly, upside should be limited below 1.3080 resistance and bring sharp selloff. However, a strong break of 1.3080 will invalidate this view and bring much stronger rebound, probably to 1.35 level or above.

Hence, the greenback is at a juncture now and juncture which could determine the outlook for the next few months and these two factors will be the most important one to look at in short term.

On the data front, Japan's finalized 3Q GDP came in at an annualized -1.8% (preliminary: -0.4%; 2Q: -0.5%), showing the nation is deeper in recession. On quarterly basis, 3Q GDP declined 0.5%, still more severe than initial figure of -0.2% and 2Q's -0.1%. Contraction in exports and capital spending is going to affect economic growth in the 4th quarter and early 2009. Leading indicators dropped to 85 as expected in Oct. Machine tools orders dropped by -62.6% in Nov.

Australia November NAB business confidence dropped to -30 (October: -29), the lowest point since the gauge began in 1989. Moreover, the business conditions index fell 6 months to -17, a level back not seen since 1992.

In the UK, November BRC retail sales dropped 2.6%, consistent with market expectation and that in October. This is the 6th consecutive month of decline and all sectors except food and drink recorded falls. Going into December. RICS house prices balance fell 76%, better than consensus of -83% and the revised 81%, in November. Though the pace of the decline has been slowed down, sales plunged to a record low as financial crisis and recession have depressed demand for property.

Swiss unemployment rate rose from 2.6% to 2.7% in Nov as expected.

Looking a head, ZEW economic sentiments in both Germany and the entire Eurozone would report further fall to -59 and -55, in December, respectively. UK industrial production and manufacturing production are both expected to deteriorate further in Oct, by contracting -0.5% mom, and -6.0% mom respectively. DCLG house price is expected to fall deeper by -6.5% yoy in Oct.

Main focus in US session will be on BoC rate decision which is expected to cut interest rates by 50bps to 1.75%. US pending home sales in October should fall 3% after dropping 4.6% a month ago.

More Forex Technical Analysis Reports Here.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6500; (P) 0.6595; (R1) 0.6737; More

AUD/USD retreats mildly after rebounding to 0.6690 after hitting inner trend line resistance. Though, intraday bias remains mildly on the upside as long as 0.6496 minor support holds. Further rise could still be seen to 00% projection of 0.6075 to 0.6619 from 0.6292 at 0.6836. On the downside, though, below 0.6496 will turn intraday outlook neutral first. Further break of 0.6292 will indicate that rebound from 0.6075 has completed and should flip intraday bias back to the downside for retesting 0.6008/6075 support zone. After all, note that AUD/USD is still staying in converging range and price actions would remains choppy before a breakout.

In the bigger picture, whole fall from 0.9849 has possibly completed the five wave sequence already, with the fifth wave ended at 0.6008. However, note that the impulsive nature of the fall from 0.9849 to 0.6008 indicate that price actions from 0.6008 is developing into correction/consolidation only. The long term down trend is still expected to resume after completing the consolidation. Sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for at least another five wave medium term decline, targeting 0.4773 (01 low). But, note that as long long as 0.6008 low holds, consolidation from could still extend further. Above 0.7014 will target 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completing the consolidation.

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Published on  Tue, Dec 9 2008, 07:02 GMT

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Mid−Day Forex Technical Report − Euro and Aussie Firm as US Stock Markets Rise

Mon, Dec 8 2008, 15:44 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Euro and Aussie Firm as US Stock Markets Rise

Euro and Aussie remain firm in early US session as stock markets opened higher, buoyed by Obama's spending plan to create 2.5m jobs. Both the greenback and yen recover a bit against Sterling and Canadian dollar. However, note that DOW's break of 8828 resistance confirms that recent rebound is resuming for 9500 level, risk aversion trades will continue to recede and hence, dollar and yen will likely remain pressured in short term.

Technically speaking, note that recent price actions in the dollar index is probably developing into a head and shoulder top reversal pattern (ls: 87.87, h: 88.46, rs: 87.68). Focus remains on the neck line support (now at 85.58). Sustained break of which will add much credence to the case that the whole rally from 71.31 has topped out. Further break of 83.11 support will confirm this case and bring medium term correction towards 50% retracement of 71.31 to 88.46 at 79.88. However, note that strong rebound from the neckline support, followed by 87.68 resistance will invalidate this scenario and retain dollar's short term bullish outlook.

