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Mid−Day Forex Technical Report − Dollar Rebounds from Record Low, Boosted by Central Banks' New Liquidity Measures

Tue, Mar 11 2008, 13:25 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Rebounds from Record Low, Boosted by Central Banks' New Liquidity Measures

After edging to new record low against Euro, Dollar rebounds stronger in early US session after Fed announced new measures to address the liquidity pressures in funding markets, coordinated with Bank of Canada, Bank of England, European Central Bank and Swiss National Bank. Dollars reversed all of today's earlier losses and surges across the board. On the other hand, the Japanese yen is sent sharply lower as stock markets are set to be boosted to have a higher open after this announcement.

Fed expanded its securities lending program today by a new Term Securities Lending Facility (TSLF). Up to $200b of Treasury securities will be lent to primary dealers for a term of 28 days, extended from overnight in the existing program. In addition, Fed increases its existing swap lines with ECB and SNB and will now provide up to $30b to ECB and $6 b to SNB. ECB will offer USD term auction funding in Eurosystem, up to $15b in 28-day operation. SNB will offer providing up to $6b USD liquidity. BoC announces new Term Repo Auctions and will acquire C$4B worth of securities and up to auction C$2b.

Data released from US today saw trade deficit at -58.2b, lower than expectation of -59.7b. Canadian trade surplus widen unexpectedly to 3.26b. Euro was boosted early to new record high against dollar after Germany ZEW economic sentiments unexpectedly improved from -39 to 32 in Mar, Eurozone ZEW also improved from -41.4 to -35. The second improvement in a row suggest that confidence are improving in the Eurozone in general.

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EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.5303; (P) 1.5353; (R1) 1.5394; More

EUR/USD surged to new record high of 1.5493 earlier today but once again failed to sustain above 61.8% projection of 1.3360 to 1.4966 from 1.4438 at 1.5431 and retreats back into established range. Upside moment continues to diminish as seen in bearish divergence condition in 4 hours MACD and RSI. A short term top should be around the corner, if not formed already. Intraday outlook is neutral for the moment.

On the downside, break of 1.5307 support will confirm that a short term top is already in place and bring pullback to 4 hours 55 EMA (now at 1.5235) and probably further to 1.5072 support (38.2% retracement of 1.4438 to 1.5493 at 1.5090). Though, downside is expected to be contained above 1.4951 (50% retracement of 1.4438 to 1.5493 at 1.4966) and bring another rise. Meanwhile, decisive break of 1.5493 high is now needed to confirm recent up trend has resumed for next short term target of 100% projection of 1.3360 to 1.4966 from 1.4438 at 1.6044.

In the bigger picture, decisive break of 1.4966 and 1.5 key resistance (61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004) confirms that medium term up trend from 1.1639 has resumed. Also, regardless of internal structure, it is treated as resumption of long term up trend from 0.8223 (00 low) to 1.3668 (04 high). Further medium term rally could be seen towards 100% projection of 0.8223 to 1.3668 from 1.7048. Such rally should still be in force as long as EUR/USD stays above 1.4778 support. However, break 1.4778 will argue that a medium term top is in place and deeper decline should then be seen to 1.4309 support and below.

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Published on  Tue, Mar 11 2008, 13:28 GMT