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Daily Forex Technical Report

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Mid−Day Forex Technical Report − Dollar Tumbles again after Tamer CPI, USD/CHF Breaks Parity

Fri, Mar 14 2008, 14:30 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Tumbles again after Tamer CPI, USD/CHF Breaks Parity

Dollar weakens again in early US session after the release of tamer than expected CPI inflation data. This time, USD/CHF breaches parity. Headline CPI was flat mom in Feb, dragging yoy rate down from 4.3% to 4.0% comparing than expectation of 4.3%. Core CPI was also flat mom, dragging yoy rate down from 2.5% to 2.3% comparing to consensus of 2.4%. The slowdown in consumer inflation can be attributed to weaker consumer demand as well as a slowdown in the rise of oil prices in Jan and Feb. Also, the tamer CPI should be good news for the Fed which can be relatively freer to cut rates deeper next week. In a separate report, U of Michigan consumer sentiment deteriorated further from 70.8 to 70.5, but was better than expectation of 69.0.

Inflation outlook in the Eurozone was very different. HICP final was revised up from 3.2% to 3.3%, reaffirming ECB's stance to be on hold in the near term. Euro retreated mildly earlier today with speculation of risk of intervention. ECB Trichet and US Treasury Paulson has repeatedly emphasized the strong dollar policy while Japan FM Nukaga also said that recent market movements are being watched carefully.

More Technical Analysis Reports Here

USD/CHF Daily Outlook

Daily Pivots: (S1) 1.0041; (P) 1.0104; (R1) 1.0163; More

USD/CHF's fall resumes in early US session and breaks mentioned 1.0000 psychological level. At this point, intraday bias remains on the downside as long as 1.0142 minor resistance holds and further decline is still expected. Above 1.0142 will turn intraday outlook consolidative first. But short term outlook will remain bearish until a break of 1.0352 resistance.

In the bigger picture, whole down trend from 1.3283 (05 high) is still in progress. Also, such medium term decline is tentatively treated as resumption of the long term down trend from 1.8305 (00 high) and has already met parity. Sustained trading below 1.0000 psychological support will set the stage for further down trend to 61.8% projection of 1.8305 to 1.1128 from 1.3283 at 0.8946.

On the upside, above 1.0352 resistance will indicate that fall from 1.1105 has possibly completed. This will also be the first alert that USD/CHF is having strong support from parity. Strong rebound should then be seen in such case, with prospect of testing 1.0729 support turned resistance. But after all, medium term outlook will remain bearish as long as this 1.0729 resistance holds.

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Published on  Fri, Mar 14 2008, 14:35 GMT