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Mid−Day Forex Technical Report − Sterling Weakens after BoE on Hold, NFP in Focus Tomorrow

Thu, Apr 5 2007, 13:16 GMT
by ActionForex.com Team

ActionForex.com

Forex Mid-Day Technical Report

Sterling Weakens after BoE on Hold, NFP in Focus Tomorrow

Sterling is pressured across the board after BoE kept rate unchanged at 5.25% today. In spite of the speculation in financial markets this week, BoE opt to be on hold this time. But the sell off could be brief with the consideration that another rate hike is still widely expected in Q2, probably in May. Meanwhile, Canadian dollar surges after employment report shows that 54.9k jobs were added in Mar, much higher than expectation of 15k. Unemployment rate remained at 6.1%. Aussie turns sideway after reaching new high at 0.8210 and risk of pull back remains as bearish divergence conditions continue to display in 4 hours chart. Elsewhere, pre-holiday quiet trading continues with dollar bounded in established range against majors.

Non-farm payroll data of Mar is scheduled to release tomorrow despite Good Friday. Markets expect NFP to show 120k jobs growth in Mar, up from Feb's 97k. Unemployment rate is expected edge slightly higher to 4.6% while average earnings slow slight by rising 0.3%. The employment components of ISM indices released this week are posting some downside risk to NFP. Manufacturing employment dropped into contractionary territory again in Mar, while service employment as dropped to very close to 50 level. Attention will also be paid to any revision on Feb's figure.

We'll take a session off tomorrow and be back after NFP release.

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

GBP/USD

Daily Pivots: (S1) 1.9725; (P) 1.9749; (R1) 1.9782; More

Cable's correction from 1.9824 extends by falling sharply to as low as 1.9668 so far. At this point further decline is in favor as long as cable stays below 1.9769 minor resistance. With bearish divergence condition in 4 hours MACD and RSI a short term top could be in place at 1.9824 already. Break of 1.9662, together with short term rising channel, will confirm this and bring deeper pull back towards 1.9545 support. But still, downside should be contained by 1.9434 cluster support (1.9183 to 1.9824 at 1.9428).

On the upside, above 1.9769 will indicate corrective fall from 1.9824 has completed. More importantly, this will keep cable within the short term rising channel and hence, keeping favor to the case that further rise will be seen in short term before having some lengthier consolidation. Break of 1.9824 will encourage further rally towards 1.9913 high.

In the bigger picture, rise from 1.8090 is still in progress after corrective fall from 1.9913, which should have completed with three waves down to 1.9183, was supported by 1.9215/17 cluster support (50% retracement of 1.8517 to 1.9913 at 1.9215, 38.2% retracement of 1.8090 to 1.9913 at 1.9217). The rise from there should represent resumption the whole rally from 1.8090 and hence further upside is expected.

However, with bearish divergence conditions being displayed in weekly RSI and daily MACD a medium term top could be around the corner. The up trend from 1.7047 could make a top after reaching 2.0046/0106 cluster resistance zone (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067, 61.8% projection of 1.8517 to 1.9913 from 1.9183 at 2.0046. And hence, focus will be on reversal signal as cable approaches these levels.

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Published on  Thu, Apr 5 2007, 13:16 GMT

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