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Daily Forex Technical Report

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Mid−Day Forex Technical Report − Markets Steady after ECB and BoE, Bernanke Next

Thu, Nov 8 2007, 14:40 GMT
by ActionForex.com Team

ActionForex.com

Forex Mid-Day Technical Report

Markets Steady after ECB and BoE, Bernanke Next

Euro remains steady in tight range below after ECB left rates unchanged at 4.00% as widely expected. During the following press conference, Trichet acknowledged that recent data confirms upward pressures in inflation and reiterates that ECB stands ready to act in a firm and timely manner to ensure price risks do not materialize. ECB sees inflation rise above 2% in coming months and will start to moderate again next year. Risks on economic growth remains on the downside "in view of the potential impact of prolonged financial-market volatility and the re-pricing of risks". After all, ECB is still in a wait-and-see mode and tightening bias is maintained to anchor inflation expectations. Link to Trichet's Introductory Statement

BoE left rates unchanged at 5.75% as widely expected. No policy statement is released and markets' focus will turn to the Inflation Report on Nov 14 details on inflation and output projections and MPC minutes on Nov 21 for vote split and views of the MPC members. Sterling edges to new 26 year high of 2.1086 after the announcement.

Market's attention is turning to Bernanke's testimony before the Joint Economic Committee in this US morning. Recent Fedspeaks provided mixed markets and markets will now turn to Bernanke for a clear message on both growth and inflation, dollar's weakness, housing downturn and financial markets volatility for adjusting the expectation for further rate cut from Fed, which is now priced near 70% chance at the Dec FOMC meeting.

Data released in US session saw US jobless claims dropped more than expected to 317k. Canada housing started unexpected dropped to 219.5k while new house price index also rose less than expected by 0.3% only.

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

GBP/USD

Daily Pivots: (S1) 2.0895; (P) 2.0982; (R1) 2.1106; More

Cable edges higher to 2.1061 in early US session and at this point, further rise is still expected as long as 2.0928 minor support holds. Sustained trading above resistance zone of 2.1 psychological resistance and 161.8% projection of 1.9652 to 2.0365 from 1.9879 at 2.1033 will encourage further rally to next short term target of 200% projection of 1.9652 to 2.0365 from 1.9879 at 2.1305 first. Below 2.0928 will turn intraday outlook consolidative first and probably bring pull back to 4 hours 55 EMA (now at 2.0799). But downside should be contained above 2.0538 resistance turned support and bring another rise.

In the bigger picture, rise from 1.7047 is treated as resumption of long term up trend from 1.3680. Sustained break of 61.8% projection level at 2.0677 now encourage further medium term rally to next projection target of 100% projection 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.2921. On the downside, a break below 2.0538 support will indicate deeper correction is underway. But still, the rise from 1.7047 should still be in progress as long as 1.9652 medium term support holds.

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Published on  Thu, Nov 8 2007, 14:41 GMT