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Daily Forex Technical Report − BoE & FOMC Minutes Awaited; German Ifo, Canadian CPI Eyed

Wed, May 21 2008, 07:22 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

BoE & FOMC Minutes Awaited; German Ifo, Canadian CPI Eyed

Markets are generally steady today so far, with expectation of mild strength in yen due to weakness stock markets. Traders are holding their bets ahead of some key even risks today. The focus in Eurozone is on Germany Ifo. The business climate index unexpectedly dropped from 104.8 to 102.4 in April, worst reading in over 2 years. Both the current situation and outlook worsened, with the former falling to 108.4 from 111.5, while the latter declined to 96.8 from 98.4 in March. The surge in oil and commodity prices are believed to be the main reason that reduced the optimism of businesses. Speculations on ECB's next move are on both sides, hike and cut. Though, with the current inflation outlook and 'sound' economic fundamentals, but risks to the economy, ECB will still more likely be on hold in the near future then not.

Another major focus in the European session will be the minutes of BoE meeting on May 8, where interest rate was left unchanged at 5.00%. Expectation is that the BoE decision was done on a 8-1 vote. However, note that there were some speculations that BoE might opt for another cut in May after a string of weak growth data released prior to the meeting. Hence, another more votes for cut shown in today's minutes will revive speculations that BoE will cut again in Jun and give renewed pressure to Sterling.

FOMC minutes will take center stage in the US session today. Markets are speculating that Fed is completed with it's most aggressive easing campaign in decades after the 25 bps cut in the Apr 29/30 meeting. The statement of that meeting was generally taken as less dovish than prior ones. The statement characterized economic activity as "weak" as opposed to having "weakened further", even though its description of financial markets was unchanged as being under "considerable stress." Also, Fed described the easing campaign since last summer as "substantial". The committee also vowed to "act as needed," but eliminated "in a timely manner."

Fed's Vice Chairman Kohn reaffirmed market's expectation of pause in his speech yesterday. Kohn said that the current monetary policy is already "appropriately calibrated" to address the Fed’s dual mandate of full employment and price stability. Markets will look into today's minutes for further clarifications of the messages from last statement as well as hints on whether Fed will really pause in June.

Before that, Canadian CPI will be the main focus which is expected to be unchanged at 1.4% yoy in Apr. Core CPI is also expected to be unchanged at 1.3% yoy.

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GBP/JPY Daily Outlook

Daily Pivots: (S1) 202.87; (P) 203.85; (R1) 205.01; More

GBP/JPY weakens mildly again after failing to take out 205.02 resistance. OUtlook remains neutral for the moment. As mentioned before, rebound from 199.78 was limited by 55 days EMA (now at 204.93). Further pullback could be seen. Break of 201.53 support will argue that rebound from 199.78 has completed. Further break of this low will confirm that whole fall from 208.99 has resumed for 198.07 support first. However, above 205.02 will suggest that rebound from 199.78 is still progress for 208.99 high before completion.

In the bigger picture, while fall from 241.35 has completed at 192.60, there is no confirmation of the completion of whole down trend from 251.09 yet. Break of 198.07 support will firstly confirm that rise from 192.60 has completed after meeting correction target of 204.49/213.48 resistance zone. Secondly, the corrective structure of the rise from 192.60 to 208.99 will confirm that it's merely a correction to the medium term down trend only. In other words, whole down trend from 251.09 is probably ready to resume in such case. However, strong rebound from 198.07 will argue that correction from 192.60 is not finished yet and another rise could be seen to 38.2% retracement of 241.35 to 192.60 at 211.22 before completion.

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Published on  Wed, May 21 2008, 07:24 GMT

Archive

• Mid-Day Forex Technical Report - Dollar Mildly Higher after Data
  Published On Fri, Aug 29 2008, 14:09 GMT
• Daily Forex Technical Report - Sterling Remains Weak in Otherwise Mixed Markets
  Published On Fri, Aug 29 2008, 07:48 GMT
• Mid-Day Forex Technical Report - Dollar Got No Boost From GDP Revision
  Published On Thu, Aug 28 2008, 13:25 GMT
• Daily Forex Technical Report - EUR/USD and AUD/USD Finally Formed a Short Term Bottom?
  Published On Thu, Aug 28 2008, 07:32 GMT
• Mid-Day Forex Technical Report - Yen Lower after Strong US Durables, Dollar Pressured by Oil
  Published On Wed, Aug 27 2008, 13:13 GMT

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