Economic data released in the US sesison saw Canadian housing starts dropped sharply to 175k in Nov.

In the Eurozone, the Sentix investor confidence index hit 6-year low at -42.3 in December, significantly worse than market expectation of -40 and last month's -36.4. Fear of recession, declines in orders and increase in unemployment were the main causes for the sharp fall. Germany's industrial production in November dropped a seasonally adjusted 2.1% MoM, worst than market expectation of -1.5% and October's revised -1.5%. this month's was brought by tumble of investment goods such as plant and machinery.

UK's PPI dropped in November on the back of falling oil price. Input PPI fell 3.3% MoM, compared with a revised -4.3% in October while output PPI declined 0.7% MoM, within market expectation buy lower than 1% plunge in October. On annual basis, input and output PPI rose 7.5% and 5.1%, respectively. Core PPI rose 0.2% monthly and 5.1% yearly. Receding inflationary pressure make it more justifiable for the BoE to cut interest rate in the next meeting.

Earlier in Asia, Japan's economic watch DI for November came down to 21 from 22.6 in October but was slightly higher than consensus of 20. Current account surplus in October dropped sharply to 960.5B yen from 1497.9 B yen in October, worse than consensus of 1094 B yen. The 8th consecutive decline was brought by 7.3% decrease in exports to 6.59 trillion yen and 8% increase in import to 6.45 trillion yen. Geographically, Japan's exports to the US were down 19% while that to the EU was down 17.2%.

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EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2632; (P) 1.2715; (R1) 1.2804; More

EUR/USD's rise from 1.2549 extends further to as high as 1.2928 in early US session and is still in progress. But after all, EUR/USD is still bounded in converging range. As discussed before, price actions from 1.2329 is developing into triangle consolidation and should be near to completion. Having said that rebound from 1.2549 should be limited below 1.3080 resistance. Below 1.2549 will bring retest of 1.2389/2329 support and decisive break there will confirm that medium term down trend has resumed for 50% retracement of 0.8223 to 1.6038 at 1.2131 next. On the upside, above 1.3080 will invalidate the triangle scenario bring strong rise to 1.3290 and above. Though, in such case, upside is still expected to be limited below 1.3768 cluster resistance and bring down trend resumption.

In the bigger picture, as discussed before, the strength of the fall from 1.6038 reinforces the case that whole decline from 1.6038 is developing into a five wave impulsive fall with first wave completed at 1.3881, second at 1.4867, third at 1.2329. Consolidation from 1.2329 might represent the fourth wave consolidation. Hence, another decline is still expected before making a medium term bottom. Below 1.2329 will target next long term fibonacci level of 50% retracement of 0.8223 to 1.6038 at 1.2131 or even further to 1.1639 key medium term support. On the upside, sustained break of 1.3768 cluster resistance (38.2% retracement of 1.6038 to 1.2329 at 1.3746) is needed to invalidate this view and indicate that whole decline from 1.6038 has made a medium term bottom.

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Published on  Mon, Dec 8 2008, 15:44 GMT

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Daily Forex Technical Report − Dollar and Yen Lower as Asian Stocks Surge

Mon, Dec 8 2008, 06:19 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar and Yen Lower as Asian Stocks Surge

Dollar and yen are broadly lower today on a couple of factors. Following late rally in Friday's US stock markets, Asian markets are driven higher by anticipation of extending the $15b loans to GM and Chrysler. US president-elect Obama pledged on the biggest public works program in 50 years that involve creation of 2.5 millions jobs. Asia markets are additionally boosted after Reserve Bank of India slashed rate from 7.5% to 6.5% and the government announced a $4b stimulus package. Crude oil rebounded over 5% on news that OPEC will cut production sharply at its Dec 17 meeting. Aussie is the biggest winner today on returned risk appetite.

On the data front, Japan's current account surplus in October dropped sharply to 960.5B yen from 1497.9 B yen in October, worse than consensus of 1094 B yen. The 8th consecutive decline was brought by 7.3% decrease in exports to 6.59 trillion yen and 8% increase in import to 6.45 trillion yen. Geographically, Japan's exports to the US were down 19% while that to the EU was down 17.2%. Later today, Japan will report November economic watch DI which should come in at 20 from 22.6 in October.

