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Daily Forex Technical Report

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Daily Forex Technical Report − Dollar Remains Firm ahead of FOMC

Wed, May 9 2007, 07:50 GMT
by ActionForex.com Team

ActionForex.com

Forex Daily Technical Report

Dollar Remains Firm ahead of FOMC

Dollar remains firm ahead of FOMC rate decision today which is widely expected to hold rates unchanged at 5.25%. The strength in the greenback ahead of this event risk is believed to be due to speculation that Fed won't materially change the language of the accompanying. statement. That is, inflation will remain FOMC member's "predominant" concern despite recent sign of resumed moderation as shown in core CPI and core PCE deflator. Meanwhile, despite recent mixed indicators, the committed would continue to believe the economy will continue to expand at a moderate pace over the coming quarters. Such a statement should delay dollar bears' expectation of a rate cut and trigger some more coverings in dollar short position, at least in the near term.

Euro remains weak across the board today, showing little reaction to higher than expected German trade surplus in Mar which increased to 18.4b. However, both imports and exports contracted. Yen rebounds on speculation of further carry trade unwinding. After all, technically speaking, Euro's outlook has turned weaker against both dollar and yen after yesterday's fall has taken out short term rising channel support and hence, further downside is anticipated in these pairs, at least in short term.

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

USD/CHF

Daily Pivots: (S1) 1.2122; (P) 1.2159; (R1) 1.2216; More

USD/CHF's rebound from 1.2079 extends sharply to as high as 1.2194 before retreating mildly. Break of 1.2170 resistance indicates that whole rebound from 1.1993 has resumed. At this point, intraday bias remains on the upside as long as USD/CHF stays above 1.2148 minor support and further rally is still expected to follow. With bullish convergence condition in 4 hours MACD and RSI as well as daily MACD and RSI, 1.1993 should at least be a short term bottom and further rise should be seen towards 1.2282 cluster resistance (50% retracement of 1.2571 to 1.1993 at 1.2282).

On the downside, touching of 1.2148 will turn intraday outlook consolidative first but it will take a break of 1.2079 support to turn short term focus back to 1.1993 low. Otherwise further rally is still in favor.

In the bigger picture, firstly, note that weekly MACD remains below signal line and USD/CHF is still trading comfortably below 55 weeks EMA (now at 1.2358), medium term risk remains on the downside and the current rebound from 1.1993 could merely be part of a sideway consolidation to the whole fall from 1.2571. The original case is still in favor as long as 1.2282 cluster resistance holds. That is 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. Break of 1.1993 low will add more credence to this case and bring further decline to 1.1878 low.

However, strong break of 1.2282 cluster 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, May 9 2007, 07:50 GMT