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Daily Forex Technical Report − Sterling Broadly Softer after Banchflower's Comments

Mon, Jul 21 2008, 07:09 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Sterling Broadly Softer after Banchflower's Comments

Sterling is broadly softer today on dovish comments from BoE Blanchflower that UK is entering a recession that may last more than a year. Blanchflower said that BoE should act right now and he'd like to see interest rates 'well below' their current level. Sterling is additional pressured after Rightmove house prices index showed deeper drop by -1.8% mom, -2.0% yoy in Jul. Though, firstly, Blanchflower is already a known dove so his comments are not much of a surprise. Secondly, Sterling's near term rise against dollar and yen are still intact technically speaking. Thirdly, it's a big week in the UK with BoE minutes, retail sales and Q2 GDP featured. So the current retreat in Sterling will likely be mild for the moment.

Aussie, on the other hand, shrugs off softer than expected PPI report and is the better performer today. Q2 PPI softened from 1.9% qoq to 1.0% qoq and from 4.8% yoy to 4.7% yoy. Markets expected a 5.3% yoy jump in PPI. Analysts are quick to point out the weak correlation between Australia's PPI and CPI data and are still awaiting a strong CPI report to be released on Wednesday.

Economic calendar is rather light today with Swiss combined PPI to be released in European session and US Leading indicators to be featured in US session.

More Technical Analysis Reports Here

GBP/JPY Daily Outlook

Daily Pivots: (S1) 212.32; (P) 213.08; (R1) 214.58; More

GBP/JPY retreats mildly ahead of 213.91 resistance but after all, intraday bias remains mildly on the upside as long as 211.53 minor support holds. As discussed before, three wave corrective structure of the fall from 213.91 to 207.98 suggests that medium term rebound from 192.60 is still in progress. Break of 213.91 will indicate that recent rally has resumed for 100% projection of 192.60 to 208.99 from 199.78 at 216.17 first. On the downside, below 211.53 will turn intraday outlook neutral. But further rise is still expected as long as pull back is contained above 207.98 support.

In the bigger picture, a medium term bottom is in place at 192.60. At this moment, there is no confirmation of completion of the rebound from there yet. Corrective nature of the fall from 213.91 to 207.98 even argues that more upside should be seen in the GBP/JPY. Break of 213.91 will confirm that 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 now be an important alert that rebound from 192.60 has completed and put focus back to 199.78 support in such case.

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Published on  Mon, Jul 21 2008, 07:13 GMT