Looking ahead, Eurozone's Sentix investor confidence for December should deteriorate further to -40 from -36.4 last month as disappointing economic data made investors worry about the economic outlook. Following a below-consensus decline of 3.6% in September, German industrial production should have contracted by another 1.5% in October. We believe manufacturing and industrial activities in Germany will remain weak over the next several months. ECB's Trichet will speak at European Parliament at 1400 GMT.

In UK, large decline in oil price continued to suppress inflation and economists expect November PPI would have fallen to an annualized 4.4%. Input and output PPI should have plunged to 6.7% and 5.2% from 13.8% and 6.8%, respectively, year on year.

Canada's housing starts in November is expected to have fallen to 194 K from 211.8 K in October. The market's focus for the nation is on tomorrow's BoC meeting which is expected to announce a 50 bp cut of interest rate to 1.75%.

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AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6330; (P) 0.6408; (R1) 0.6525; More

AUD/USD's break of 0.6535 minor resistance confirmed that fall consolidation from 0.6619 has completed with three waves to 0.6292. In other words, rebound from 0.6075 is resuming and is targeting 100% projection of 0.6075 to 0.6619 from 0.6292 at 0.6836. On the downside, though, below 0.6292 will flip intraday bias back to the downside for retesting 0.6008/6075 support zone. After all, note that AUD/USD is still staying in converging range and price actions would remains choppy before a breakout.

In the bigger picture, whole fall from 0.9849 has possibly completed the five wave sequence already, with the fifth wave ended at 0.6008. However, note that the impulsive nature of the fall from 0.9849 to 0.6008 indicate that price actions from 0.6008 is developing into correction/consolidation only. The long term down trend is still expected to resume after completing the consolidation. Sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for at least another five wave medium term decline, targeting 0.4773 (01 low). But, note that as long long as 0.6008 low holds, consolidation from could still extend further. Above 0.7014 will target 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completing the consolidation.

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Published on  Mon, Dec 8 2008, 06:19 GMT

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Weekly Review and Outlook − Mixed Outlook as Markets Immune to Poor Data

Sun, Dec 7 2008, 08:43 GMT
by ActionForex.com Team

ActionForex.com

Weekly Review and Outlook

Mixed Outlook as Markets Immune to Poor Data

The biggest question in everyone's mind now is on the reason for the lack of follow though reactions in the financial markets after a string of poor economic data from around the world. The world is without a doubt in recession and indeed NBER confirmed that recession in US started last Dec already. Friday's shockingly poor non-farm payroll report strongly suggests that recession is not going to end soon. However, stocks managed to rebound and closed higher after initial selloff. While dollar and yen were generally higher last week, the strength was not that broad based. EUR/USD, AUD/USD are still held above last month's low. USD/CAD and USD/CHF are also kept below recent high too. USD/JPY and EUR/JPY are still staying above Oct's low and recent fall is rather unconvincing. AUD/JPY is also struggling around the middle of recent range only.

Technically speaking, a couple of developments need to be noted. Firstly, as we mentioned during the week, it's possible that dollar index is completing a head and shoulder top reversal pattern to conclude the rise from 71.31. Focus is on neck line support at 85/86 level and break will significantly increase the chance that a medium term top is in place. Broad based profit taking on dollar long positions would then take place that send the dollar index lower to 75/80 support zone. Secondly, last week's development in DOW suggests that the price actions from 8828 to 8118 is merely consolidating the rebound from 7450. In other words, such rebound is still in favor to extend in short term, probably to retest 9500 level. However, thirdly, development in crude oil and gold suggests that some more downside should still be seen in commodity markets in general.

