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Daily Forex Technical Report

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Mid−Day Forex Technical Report − Dollar Remains Pressured as Oil Breaks $143

Mon, Jun 30 2008, 14:14 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Remains Pressured as Oil Breaks $143

Dollar pares some losses in early US session on profit taking on short positions as traders are aware of the key event risks of ECB rate decision and Non-farm payroll towards the end of the week. Nevertheless, the overall tone remains dollar bearish. Oil's persistent strength that pushes it through $143 a barrel will continue to exert pressure on the greenback. On the other hand, Eurozone Jun CPI estimate released earlier today saw inflation surged to 4% yoy, doubling ECB's target of 2%. That's seen as the final piece of deciding factor for ECB's anticipated rate hike this Thursday.

Talking about ECB, while Trichet and other ECB officials has made it clear that this month's rate hike is not the start of a series of rate hikes, markets' opinion is divided. Focus will still be on the post meeting conference on the hints of whether more will be from ECB this year. At this moment, EUR/USD is still staying near to middle of a medium term range and sentiments could flip either side based on how tough is the talk on inflation.

Aussie surges to new 25 year high of 0.9625 earlier today but retreats mildly on dollar's recovery. Focus will be on RBA rate decision in the coming Asia session. While RBA is widely expected to be on hold at 7.25%, any increase in inflation concern and hints of restarting the tightening cycle will give the Aussie another boost higher.

Other data released today saw Canadian GDP beat expectation by rebounding 0.4% mom in Apr. US Chicago PMI climbed mildly to 49.6 in Jun, above consensus of a fall to 48.4. UK Gfk consumer confidence tumbled further from -29 to -34 in Jun, hitting the lowest level since 1990. Japanese manufacturing PMI dropped from 47.7 to 46.5 in Jun. Housing starts dropped -6.5% yoy in May to 1.07M. Construction orders fell -25.2% in May.

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EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.5744; (P) 1.5767; (R1) 1.5815; More

EUR/USD retreats mildly after reaching as high as 1.5836 earlier today. Nevertheless, intraday bias remains on the upside as long as 1.5718 minor support holds. Further rally is expected to test 1.5843 resistance. Note that at this moment, it's uncertain what form of pattern will the consolidation from 1.6019 eventually develop into. 1.5843 remains a key near term focus. Break of this resistance will add favor to the case that consolidation has already completed at 1.5302 and will bring stronger rise to retest 1.6019 record high first. On the downside, below 1.5718 minor support will indicate that an intraday top is in place and EUR/USD could have started the final leg of triangle to complete the consolidation from 1.6019.

In the bigger picture, a medium term top is in place at 1.6019 after meeting 1.6 psychological resistance. Subsequent sideway consolidation should be close to completion, it not finished already. As mentioned above, above 1.5843 will indicate that such consolidation has completed. Further decisive break of 1.6019 will confirm this case and bring rise to 61.8% projection of 1.4309 to 1.6019 from 1.5284 at 1.6341 first. On the downside, while another setback could still be seen before completing the consolidation, downside should be contained above 1.5302 support. Break of this support level is needed to switch to the case that price actions from 1.6019 are developing into deep correction to test 1.4966 cluster support.

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Published on  Mon, Jun 30 2008, 14:18 GMT