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Daily Forex Technical Report

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Daily Forex Technical Report − Sterling Mixed ahead of PPI

Mon, May 12 2008, 07:59 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Sterling Mixed ahead of PPI

Markets are lacking a consensus view on the Sterling at this moment as a string of important economic is scheduled to be released this week, starting with PPI inflation report today. While the pound edges lower against the greenback, the downside momentum is seen diminishing as the British currency is supported by recovery in EUR/GBP cross. Further policy easing is undoubtedly expected from the BoE but the expectation of timing is divided. The events this week including PPI, CPI, employment as well ass the quarterly economic forecasts from BoE will be critical in determining market's expectation of the path of BoE's further rate cuts as well as the Sterling.

Input PPI in UK is expected to accelerate further from 20.6% yoy to 21.5% in Apr. Output PPI is also expected to climb from 6.2% yoy to 6.4%. Core PPI expected to be up from 3.1% yoy to 3.2%. UK Trade Balance is expected to show -7.5b deficit in Apr. Other data to be released today include Canadian new housing price index and US fed budget.

Released overnight, Australia NAB business confidence slumped in Apr from -4 to -8, arguing that there could be slowing in domestic demand and business conditions ahead. Aussie was mildly lower after the release. Japanese economic watch DI dropped from 36.9 to 35.5 in Apr, machine orders grew 0.3% yoy. The yen gives up some of last week's gain.

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GBP/USD Daily Outlook

Daily Pivots: (S1) 1.9473; (P) 1.9522; (R1) 1.9584; More

Cable edges lower to 1.9442 today. Even though downside momentum seems diminishing, outlook remains unchanged so far. Intraday bias remains on the downside as long as 1.9621 resistance holds. Prior break of 1.9599 support indicates that decline from 2.0391 has resumed for retest of 1.9337 low. On the upside, above 1.9621 resistance will turn intraday outlook neutral first and bring rebound.

In the bigger picture, down trend from 2.1161 have made a low at 1.9337. Rebound from there should have completed with three waves up to 2.0391, which is corrective in nature. Subsequent fall form there also display a corrective structure too. In other words, wide range consolidation from 1.9337 is expected to extend further. Hence, current fall from 2.0391 will likely be contained by 1.9337 support and be followed by another rise to retest 2.0391 resistance or above before completing the consolidation. Break of 1.9772 resistance will be the first signal that the final rally of the consolidation has started.

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Published on  Mon, May 12 2008, 08:03 GMT