Hence, the overall outlook is quite mixed in the financial markets and investors are probably waiting to see the "January Effect" before committing. Still, some developments could provide the guidance in near term:

1. If DOW manages to break 8828 resistance together will USD/JPY and EUR/JPY breaking 97.43 and 126.24 respectively, that will indicate that stock markets are staging another strong rebound. That is, risk aversion will recede. This will be inline with the view that USD/JPY's and EUR/JPY's consolidation from 90.92 and 113.63 are still in progress and another strong rise should be seen to retest 100.54 and 131.32 resistance levels before completing such consolidation. However, DOW's break of 8118 with USD/JPY and EUR/JPY breaking 90.92 and 113.63 will invalidate this view and suggests that another massive risk aversion trade is underway.
2. Dollar index needs to hold above mentioned neck line support at 85/86 for the short term bullish view to remain intact. Breaking of 88.46 high, together with EUR/USD and AUD/USD taking out recent low of 1.2329 and 0.6008 will confirm that dollar's medium term up trend is resuming. However, a break of the mentioned trend line together with USD/CAD breaking 1.2125 support and USD/CHF breaking 1.1924 support will be an important alert that the back has topped out in medium term and some massive selling could be seen to correction prior rally.

Currency Heat Map Weekly View

National Bureau of Economic Research (NBER) said that the US economy has been in recession since Dec 07. The report from NBER said that "domestic production and employment are the primary conceptual measures of economic activity" and payroll employment "reached a peak in December 2007 and has declined every month since then." Fed Bernanke said the room to lower interests from form the current 1% level is "obviously limited" even though it's still feasible. Fed will dig deeper into the toolkits instead and economists said that this could be the start of a shift to "quantitative easing" that resembles what BoJ did in 2001-2006.

Non-farm payroll report showed US economy lose -533k jobs in Nov, much worse than expectation of -340k, largest contraction in 34 years since 1974. Oct's number was revised further down from -240k to -329k. Unemployment rate climbed from 6.5% to 6.7%, hitting the highest level since 1993. This was the 11th consecutive month of contraction in payrolls and indeed, there was no single month of expansion this year.

ISM manufacturing index in US dropped more than expected to 36.2 in Nov, suggesting the manufacturing industry is contracting in the fastest pace since 1982. Price paid component continued it's steep slide to from 37.0 to 25.5. Employment component remains deep in contraction region and deteriorated further from 34.6 to 34.2. ISM non-manufacturing index dropped to record low of 37.3 in Nov, suggesting contraction in services section is accelerating. Price paid index dropped sharply from 53.4 while employment component also dived further in sub-50 region from 41.5 to 31.3.

Construction spending dropped -1.0% in Oct versus expectation of -0.9%. Initial jobless claims dropped slightly to 509k. However, continuing claims rose to 4.09m, largest since 1982. Factory orders dropped sharply by -5.1% in Oct.

ECB surprised the markets by delivering the largest ever rate cuts by 75bps, bringing the benchmark interest rates down from 3.25% to 2.5% while economists generally expected a 50bps cut. ECB revised down GDP growth forecasts and expect that it could be negative in 2009. Inflation is expected to slow to below ECB's target to 1.1-1.7% in 2009 before climbing back to near to the banks' 2% target in 2010. More on ECB here.

Eurozone manufacturing PMI was revised down to 35.6 (Oct: 42.9), compared with preliminary figure of 36.2. This is the lowest figure since the index began 11 years ago and the 6th month that the manufacturing index stayed below 50. Final number for November's services PMI was revised to 42.5 from 43.3 initially. Falling from 45.8 in October, the figure marked the sharpest drop in 10 years and the 6th consecutive month that the sector is in contraction. GDP contracted for the second quarter in Q4 by -0.2% qoq, confirming Eurozone is already in technical recession. Retail sales shrank -0.8% mom, -1.5% yoy in October, worse than consensus of -0.4% mom and -1.4% yoy. PPI has record drop of -0.8% mom in Oct versus expectation of -0.3%. Year-on-year rate moderated from 7.9% to 6.3%.

