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Daily Forex Technical Report − More Upside in Yen Crosses as Correction Completed

Fri, Jul 18 2008, 07:39 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

More Upside in Yen Crosses as Correction Completed

The week is so far dominated by volatility in the Japanese yen as investors' sentiment flip-flop. Note that development so far left argues that earlier rebound is the Japanese yen was corrective in nature as seen in the three wave structure in the fall in USD/JPY and GBP/JPY. On the other hand, the relatively firmer EUR/JPY is still supported by key near term support of 165.50 and AUD/JPY is back pressing recent high at 103.67. It was premature to call for a top in yen crosses and more upside would likely be seen, at least in near term.

While markets talk about the boost of the sharp retreat in oil to dollar, the greenback is so far still engaging in tight range against most major currencies. Fall in oil prices lifted stock and carry trades, but not that much the buck. Sterling was sent mildly lower on speculation that UK Chancellor Darling will introduce a new set of spending guidelines that would allow for breaking of limits of public-sector debt but reaction is so far limited. ECB Trichet reiterated that the bank is committed to maintaining medium term price stability and getting inflation back to "below 2 percent, close to 2 percent" and emphasize the importance of avoiding "second-round effects". Trichet also said that economic growth in the Eurozone will stall in Q2 and Q3 before returning to "moderate" growth.

BoJ minutes released overnight revealed that members are divided on the future course of monetary policy. Some members are still alerted about inflationary pressures. On the other hand, some members emphasized that the focus on slowing economic growth.

Data released saw German PPI climbed to 26 year high of 6.7% yoy in Jun. Eurozone trade balance will be main feature in European session and is expected to show -1b deficit in Jun. US economic calendar is empty. Though, Canadian leading indicators and wholesale sales will be released today.

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GBP/JPY Daily Outlook

Daily Pivots: (S1) 208.66; (P) 209.46; (R1) 210.93; More

GBP/JPY's sharp rebound from 207.98 and break of 212.43 resistance left the fall from 213.91 in three wave corrective structure. This suggests that such call from 213.91 is merely a correction in the whole medium term rebound from 192.60 and more upside could be seen. Break of 213.91 will confirm that such rally from 192.0 has resumed. Meanwhile, on the downside, it will take a break of 207.98 support to revive the case that a short term top is formed. Otherwise, short term outlook is neutral at worst.

In the bigger picture, GBP/JPY is now back pressing 213.48/91 resistance zone. As mentioned before, corrective nature of the fall from 213.91 to 207.98 argues that more upside should be seen in the GBP/JPY. Break of 213.91 will revive the case the medium term rebound is still in progress for 61.8% retracement of 241.35 to 192.60 at 222.75. On the downside, though, break of 207.98 will suggest that GBP/JPY has failed mentioned 213.48 key medium term resistance again and will argue that medium term rebound from 192.60 has already completed. Focus will be back to 199.78 support in such case.

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Published on  Fri, Jul 18 2008, 07:53 GMT

Archive

• Mid-Day Forex Technical Report - Yen and Oil Remain Dominant
  Published On Thu, Aug 21 2008, 12:21 GMT
• Daily Forex Technical Report - Yen and Oil Driving Forex Markets
  Published On Thu, Aug 21 2008, 07:22 GMT
• Mid-Day Forex Technical Report - Canadian Dollar Mildly Higher after Solid Retail Sales
  Published On Wed, Aug 20 2008, 12:43 GMT
• Daily Forex Technical Report - Focus on BoE Minutes and Canadian Retail Sales
  Published On Wed, Aug 20 2008, 08:17 GMT
• Mid-Day Forex Technical Report - Dollar Remains Firm after Strong Inflation and Weak Housing
  Published On Tue, Aug 19 2008, 12:58 GMT

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