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Daily Forex Technical Report

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Daily Forex Technical Report − Markets Look Forward to US GDP and FOMC Statement

Wed, Jan 31 2007, 07:42 GMT
by ActionForex.com Team

ActionForex.com

Forex Daily Technical Report

Markets Look Forward to US GDP and FOMC Statement

Dollar remains bounded in tight range ahead of FOMC announcement and a handful of economic data today. Markets will likely remain quiet before US Q4 GDP data where volatility should jump up. A solid 2.9% growth is expected in the Q4 GDP and if that's confirmed, dollar will likely be boosted as expectation will then be built up for a more upbeat FOMC statement that reflect recent improvements of growth outlook.

Fed is widely expected to keep its target rate unchanged at 5.25% today. Once again the focus will be on the accompanying statement. There were three major developments since last meeting in Dec. Economic indicators has be resilient and showed that the US economy grew near potential in the fourth quarter. Inflation eased moderately but the pace certainly slow. More importantly, Fed members has shifted to a more hawkish stance in their speeches, saying that growth outside housing sector remains firm and inflation pressure may moderate slower than they would like to see. Hence, the statement's wordings on inflation is not expected to change but the wordings about "recent indicators have been mixed" could be modified to reflect the current growth outlook, leaving the statement a slightly more hawkish statement than the prior one.

A series of better than expected key economic data, in particular the retails sales and trade balance, pointed to a stronger growth in the US economy in the last quarter of 2006. Consensus expects that US GDP has grown at a quicker pace of 2.9% in Q4, comparing to prior quarter's 2.0%. GDP price index growth is expected to drop from 1.9% to 1.7% while core PCE rise is expected to stay at 2.2%, suggesting that price pressure continues to moderate slowly. Chicago PMI is expected to rise slightly from 51.6 to 52.0 in Jan while construction spending is expected to rebound from Nov's -0.2% to 0.1% rise in Dec. ADP employment data, which is used as preview to Non-farm payroll, is expected to 122k job growths in Jan.

Euro was steady after yesterday's Germany CPI data which saw a surprised drop of -0.1% mom in Jan. Just released, Germany retail sales rose much more than expected by 2.4% in Dec, comparing to prior -0.7% and expectation of 1.3%. More data from the Eurozone will be featured today including Germany and Eurozone unemployment, Eurozone consumer confidence. HICP inflation is expected to accelerate from Dec's 1.9% to Jan's 2.1%.

Swiss franc remains pressured on carry trade and is pressing record low against euro with EUR/CHF at 1.6253. KOF Leading indicator, which serves as a predictor of further economic activities, is expected to continues it's downtrend that started last Jul and fell further from 1.6 to 1.56 in Jan. UK Gfk consumer confidence is expected to drop further from -8 to -9 in Jan.

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

USD/CHF

Daily Pivots: (S1) 1.2491; (P) 1.2517; (R1) 1.2538; More.

USD/CHF's retreat from 1.2545 was contained above mentioned 1.2486 support and strengthens mildly today. Though, it's still bounded in recently established range as USD/CHF hasn't taken out medium term falling trend line resistance (1.3238 to 1.2768, now at 1.2546) yet. At this point, further rally is still in favor as long as USD/CHF stays above 1.2486 minor support. Sustained break of the trend line resistance should bring further rise towards 1.2768 cluster resistance (61.8% retracement of 1.3283 to 1.1878 at 1.2746). On the downside, below 1.2486 will turn intraday outlook consolidative first but pullback should be contained above 1.2422 support and bring rally resumption.

In the bigger picture, decisive break of medium term trend line resistance will also indicate that whole medium term down trend from 1.3283 has already completed at 1.1878. Further rally should be seen towards 1.2768 cluster resistance first. Decisive break of 1.2768 cluster resistance will add much weight to the case that whole corrective rise from 1.1288 (04 low) has resumed and further rally should be seen towards 1.3283 (06 high) or above.

On the downside, break of 1.2422 support will also have short term rising channel (now at 1.2448) taken out too. With bearish divergence conditions in 4 hours MACD and RSI as background, this could indicate that the whole rise from 1.1878 has completed, after failing to break mentioned medium term falling trend line. Deeper correction should then be seen towards 1.2268 resistance turned support in such case.

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Published on  Wed, Jan 31 2007, 07:44 GMT