BoE cut its key rate by 100bps to 2.00%, lowest since 1951, inline with market expectations. In the rather lengthy accompanying statement, BoE noted that " business surveys have weakened further and suggest that the downturn has gathered pace,". Then bank said that consumer spending and business investments have "stalled". Activity indicators in the rest of the world have weakened too. Note that since MPC warned of a "substantial" risk that inflation would undershoot the target range of 2-3%. It's still expected that the current easing cycle is not over yet. Focus will turn to the MPC minutes to be released on Dec 17. More on BoE here

November Manufacturing PMI for the UK also dropped more than expected to 34.4 (consensus: 39.2). This is the 7th straight month that the index showed a contraction in the nation's manufacturing sector. Services PMI surprised on the downside to 40.1(consensus: 41.2, Oct: 42.4), the 7th straight month of contraction and the lowest level since the index began in 1996. Construction PMI came in at 31.8, worse than consensus of 33.5 and October's 35.1, the lowest level since the index began in 1997, and the ninth consecutive month that the index stayed below 50. Nationwide Consumer Confidence Index fell to 50 (consensus: 50, October: 56), the lowest level since the survey began in May 2004. Halifax house prices sank -2.6% mom, -14.9% yoy in Nov. The average house price stood at 163k pounds, the lowest level since July 2005 but still higher than 90k pounds in November 1998.

(consensus: -1%) in November from last month, according to a report by Halifax. Worse still, October's figure was revised down to -2.4% from + 2.3%. Year on year, house prices have declined 14.9% from 13.7%. The average house price stood at 163 605 pounds, the lowest level since July 2005 but still higher than 90 000 pounds in November 1998. Volume, on the other hand, has been stabilized as the number of mortgages approved was largely unchanged in October for the fourth consecutive month.

Swiss SVME PMI plunged for the third month in a row to 35.2 in Nov, much lower than consensus of 44.5. CPI dropped -0.7% mom in November, worse than market expectation of -0.4% and +0.5% in October. CPI rose an annualized 1.5%, compared with consensus of 1.9%. GDP was flat qoq in Q3, with yoy rate down from revised 2.6% to 1.6%.

After an unscheduled emergency meeting, BoJ decided to, effective Dec 9, accept corporate debt of BBB rating or higher in order to encourage lending and activate trading of corporate bonds and commercial papers. The BoJ will also start a new lending facility for commercial banks in January. Q3 business capex declined for the 6th quarter to 13%, worse than consensus of -10% and -6.5%.

Canadian GDP rose 0.1% mom in Sep, below expectation of 0.2%. Though, Q3 annualized growth rate came in at 1.3%, above expectation of 1.1%. Building permits dropped more than expected by -15.7% in Oct. Ivey PMI dropped more than expected to 40.2 in Nov. After two months of upside surprise, the job market in Canada shrank sharply by losing -70.6k jobs in November, largest fall since 1982. Unemployment rate climbed from 6.2% to 6.3%, below expectation of 6.4%. However that was only due to -0.3% fall in the labor force size.

RBA has the deepest rate cut since 1991, cut by 100bps, bringing the OCR down to six year low of 4.25%. More on RBA here. Retail sales surprisingly rose 0.7% mom in November, big improvement from -1.1% in September and better than market expectation of -0.2%. Current account deficit came in at -A$9.736B in 3Q08, better than consensus of a deficit of -A$11.1B. Q3 GDP increased 0.1% from Q2, lower than 0.2% as market expected, showing the economy is in its weakest growth in 8 years. On annualized basis, growth was 1.9% (2Q: 2.9). Trade balance came in at A$2.952B, brought by a strong increase in non-rural goods exports such as minerals and metal ores. The figure beat market expectation of A$ 1.41B and was more than doubled the downwardly revised A$1.25B in September.

RBNZ lowered the OCR by 150bp to 5% today. The move is consistent with consensus and pushes the interest rate to the lowest since early 2004. More on RBNZ here.

The Week Ahead

While a number of key event are scheduled this week, it remains doubtful on how markets will react to those events based on recent pattern. The key focus will remain on the above mentioned levels in DOW and dollar index. That is, whether DOW could break 8828 resistance and whether dollar index could hold above the neckline support.

Bank of Canada will announce rate decision on Tuesday and markets expect another 50bps cut in rates to 1.75%. SNB is also expected to cut rates by 50bps to 0.50% on Thursday.

Economic data to watch for include US pending home sales, import prices, trade balance, PPI, personal income and spending and retail sales; Germany ZEW and Eurozone industrial production; UK PPI, industrial production and manufacturing production, trade balance; Japan GDP, consumer confidence and industrial production; Swiss unemployment, ZEW; Canadian housing starts, trade balance; Australian unemployment rate ; New Zealand retail sales.

