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Daily Forex Technical Report

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Daily Forex Technical Report − Services Data Dominate Focus Today

Mon, Feb 5 2007, 07:49 GMT
by ActionForex.com Team

ActionForex.com

Forex Daily Technical Report

Services Data Dominate Focus Today

Dollar extends Friday's gain against European majors in a day with lots of service industry data. Services PMI from Germany, Eurozone and UK will be featured in European session today. Eurozone Services PMI is expected to ease slightly in Jan, dropping from 57.6 to 57.0. Meanwhile UK Services PMI is also expected to retreat slightly from 60.0, after reaching the highest level since Jun 97 at 60.6 last month. ISM non-manufacturing index in Jan is expected to remain solid and rise slightly to 57.0.

Meanwhile, the Japanese yen also edges higher as G7 speculation continues. Whether the yen's weakness will be a topic of criticism by European officials in the upcoming meeting this weekend remains to be seen. But this is an event risk that yen traders won't ignore and thus, we will likely see some unwinding of carry trades ahead of the meeting.

Overnight, Australian dollar weakened mildly after weaker than expected retail sales report which showed retail sales grew a mere 0.3% in Dec only, comparing to consensus of 0.5%. Markets have scaled back their expectation for a rate hike from RBA later this week after disappointing Q4 CPI inflation data from Australia. The retail sales report has done nothing to revive the rate hike expectation.

On the other hand, the New Zealand dollar was boosted by data showing accelerating wages growth in New Zealand that sparked further speculation that RBNZ will raise rate in their next policy meeting. According to data released by Statistics New Zealand, labor cost index jumped 3.2% yoy in the Dec quarter following a 2.9% increase the prior period. Private sector hourly earnings shot up 5.4% over the same period.

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

USD/JPY

Daily Pivots: (S1) 120.69; (P) 121.01; (R1) 121.41; More

USD/JPY's rebound from 120.07 was limited at 121.34 and weakens again today, now pressing mentioned 120.61 support. As discussed before, since a short term top should be formed at 122.17, after subsequent fall has taken out short term rising channel and with bearish divergence condition remaining in 4 hours MACD and RSI. Hence short term outlook remains consolidative and risk of another fall remains. Break of 120.07, will also complete a short term head and shoulder top formation, and will further confirm this case. In such case, deeper correction is expected to follow towards 55 days EMA (now at 119.28). On the upside, firm break above 122.17 is needed to indicate rise from 114.41 has resumed.

In the bigger picture, with medium term up trend from 108.99 remain in force, favor is still on the case that rise from 108.99 represents resumption of long term up trend from 101.66. The preferred interpretation of the rise from 108.99 is that the first move has completed at 117.87. Subsequent price actions to 113.95, 119.86 and 114.41 is treated as interim consolidation that's skewed upward by the rise to 119.86. Rise from 114.41 is treated as resumption of the whole up trend. With this interpretation, the correction from 122.17 should be contained above 117.96 support and bring further rally towards next upside target of 100% projection of 108.99 to 117.87 from 114.41 at 123.29 first.

However, decisive break of 117.96 support will rise some doubt about this interpretation In such case, a deeper decline should follow to retest medium term rising channel (now at 115.68) first. A break of this channel will swing favors back to the case that another medium term decline should be seen towards 108.99 low before completing the whole long term consolidation that started at 121.38.

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Published on  Mon, Feb 5 2007, 07:49 GMT