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Daily Forex Technical Report − The Day Finally Comes, ECB and NFP Watched

Thu, Jul 3 2008, 08:12 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

The Day Finally Comes, ECB and NFP Watched

The highly anticipated day of ECB rate decision and Non-farm payroll finally comes. ECB is widely expected to raise rate by 25bps to 4.25% after Trichet's hint in last meeting and subsequent hawkish comments from ECB members. Considering that consumer inflation has now doubled ECB's target and reached 4% yoy in Jun, PPI also topped at above 7% yoy in May, part of the markets speculate that a one-off 25bps hike is simply note enough to bring inflation back down. Some speculates that ECB could give a one off aggressive hike of 50bps and stop there but this is the unlikely scenario. Indeed the focus is on whether Trichet, after delivering a 25bps hike, will hints that it's really a one-off hike as suggested by some ECB members, or will maintain the degree of hawkish tones and suggest there may be more in the near future.

More on ECB:

• Euro Open: Will An ECB Rate Hike Take Euro To 1.60?
• European, US Markets Face Volatile Day On ECB Rate Decision, US NFPs
• EUR/USD: How To Trade The ECB Rate Decision On Thursday
• ECB: Preview of July 3 Meeting
• ECB in Uncharted Waters
• Expected Outcome of the ECB's Monetary Policy Meeting
• EU Preview: Majority of Economists Expect Rate Hike in July After Hint in June
• Central Bank Watch: Market Attention Shifts to ECB - Finally Time to Hike?
• Euroland: Core Inflation Contained but Not for Long
• ECB Forecast Change: Hike in July
• Euroland: ECB in a State of Heightened Alert
• ECB Threatens July Rate Rise
• (ECB) Press Conference Introductory Statement with Q&A 5, June 2008

Another major market mover today is the always important non-farm payroll report. Markets expect the job market in US continued to contract for the sixth consecutive month by -60k in Jun. Unemployment rate is expected to tick down from 5.5% to 5.4%. Leading indicators saw ADP employment fell -79k, challenger report showed 46.8% increase in layoffs, continuous claims hit highest level since Feb 04, employment component of ISM manufacturing index dived to 43.7. There isn't much room for an upside surprise today .

However, NFP will be released at the same time when ECB press conference starts at 1230GMT. So, expects much volatility at that hour and markets could flip flop as ECB press conference goes. Also, note that ISM non-manufacturing index will be released at 1400GMT today. Economists expect the index to stay expansionary at 51 in Jun. Hence, the volatility could extend further in the US session.

Before the above, Services PMIs in Eurozone and UK will be released, with Eurozone retail sales too, in European session. Released earlier, Swiss CPI was unchanged at 2.9% yoy in Jun. Australian trade balance turned deficit at -956M in May.

More Technical Analysis Reports Here

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.5810; (P) 1.5849; (R1) 1.5921; More

EUR/USD turns into sideway trading after reaching as high as 1.5890. Nevertheless, intraday bias remains on the upside as long as 1.5775 minor support holds. As discussed before, prior break of 1.5843 resistance is taken as the second signal that consolidation from 1.6019 has completed at 1.5302 already. Retest of 1.6019 record high should be seen. Break will confirm medium term up trend has resumed. On the downside, below 1.5775 will indicate that an intraday top is in place and bring pullback to 4 hours 55 EMA (now at 1.5720). But downside should be contained well above 1.5468 support and bring rally resumption.

In the bigger picture, a medium term top is in place at 1.6019 after meeting 1.6 psychological resistance. Above 1.5843 indicates that such consolidation has likely completed at 1.5302 already. 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 cannot be ruled out 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  Thu, Jul 3 2008, 08:24 GMT

Archive

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• Mid-Day Forex Technical Report - US Unemployment Rate Surged to 5 Year High, Markets Volatile
  Published On Fri, Sep 5 2008, 13:16 GMT
• Daily Forex Technical Report - Massive Carry Trade Unwinding ahead of Non-Farm Payroll
  Published On Fri, Sep 5 2008, 07:44 GMT

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