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Daily Forex Technical Report − EUR/USD Breaks 1.49 in Thin Market, Heading to 1.5

Fri, Nov 23 2007, 07:33 GMT
by ActionForex.com Team

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Forex Daily Technical Report

EUR/USD Breaks 1.49 in Thin Market, Heading to 1.5

EUR/USD takes out 1.49 level in thin market and is set to capitalize on the lower holiday liquidity to test 1.5 psychological resistance. While Euro also strengthens against Sterling, it remains pressured in EUR/JPY and EUR/CHF crosses, suggesting that risk aversion is the larger underlying force. Dollar continues to be pressured on pessimism on the US economy as well as expectation for further rate cut from Fed in Dec and beyond. USD/JPY dives below 108 level while USD/CHF also takes out 1.09. Commodity currencies trade with an undertone.

Economic calendar is light today with focus on Nov flash PMIs from Eurozone. PMI service is expected to drop from 55.8. PMI manufacturing is also expected to drop from 51.5 to 51. Note that PMI manufacturing is getter close to the 50 expansion/contraction level. European politicians and businessmen are already starting to voice out concern of the damage of a strong Euro, including remarks by Airbus chief that the weakness of the dollar is threatening its Airbus. A dip below 50 in PMI will give them more bullets to call for intervention.

Just released, Germany import price rose 0.7% mom, 2.7% yoy versus consensus of 1.3% mom, 1.9% yoy. UK Q3 GDP is expected to show 0.8% qoq, 3.3% yoy growth, same as preliminary estimate.

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

EUR/USD

Daily Pivots: (S1) 1.4822; (P) 1.4847; (R1) 1.4873; More

EUR/USD surges to as high as 1.4966 today and is set to test 1.5 key medium term resistance but upside could be limited there initially on overbought condition. Nevertheless, further upside is still expected as long as 1.4841 support holds. On the downside, below 1.4841 will indicate a short term top is possibly in place and bring pull back to short term rising channel support (now at 1.4700). Break will argue that rise from 1.4014 has completed and bring deeper decline towards 1.4519 support.

In the bigger picture, regardless of internal structure, medium term up trend from 1.1639 remains in force and is treated as resumption of long term up trend from 0.8223 (00 low) to 1.3668 (04 high), with subsequent correction ended at 1.1639. Such rally is expected to extend further to 61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004 which will overlap with 1.5 psychological resistance. But upside could be limited there initially on overbought condition. However, sustained trading above this key resistance will path the way to next projection target of 100% projection at 1.7048.

On the downside, in case of pullback, it will be treated as correction rise from 1.4014 only as long as 1.4519 support holds. However, break of 1.4519 will indicate that the rise from 1.3360 has possibly completed too with a medium term top formed. Deeper correction could then be seen to 1.4014/4281 support zone before completion.

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Published on  Fri, Nov 23 2007, 07:35 GMT

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