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Mid−Day Forex Technical Report − Dollar's Fall Resumes

Tue, May 20 2008, 13:39 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar's Fall Resumes

Worse than expected Germany ZEW Economic Sentiment, which deteriorated from -40.7 to -43.6 versus expectation of -37.5 could be used as an excuse to send the Euro lower today. But instead, markets' focus was on ZEW President Wolfgang Franz's comments. In an environment with speculations on whether ECB will cut rates, Franz said he expected ECB to raise rates in the near future to fight inflation instead. EUR/USD was sent sharply higher and took out yesterday's high of 1.5632. The strength in EUR/USD in turn triggered broad based dollar selling. Mixed producer price inflation, with headline PPI moderation from 6.9% yoy to 6.5% yoy and core CPPI climbing from 2.7% yoy to 3.0% yoy offer no special support to the greenback.

Other data released today include Canadian wholesale sales, which rose 0.6% mom in Mar, international securities transactions that rose to 5.3b. Germany PPI climbed 1.1% mom, 5.2% yoy, above consensus of 0.6% mom, 4.8% yoy. Swiss Combined PPI beat expectation by rising 0.7% mom, 3.6% yoy in Apr, though moderated from 3.9% yoy in Mar.

The Aussie remains strong, riding on the hawkish RBA minutes. The minutes of the May 6 meeting showed that the board member are concerned with the uncomfortably high inflation in Australia. More importantly, the minutes said that 'members spent considerable time discussing the case for a further rise in the cash rate' even though the final decision was to on hold due to uncertainty surrounding the outlook.

BoJ left rates unchanged at 0.50% as widely expected. Economic assessment was left unchanged. Mild recovery in is seen in housing investment. Production is seen flat. CPI will likely move4 higher into positive territory. Uncertainties in global economy and market still poses a risk to the economy of Japan.

More Technical Analysis Reports Here

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.9418; (P) 1.9521; (R1) 1.9589; More

Cable's rebound from 1.9363 resumes today and takes out 1.9636 resistance. As mentioned before, this, together with mild bullish convergence condition in 4 hours MACD and RSI, suggests that short term low is in place already. Also, the whole decline from 2.0391 could have completed too. At this point, intraday bias remains on the upside as long as 1.9591 minor support holds. Break of falling trend line resistance (now at 1.9726) will add more credence to this case and encourage rally to 2.0029 resistance first. On the downside, below 1.9591 will turn intraday outlook neutral first. But break of 1.9454 support is needed to indicate rise from 1.9363 has completed. Otherwise, another rally is still expected after pull back.

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 from there also displays a corrective structure too. In other words, wide range consolidation from 1.9337 is expected to extend further. The structure and length of this consolidation could either be in form of a three wave sideway consolidation or in form of five wave triangle pattern. In either case, the fall from 2.0391 is expected to be contained by 1.9337 support and be followed by another strong rally.

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Published on  Tue, May 20 2008, 13:44 GMT

Archive

• Mid-Day Forex Technical Report - Yen and Oil Remain Dominant
  Published On Thu, Aug 21 2008, 12:21 GMT
• Daily Forex Technical Report - Yen and Oil Driving Forex Markets
  Published On Thu, Aug 21 2008, 07:22 GMT
• Mid-Day Forex Technical Report - Canadian Dollar Mildly Higher after Solid Retail Sales
  Published On Wed, Aug 20 2008, 12:43 GMT
• Daily Forex Technical Report - Focus on BoE Minutes and Canadian Retail Sales
  Published On Wed, Aug 20 2008, 08:17 GMT
• Mid-Day Forex Technical Report - Dollar Remains Firm after Strong Inflation and Weak Housing
  Published On Tue, Aug 19 2008, 12:58 GMT

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