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Daily Forex Technical Report

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Mid−Day Forex Technical Report − Weakness in Yen and Sterling Persists

Mon, Jan 29 2007, 14:58 GMT
by ActionForex.com Team

ActionForex.com

Forex Mid-Day Technical Report

Weakness in Yen and Sterling Persists

Sterling and Japanese yen remain weak against dollar in quiet trading today. Upbeat CBI distributive trade, what beat expectation of 14 and rising to a reading of 30 in Jan, was ignored by the markets as Sterling edges further lower to 1.9547. Focus remains on adjusting positions after last week's dovish BoE minutes that practically eliminated the chance for a Feb hike.

After breaking to a fresh four year high at 122.17 earlier today, USD/JPY turns sideway. However, there is no apparent buying the the Japanese yen that pushes for a stronger recovery. Short term outlook in the yen remains bearish. In particular, overnight's weak retail sales data are suggesting that markets will get another disappointment in the household spending data in the coming Asian session.

Elsewhere, dollar is mixed, staying range bound against Euro and Swissy, rising against Aussie but falling against Lonnie. Traders should remain cautious today and tomorrow, waiting for the upcoming key events of GDP, FOMC and then NFP that could spark much higher volatility in the markets.

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

GBP/USD

Daily Pivots: (S1) 1.9543; (P) 1.9612; (R1) 1.9667; More

Cable edges further lower to 1.9546 today. At this point, intraday bias remains on the downside as long as cable stays below 1.9614 minor resistance. Further decline is expected to follow towards rising trend line (1.8517 to 1.8834, now at 1.9469).

Above 1.9614 will turn intraday outlook consolidative and bring some mild recovery. But still, break of 1.9679 is needed to indicate that fall from 1.9913 has completed. Otherwise, risk of another fall remains.

In the bigger picture, right now, we already have bearish divergence conditions in weekly RSI, daily MACD and RSI. Sustained break of 1.9588 cluster support will be the a warning that whole rise from 1.8517 has completed earlier than we thought. Break of mentioned rising trend line support will confirm such case and bring much deeper decline towards 1.9237/61 cluster support (23.6% retracement of 1.7047 to 1.9913 at 1.9237). Decisive break of this 1.9237/61 cluster support will add much weight to the case that whole medium term up trend from 1.7047 has already completed and much deeper decline should be seen towards next cluster support at 1.8834 (38.2% retracement of 1.7047 to 1.9913 at 1.8818).

Meanwhile, a strong break above 1.9679 resistance is needed to save that case that rally from 1.9261 is still in progress. In such case, further rise should be seen to retest 1.9913 high and break will confirm whole rally from 1.8517 has resumed. But still, close attention will be paid to sign of loss of upside momentum and reversal pattern formation as cable approaches key 2.0106 cluster resistance (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067) as the whole medium term up trend from 1.7047 could complete at or below this level.

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Published on  Mon, Jan 29 2007, 14:58 GMT