More Forex Technical Analysis Reports Here.

USD/CAD Weekly Outlook

USD/CAD rose sharply to as high as 1.3005 last week but failed to take out mentioned 1.2984/3015 resistance zone and retreated sharply on Friday. Short term outlook is turned neutral for the moment. Recent development argues that price actions from 1.3015 is developing into ascending triangle and another fall could now be seen to complete such pattern. Based on this view, fall from 1.3005 should be contained above 1.2125 support. Decisive break of 1.3015 will confirm that medium term up trend has resumed for 61.8% retracement of 1.6196 to 0.9056 at 1.3469. However, a break below 1.2125 will dampen this view and indicates that deeper fall should be seen to retest 1.1464 support before completing the consolidation.

In the bigger picture, preferred interpretation of the up trend from 0.9056 is that first wave rally is completed at 1.0248. Subsequent second wave consolidation was in form of triangle and finished at 0.9823. Rise from 0.9823 is treated as third wave rally and should have completed at 1.3015 already. Subsequent consolidation from 1.3015 is probably in form of triangle. Sustained break of 1.3015 will confirm that medium term up trend has resumed for 61.8% retracement of 1.6196 to 0.9056 at 1.3469. Though, note that sustained break of 1.1464 will indicate that the fifth wave is possibly completed In other words, whole rise from 0.9056 has possibly completed too. Deeper correction should then be seen in such case.

In the longer term picture, the decisive break of 55 months EMA affirms that case that a long term bottom is already formed at 0.9056 with bullish convergence condition in monthly MACD. At this moment, it's too early to conclude how far this up trend will eventually extend to. Nevertheless, note that the impulsive nature of the rise from 0.9056 indicates that the price actions after the rise from 0.9056 completes a five wave sequence will be corrective in nature, and be followed at least another medium term up trend before completing the long term rise.

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Published on  Sun, Dec 7 2008, 08:43 GMT

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Mid−Day Forex Technical Report − Risk Aversion to Dominate after Exceptionally Poor Job Report from US and Canada

Fri, Dec 5 2008, 13:52 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Risk Aversion to Dominate after Exceptionally Poor Job Report from US and Canada

Risk aversion is set to dominate the final session in the week after exceptionally poor employment report from US and Canada. Non-farm payroll report showed US economy lose -533k jobs in Nov, much worse than expectation of -340k, largest contraction in 34 years since 1974. Oct's number was revised further down from -240k to -329k. Unemployment rate climbed from 6.5% to 6.7%, hitting the highest level since 1993. This was the 11th consecutive month of contraction in payrolls and indeed, there is no signal month of expansion this year. Yen is noticeably higher across the board after the release on anticipation of lower open in the US stock markets. While USD/JPY should continues its slide, dollar could gains against commodity currencies on risk aversion.

Canadian dollar tumbles sharply after the release of much worse than expected employment report. After two months of upside surprise, the job market in Canada shrank sharply by losing -70.6k jobs in November, largest fall since 1982. Unemployment rate climbed from 6.2% to 6.3%, below expectation of 6.4%. However that was only due to -0.3% fall in the labor force size. The Canadian dollar is additional hit by weakness in crude oil which tales out 43 level today.

Germany factory orders dropped sharply by -6.1% mom, -17.5% yoy in Oct, much worse than expectation of 0.4% mom and -12.1% yoy. Bundesbank said in the semi-annual macroeconomic projections that inflation in Germany could turn negative by mid 2009, unemployment rate could reach 8.1% and GDP is expected to contract -0.8%.

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USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 91.70; (P) 92.58; (R1) 93.09; More.

USD/JPY dives to as low as 91.59 in early US session and further decline is still expected to retest 90.92 low. Sustained break there will confirm that medium term fall from 110.66 has resumed However, note that the lack of impulsive structure of the fall from 100.54 so far is still arguing that it might be part of the consolidation that started at 90.92. Above 93.46 will turn intraday outlook neutral first. Further break of 95.74 resistance will indicate that fall from 100.54 has possibly completed. The corrective structure in turn suggests that consolidation from 90.92 is still in progress and stronger rally should be seen to retest 100.54 before completion.

