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Daily Forex Technical Report

Mid−Day Forex Technical Report − Dollar Rebounds Strongly, but Limited by Poor Data

Wed, Nov 28 2007, 15:40 GMT
by ActionForex.com Team

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Forex Mid-Day Technical Report

Dollar Rebounds Strongly, but Limited by Poor Data

Dollar extends its recovery against euro today, confirming that a short term top is already in place in EUR/USD last week after failing 1.5 psychological resistance. However, the recovery is limited in early US session after disappointing data. Durable goods orders fell for the third month in a row by -0.7% in Oct, missing expectation of 0% with ex-transport orders tumbling -0.7%. Existing home sales also dropped more than expected by -1.2% to 4.97m. Fed's Kohn's dovish comments always weigh on the greenback. Kohn said that the deterioration in credit condition is deeper than he anticipated and sounds like he may vote for a cut in the Dec 11 FOMC meeting.

Meanwhile, yen and swiss franc are both broadly weaker, following strength in global and US stock markets. Higher yielders, including Aussie and Sterling are steady against dollar and strengthen in yen crosses. USD/CAD had a second attempt earlier today on parity resistance but fails to break through yet.

Released in European session, Germany Gfk consumer sentiments dropped further from 4.5 to 4.3 in Dec. Swiss KOF leading indicator dropped from an upwardly revised 2.04 to 2.02, above expectation of 1.98 but still maintaining the downtrend. Fed's Beige book will be featured next.

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

EUR/USD

Daily Pivots: (S1) 1.4788; (P) 1.4848; (R1) 1.4888; More

EUR/USD's correction from 1.4966 resumes today and dips to as low as 1.4711 in early US session. Break of the short term rising channel support (now at 1.4775) confirms that rally from 1.4014 has completed with bearish divergence condition in 4 hours MACD and RSI. At this point, further correction is expected to be seen as long as 1.4905 resistance holds, towards 1.4519 support. On the upside, above 1.4905 will indicate that the corrective fall from 1.4966 has completed and will bring retest of 1.5 cluster resistance.

As discussed before, while rise from 1.4014 is completed, it's early to confirm that rise from 1.3360 has completed too. Focus is now 1.4519 cluster support (50% retracement of 1.4014 to 1.4966 at 1.4490). Decisive break of this support zone will add much credence to the case that rally from 1.3360 has completed too after failing 1.5 key medium resistance and bring deeper correction to 1.4014/4281 support zone before resuming the long term up trend. But strong rebound above this level will suggest another rise should be seen before making a medium term top.

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) and is now close to 61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004 target which will overlap with 1.5 psychological resistance. Upside could be limited by this resistance initially on overbought condition. Sustained trading above this key resistance is needed to confirm medium term rally is still underway to next projection target of 100% projection at 1.7048. On the downside, firm break of 1.3851 resistance turned support is needed to be the first signal that this up trend from 1.1639 has completed. Otherwise, long term outlook remains bullish.

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Published on  Wed, Nov 28 2007, 15:43 GMT

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