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Daily Forex Technical Report

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Daily Forex Technical Report − Yen Maintains Broad Based Strength on Risk Aversion

Wed, Jul 16 2008, 08:03 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Yen Maintains Broad Based Strength on Risk Aversion

While dollar stabilizes a bit against most major currencies, the Japanese yen maintains its upside momentum and continues to climb higher against most currencies as markets are still concerned on the impact of credit crisis to the global economy. The broad based strength in yen argues that the rebound in yen crosses started earlier this year has topped out. Note that Even though there is no confirmation in reversal in EUR/JPY, which made another record high earlier this week, the outlook is vulnerable. Though, based on the relative weakness of dollar against European currencies and commodity currencies, USD/JPY will likely be most hit in case of another round of massive carry trade unwinding.

It's another extremely busy day today. Eurozone HICP inflation in Jun is expected to finalize at 0.4% mom, 4.0% yoy. Germany HICP released in early US session is confirmed at 0.4% mom, 3.4% yoy already. UK Employment report will be another focus in the European session today and is expected to show unemployment rate unchanged at 5.3% in May. Claimant count to climb slightly higher to 10k in Jun. Note that as mentioned yesterday, EUR/GBP weakens on stronger than expected inflation data in UK and record low in ZEW. Such near term down trend may continue in case of better than expected employment data from UK today.

The economic calendar is jam packed in the US. Bernanke point out increased downside risks to growth and upside risks to inflation in his prepared remarks in the testimony yesterday. Inflation was indicated as Fed's top priority and Bernanke maintained this hawkish tone during his Q&A session. Jun CPI data to be released today will probably reaffirm Bernanke's worry on inflation. Headline CPI is expected to climb further from 4.2% yoy to 4.5% yoy in Jun while core CPI is expected to be unchanged at 2.3%. Fed will release meeting minutes today too but will likely be overshadowed by second part of Bernanke's testimony. Other data include TIC capital flow and industrial production.

More Technical Analysis Reports Here

GBP/JPY Daily Outlook

Daily Pivots: (S1) 208.60; (P) 210.30; (R1) 211.69; More

GBP/JPY's fall from 213.91 finally resumed as expected and dives to as low as 208.55 so far. At this point, intraday bias remains on the downside as long as 210.44 minor resistance holds. Further fall is now expected to be seen to test key near term support at 199.78. On the upside, above 210.44 will turn intraday outlook neutral first but recovery should be limited below 212.43 resistance and bring another fall.

In the bigger picture, as discussed before, failure to sustain above 213.48 key medium term resistance argues that at least a short term top is in place. Break of the short term trend line support is taken as another signal that medium term rebound from 192.60 has completed at 213.91 already. Further break of 199.78 support confirm such case, and focus will be back to 192.60 low. On the upside, break of 213.91 resistance is needed to revive the case that medium term rebound is still in progress. Otherwise, risk remains on the downside even in case of strong rebound.

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Published on  Wed, Jul 16 2008, 08:06 GMT