In the bigger picture, as long as 103.06 cluster resistance (61.8% retracement of 110.66 to 90.92 at 103.12) holds, medium term outlook remains bearish. Prior break of 95.77 low confirms that whole down trend from 124.13 has resumed and should target 100% projection of 124.13 to 95.77 from 110.66 at 82.3 next. Also, note that the current development clears out the long term picture too. Price actions that started from 79.75 (95 low) has completed in form of a triangle that ended with five waves to 124.13. In other words fall from 124.13 is just part of an even larger scale down trend which could extend further to retest 79.75 low.

On the upside, sustained break of 103.06 cluster resistance will firstly argue that fall from 110.66 has completed. Secondly, it will also argue that a medium term low is in place at 90.92 and outlook will be turned neutral with focus back to 110.66 high.

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Published on  Fri, Dec 5 2008, 13:52 GMT

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Daily Forex Technical Report − Dollar at Critical Point ahead of Non−Farm Payroll

Fri, Dec 5 2008, 06:56 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar at Critical Point ahead of Non-Farm Payroll

Short term outlook of the dollar is at a critical point ahead of non-farm payroll today. Dollar index's sharp retreat from 87.68 argues that rebound from 84.78 might be completed and turned intraday outlook neutral for the moment. More importantly, the lack of decisive momentum is now raising the possibility that dollar index is completing a head and shoulder top formation (ls: 87.87, h: 88.46, rs: 87.68). However, we must emphasize that it's not advisable to jump ahead before the pattern is formed. Firstly, any rise above 87.68 will dampen the chance of this head and shoulder top scenario and indicate that recent up trend is still intact. Secondly, break of the neckline support at 85.38 will be be an important alert that such head and shoulder pattern has completed. While one could enter short in such case, this should not be taken as the confirmation that a medium term top is formed yet. Sustained break of 83.11 is still needed to be the confirmation. Thirdly, any strong rebound above 83.11 will argue that dollar index could indeed be just unfolding as in triangle consolidations. In any case, head and shoulders look-alikes are always tricky to trade. The non-farm payroll report to be released today could be the trigger.

Elsewhere, the themes in the forex markets are pretty much unchanged. Yen remains firm against dollar and in crosses. EUR/USD's consolidation continues with the support from Euro's strength in EUR/GBP which hit record high of 0.8723. Commodity currencies are mixed with clear weakness seen in the Canadian dollar as crude oil dived to as low as 43.36. AUD/USD, on the other hand, continues to trade in tight range.

Job market in US is expected to lose 320k jobs in Nov unemployment rate would have risen to 6.8%, the worst in 7 years. However, as employment surveys have shown signs of aggressive job cuts by employers recently, we think it's possible that the actual data will surprise on the downside. In November, initial jobless claims reached a 16-year high at 543k, 64k higher than October. Although initial jobless claim came in better than expected at 509k, the data was affected by Thanksgiving holiday and should not be used as an indicator for recovery. Indeed, the 4-week moving average for initial jobless claims rose to 525k and continuing claims rose to 4.09M, the highest since 1982. Also, note that employment component of both ISM indices hit record low in Nov. ADP private job report showed 250k losses, a record. Challenger report showed 148% jump in planned layoffs, highest since 2002. There's nothing to cheer about.

Employment report in Canada will also be released today and is expected show -25k job loss in November, down from 9.5k growth a month ago. This will push the unemployment rate up to 6.4% from 6.2%.

The market expects a rebound in Germany factory order in October to +0.4% from -8% in September. Orders have been falling for 8 consecutive months and the September data was extraordinarily weak. It¡¦s likely for a technical rebound in October. However, on annual basis, the gauge will still fall 12.1% in October, much lower than the 2.7% decline in September. For the remaining of Q4, we expect the data to remain weak.

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USD/JPY Daily Outlook

Daily Pivots: (S1) 91.70; (P) 92.58; (R1) 93.09; More.

USD/JPY dips further to 92.06 and at this point, intraday bias remains on the downside as long as 93.46 minor resistance holds. The fall from 100.54 is still expected to extend further to retest 90.92 low. However, note that the lack of impulsive structure of the fall from 100.54 so far i