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Mid−Day Forex Technical Report − Sterling Soars on Retail Sales, Dollar Recovers

Thu, May 22 2008, 12:58 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Sterling Soars on Retail Sales, Dollar Recovers

After being pressured for most of the day, dollar recovers some loss in early US session after better than expected jobless claim report which dropped from upwardly revised 374k to 365k. On the other hand, Canadian dollar gives back some of the recent gains after disappointing retail sales report which showed a mere 0.1% mom growth in Mar with ex auto sales flat. Kiwi and Sterling are still the biggest gainer today and are both still maintaining strong momentum.

Sterling is boosted by better than expected retail sales report today. Apr retail sales dropped -0.2% mom versus expectation of -0.5%. Year-over-year came in at 4.2%, inline with consensus. CBI industrial trend survey improved from -13 to -10 in May, also beat expectation of -12. While the pound rallies sharply against dollar, it's strength is also apparent in crosses including EUR/GBP and GBP/CHF. Note the corrective structure of the fall in sterling in these two crosses since early May, today's rebound in sterling could also mark the short term reversal in these crosses.

Kiwi extends recent rebound after Finance Minister Michael Cullen announced a tax cut plan that reduces the odds that RBNZ will need to cut rates to support growth in the economy.

Other data released today saw Eurozone industrial orders dropped -1.0% mom, -2.5% yoy versus expectation of -0.5% mom, +6.4% yoy, first annualized decline in three years. Japanese all industry index rose 0.5% in Mar, beating expectation of -0.2%. Trade surplus shrank to 485b on much stronger than expected import growth.

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GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.9723; (P) 1.9727; (R1) 1.9729; More

Cable's rise from 1.9363 extends further today and accelerate after finally taking out short term falling trend line resistance, reaching as high as 1.9979 so far. At this point, intraday bias remains on the upside as long as 1.9750 minor support holds. Further rally is expected to 2.0029 resistance. Break will encourage rise to retest 2.0391. On the downside, below 1.9612 will turn intraday outlook neutral first and bring pull back. But downside should be contained by 1.9612 support and bring rally resumption.

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 current rise from 1.9363 will likely extend further to retest 2.0391 before completion. Nevertheless upside of such consolidation should still be limited by 61.8% retracement of 2.1161 to 1.9337 at 2.0464.

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Published on  Thu, May 22 2008, 13:00 GMT

Archive

• Weekly Review and Outlook - Sharp Reversal in Yen as Investors' Sentiment Improved
  Published On Sat, Jul 19 2008, 10:38 GMT
• Mid-Day Forex Technical Report - Dollar Quietly in Range, Yen Mildly Lower
  Published On Fri, Jul 18 2008, 12:57 GMT
• Daily Forex Technical Report - More Upside in Yen Crosses as Correction Completed
  Published On Fri, Jul 18 2008, 07:39 GMT
• Mid-Day Forex Technical Report - Yen Sold off as Risk Appetite Returns
  Published On Thu, Jul 17 2008, 14:05 GMT
• Daily Forex Technical Report - Dollar's Mild Rebound Continues
  Published On Thu, Jul 17 2008, 06:52 GMT

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