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Daily Forex Technical Report

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Mid−Day Forex Technical Report − Euro in Range, Sterling Retreats after Central Banks on Hold

Thu, Sep 6 2007, 13:39 GMT
by ActionForex.com Team

ActionForex.com

Forex Mid-Day Technical Report

Euro in Range, Sterling Retreats after Central Banks on Hold

Euro stays in tight range while Sterling retreats mildly term ECB and BoE left rates unchanged. ECB kept rates unchanged at 4.00% today. In the following press conference, Trichet said that even though policy stance is still on the "accommodative side" and inflation risks remains on the upside in the medium term, more information is needed before the next policy move. Also Trichet said that it's too early to draw conclusion from the current correction in risk reassessment. No "vigilance" was used by Trichet this time which suggests that ECB will be on hold for a while, at least, till Oct. One thing to note is that Trichet emphasized a few times that ECB has to ensure that money markets function properly whatever the interest rate is and that this is completely separate topic to maintaining price stability. Also, ECB announced a new long-term refinancing operation as a supplementary operation will be conducted, the details of which will be available right after the press conference.

BoE kept rates unchanged at 5.75% as widely expected. In the accompanying statement BoE expect inflation to remain close to its 2% target, or a "little below", in the next few months. Also, "tentative signs of a lowing in consumer spending" is noted. But "indicators of pricing pressure remain somewhat elevated. " Regarding the recent credit crunch, BoE noted that it's too soon to tell how the disruption in financial markets will impair the availability of credit to companies and households but will monitor closely the evolution of both "credit spreads" and the "quantities of credit extended". more details will be available in the minutes to be published on Sep 19.

From US, jobless claims dropped more than expected to 318k. Q2 productivity accelerated more than expected to 2.6% while unit labor costs slowed to 1.4%, suggesting reduced risk of wave inflation. Next will be ISM Non-manufacturing Index. Dollar has been pressured since yesterday's poor ADP and pending home sales. Additional pressure will be seen in case of downside surprise in today's ISM non-manufacturing index as markets are already speculating and poor NFP number tomorrow.

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

EUR/USD

Daily Pivots: (S1) 1.3586; (P) 1.3628; (R1) 1.3688; More

EUR/USD turns into consolidation in tight range into US session, after ECB kept rates unchanged at 4.00%. Nevertheless, further rise is still in favor as long as 1.3599 minor support holds. retest of 1.3719 should be seen and break will indicate rise from 1.3360 has resumed for a retest of key resistance zone of 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822 and 1.3851 high. However, below 1.3599 support will indicate that price actions from 1.3719 is possibly developing into deeper pull back will put support zone of 1.3449 and 1.3543 into focus. Also, break of 1.3543 will be the first alert that rebound from 1.3360 is merely a correction to fall from 1.3851 only and will put 1.3449 support into focus.

In the bigger picture, EUR/USD is still kept above mentioned long term cluster support at 1.3328/29 (38.2% of 1.2483 to 1.3851 at 1.3328 and 23.6% retracement of 1.1639 to 1.3851 at 1.3329), as well as 55 weeks EMA (now at 1.3247). There is no confirmation of completion of up trend from 1.1639 yet. Also, the corrective nature of the fall from 1.3851 to 1.3360 suggest that it's merely a correction, or part of a consolidation to the medium term rally. However, since 1.3822/51 is an important medium term resistance zone, sustained break of this zone is needed to confirm long term up trend from 1.1639 has resumed. Otherwise, medium term outlook will remain neutral and another fall could be seen to 1.3360 low or below before completing the consolidation.

On the downside, 1.3262 low will be the support level to pay attention too. Medium term outlook will still be neutral as long as this support holds. However, decisive break of this level will add favor to the case that whole up trend from 1.1639 has completed and bring further fall to 1.2978 (medium term resistance turned support) first.

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Published on  Thu, Sep 6 2007, 13:39 GMT