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Daily Forex Technical Report

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Daily Forex Technical Report − Dollar Steady ahead of ISM, Sterling Tumbles

Mon, Jun 2 2008, 07:36 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar Steady ahead of ISM, Sterling Tumbles

Sterling is so far the biggest loser today on speculation that the UK's biggest mortgage lender to landlords, Bradford & Bingley Plc, needs to raise additional 250m pounds from shareholders on increasing concern about the UK housing market slump. The sharpest fall is seen in GBP/JPY on risk aversion, which in turn triggered some broad based buying in the yen . On the other hand, Dollar is steady in range as markets await manufacturing data from US.

Markets expect the ISM manufacturing index to stay in contraction region below 50 for the fourth consecutive month at 49 in May. Price index is expected to continue the up trend and edge higher from 84.5 to 85.0. Recently, speculations that Fed will remove some of the aggressive policy easing and hike in Sep started to build up after a string of hawkish comments from Fed officials. This week's data, including today's ISM manufacturing index, the ISM Services Index and the Non-farm payroll later this week will provide the evidence on whether past rate cuts were enough to help save the economy from a recession. Note that baring a disastrous reading today, which is unlikely, dollar shouldn't face much pressure even in case of downside surprises since the Fed will still be expected to be on hold in the near term. However, an expansionary reading in the headline index, plus a strong jump in the price component will very likely boost the dollar for a strong rally, in particular against Euro and Swissy. Also, with NFP on Friday in sight, markets will look closely into the employment component too, which has already stayed contractionary for six months since last Nov.

Released earlier today, Australia retail sales unexpected dropped -0.2% in Apr. Aussie dips mildly after the release but after all, the price actions from 0.9653 are still treated as consolidations only and further rally is still expected upon completion. Swiss GDP grew 0.3% qoq in Q1, inline with expectation. Year over year growth rate moderated from 3.6% to 3.0%. SVME PMI dropped to 55.7 in May but is slightly above expectaion. Other data to be watched today include Eurozone and UK manufacturing PMI and US construction spending.

More Technical Analysis Reports Here

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.9727; (P) 1.9775; (R1) 1.9866; More

Cable dives sharply to as low as 1.9658 today after gapping lower. The correction from 1.9852 is still in progress. While further downside cannot be ruled out, outlook remains basically unchanged as long as 1.9612 cluster support (50% retracement of 1.9363 to 1.9852 at 1.9608) holds. Prior break of falling trend line resistance indicates that fall from 2.0391 has already completed at 1.9363, supported above mentioned 1.9337 low as expected. Further rally is expected to 2.0029 resistance first and then 2.0391 resistance after finishing the current correction. A break above 1.9826 resistance will indicate that consolidation from 1.9852 has completed and rise from 1.9363 has resumed.

In the bigger picture, down trend from 2.1161 have made a low at 1.9337. The corrective nature of the rise from 1.9337 to 2.0391 and fall from 2.0391 to 1.9363 suggests that price actions from 1.9337 are developing into sideway consolidation to whole fall from 2.1161. Though, 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. But in either case, the current rise from 1.9363 should extend further to test 2.0391 resistance. Nevertheless upside of such consolidation should still be limited by 61.8% retracement of 2.1161 to 1.9337 at 2.0464. On the downside, below 1.9612 will turn focus back to 1.9337/63 support zone. Break of this support zone will indicate that decline from 2.1161 has resumed.

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Published on  Mon, Jun 2 2008, 07:42 GMT