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Daily Forex Technical Report

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Daily Forex Technical Report − EUR/USD Watching Ifo and US Existing Home Sales, Sterling Hammered

Tue, Sep 25 2007, 06:30 GMT
by ActionForex.com Team

ActionForex.com

Forex Daily Technical Report

EUR/USD Watching Ifo and US Existing Home Sales, Sterling Hammered

EUR/USD retreats mildly as traders take profits ahead of two sets of important data today. Germany Ifo will be featured in European session first. The business confidence indicator peaked has been in a steady down trend since reaching 108.6 in Apr/May this year It's expected to drop further from 105.8 to 105.0 in Sep, lowest level in a year, due to recent financial market turmoil and strength of Euro. Current condition index is also expected to dip below 100 level for the first time since last Oct. But after all, the readings are still high and is not expected to alter the expectation of further tightening from ECB unless the deterioration is much worse than consensus.

The more market moving data could indeed be existing home sales in US. Sales is expected to drop another -4.6% to 5.49M annualized rate in Aug, reaching a 5 year low. Such deterioration in the housing market will continue to solidify expectation for further rate cut from Fed this year and maintain the selling pressure on the greenback. Conference Board consumer confidence is also expected to drop to 13 month low of 104 in Sep.

Overnight, Sterling staged a sharp intraday reversal and was hammered against dollar again. Newspaper reported the Financial Services Compensation Scheme, UK's deposit protection scheme which took over a 9 million pound fund from its predecessor is holding only 4.4 million pounds after payouts to depositors with collapsed credit unions. IMF also warned that the UK sub-prime mortgage market is comparable to the US.

BoJ minutes of the Aug meeting revealed that some members said if the bank was confident of the economy, a rate hike should not be delayed. Though the meeting was resulted in an 8-1 vote to keep rates unchanged at 0.5%. CSPI rose 1.0% yoy in Aug, below expectation of 1.6%. Nevertheless, the yen is mildly higher on risk aversion.

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

GBP/USD

Daily Pivots: (S1) 2.0173; (P) 2.0245; (R1) 2.0293; More

Cable's rally from 2.1.9879 was limited at 2.0320 and reversed sharply lower after failing to stay firmly above falling trend line resistance (now at 2.0303). With 2.0365 high remains intact, the rebound from 1.9652 is still treated as a correction to fall from 2.0652 only and is regarded as completed at 2.0365. Further downside should could be seen towards 1.9951 support and break will confirm that short term bias is turned back to the downside for 1.9879 low and then 1.9652. Above 2.0204 will turn intraday outlook neutral again.

In the bigger picture, with cable staying above 1.9621 support as well as 55 weeks EMA (now at 1.9624), there is no confirmation of long term reversal yet. But still, a medium term top is in place at 2.0652 with bearish divergence condition and daily and weekly MACD. Break of 1.9652 low will confirm that correction from 2.0652 has resumed for 1.9365/71 cluster support (100% projection of 2.0652 to 1.9652 from 2.0365 at 1.9365, 50% retracement of 1.8090 to 2.0652 at 1.9371). Also, sustained trading below 1.9621 support will add more weight to the case that whole rally from 1.7047 has indeed completed after failing 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677 and bring deeper decline to next support zone of 1.9183 and 38.2% retracement of 1.7047 to 2.0652 at 1.9275 first.

However, above 2.0365 high will revive the case that price actions from 2.0652 is probably developing into sideway consolidation only. But still, 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677 remains a key resistance. Decisive break of this resistance is needed to confirm rally from 1.7047 has resumed for 100% projection of 1.3680 to 1.9554 from 1.7047 at 2.2901. Otherwise, another fall could still be seen before completing the consolidation.

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Published on  Tue, Sep 25 2007, 06:31 GMT