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Daily Forex Technical Report

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Mid−Day Forex Technical Report − Dollar Higher Ahead of FOMC Minutes, EUR/JPY Remains Strong

Wed, Apr 11 2007, 14:38 GMT
by ActionForex.com Team

ActionForex.com

Forex Mid-Day Technical Report

Dollar Higher Ahead of FOMC Minutes, EUR/JPY Remains Strong

Dollar is seen higher against Swiss Franc and Japanese Yen while remaining steady against Euro ahead of FOMC minutes. The minutes will be closely parsed by the markets for clues on future path of monetary policy of the Fed. But we believe that Bernanke should have elaborated most of the important points in the testimony to Joint Economic Committee. Those include change of wordings in last FOMC statement like replacing "additional firming", by "Future policy adjustments" which was then taken by the market as a clue for possible rate cut. Also, economic outlook was somewhat down graded, in particular the housing market was changed from "some tentative signs of stabilization" to "adjustment …is ongoing"

After all, Fed will likely remain hawkish and emphasize inflation as the predominant concern, in particular after core inflation bottomed at 2.6% last Dec and reaccelerated to 2.7% since then. As the economy continues to develop in a way that inflation pressure remains high, labor markets remain tight while capital spending and housing continues to slow down, the Fed's rate decision will become tighter. And hence, believe the most important focus should be the view of individual members and the change in hawkishness and dovishness of individual voting member will become more important. Before the FOMC minutes, Bernanke's speech will be also be closely watched.

Elsewhere, EUR/JPY remains strong and continues to make record higher today. Note that carry trade remains one key market moving factor with swissy and yen, as low yield currencies, continuing to weaken across the board. Sterling was earlier boosted by speculation that Treasury will propose allowing British based multinational companies to repatriate foreign profits free of tax, but upside against dollar is still limited by near term resistance of 1.9824.

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

USD/CHF

Daily Pivots: (S1) 1.2115; (P) 1.2192; (R1) 1.2243; More

USD/CHF's fall from 1.2281 was supported by the inner rising trend line and recovers strongly since then. Touching of 1.2212 minor resistance indicates that an intraday low is formed and further recovery is now in favor. Break of 1.2212 will likely encourage a retest of 1.2281 resistance. On the downside, even though a break below 1.2142 will encourage further fall towards 1.2082 support, consolidation from 1.2029 could still be in progress as long as USD/CHF stays above 1.2082 support. Another rise towards next cluster resistance at 1.2354 (61.8% retracement of 1.2550 to 1.2029 at 1.2351) cannot be ruled out. Break of 1.2082 is needed to indicate that consolidation from 1.2029 has completed and bring retest of this 1.2029 cluster support (78.6% retracement of 1..1878 to 1.2571 at 1.2026).

In the bigger picture, medium term outlook remains bearish with USD/CHF staying below both 55 days EMA and 55 weeks EMA. Daily and weekly MACD is still staying negative, supporting this view too. The preferred interpretation at this point is that the whole down trend from 1.3283 is still in progress with the first move from 1.3283 finished with three waves down to 1.1919. Subsequent rebound to 1.2768 was the interim correction and price actions from there represent resumption of such down trend. Further decline should be seen to 1.1878 low and sustained break will add more credence to this view and bring further medium term weakness towards 100% projection of 1.3283 to 1.1919 from 1.2768 at 1.1404.

However, note that USD/CHF is still bounded in wide range of 1.1878 to 1.2768. A rebound to above 1.2354 resistance will dampen this view and indicate that the fall from 1.2571 has completed after meeting 1.2027 fibo support. Another rise could then be seen to retest this high and then the upper end of the range at 1.2768.

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Published on  Wed, Apr 11 2007, 14:37 GMT