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Daily Forex Technical Report

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Daily Forex Technical Report − Yen Rebounds Further, German Ifo and US Housing in Focus

Thu, Jan 25 2007, 07:53 GMT
by ActionForex.com Team

ActionForex.com

Forex Daily Technical Report

Yen Rebounds Further, German Ifo and US Housing in Focus

The Japanese yen strengthen further across the board today as traders continues to take profit on carry trades. There are speculations that European officials want to complain over the yen's weakness at next months G7 meeting. Eurozone finance ministers will draft a common position for the meeting and it's believed that they will include a more forceful message about yen's weakness. Though, Japanese Finance Minister Koji Omi has denied he had heard about yen being a topic in the upcoming meeting. Further support on yen was provided after BoJ policy Board Member Miyako Suda said that policy makers shouldn't spend too long examining economic data before raising interest rates, if it is convinced the economy is moving in line with its scenario. He said that "by taking too much time in confirming, there is a risk of being too late in raising rates, forcing us to step up the pace of future rate hikes."

Overnight, RBNZ kept rate unchanged at 7.25% as widely expected. Governor Bollard remains hawkish as he said that "in the absence of clear indications of a moderation in housing and domestic demand, it is likely that further policy tightening will be required." However, inflation is expected to "decrease considerably" this year as energy prices fall even though is will accelerate again in 2008 and be in the upper end of his target range of 1-3%. So, it's still a close call on whether RBNZ will raise rates again in first quarter and that will very much depends on the upcoming housing and domestic growth data. Nevertheless, kiwi was boosted mildly after the announcement.

Focus in the European session will be on German Ifo Business Climate. In Dec, the index rose to a 16 year high of 108.7 and is expected to rise further to 109.0 in Jan on the back on falling energy prices. And unless there's a sharp retreat, it shouldn't alter the expectation that ECB will hike in March. Housing data will be the main focus in US session with existing home sales expected to drop mildly to 6.25m annualized rate in Dec. Existing home sales has stabilized after reaching a low of 6.21m last Sep. Today's data will continue to show stabilization in housing markets slowdown.

Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.

EUR/USD

Daily Pivots: (S1) 1.2933; (P) 1.2985; (R1) 1.3021; More

EUR/USD's fall from 1.2042 extends further to 1.2946 before turning sideway. Break of 1.2965 resistance turned support suggests that the rebound from 1.2865 has completed at 1.3042, limited below mentioned 1.3052 cluster resistance (38.2% retracement of 1.3364 to 1.2865 at 1.3057). At this point further decline is expected to follow to retest 1.2865 low. Break will confirm that the fall from 1.3296 has resumed for 1.2760 support. On the upside, above 1.3004 resistance will turn focus back to 1.3052 cluster resistance again.

In the bigger picture, an important medium term top could be in place at 1.3364 already, in particular, with bearish divergence condition in weekly MACD and RSI. Sustained break of 1.2760, which will probably have medium term rising channel line (now at 1.2732) taken out too, will add much weight to the case that whole medium term up trend from 1.1639 has completed. Focus will then be on 1.2483 cluster support (50% retracement of 1.1639 to 1.3364 at 1.2502). Decisive break of 1.2483 cluster support will confirm this case and have medium term outlook turned bearish.

On the upside, sustained break of 1.3052 cluster resistance will indicate the fall from 1.3364 has possibly completed after drawing support from resistance line (1.2978 to 1.2937, now at 1.2853). This will also save the case that medium term up trend from 1.1639 is still in progress with EUR/USD kept inside the rising channel. Break of 1.3296 resistance will suggest the rise from 1.2483 has possibly resumed and EUR/USD could make a new high above 1.3364 before finally making a top on above mentioned bearish divergence condition in weekly chart.

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Published on  Thu, Jan 25 2007, 07:55 GMT