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Daily Forex Technical Report − Pound to Face GDP Test, Yen Rebounds Further

Fri, Jul 25 2008, 07:26 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Pound to Face GDP Test, Yen Rebounds Further

Yen crosses are broadly sold off today following weakness in global stock markets. Particular weakness is seen in GBP/JPY as the pound is generally soft ahead of the highly anticipated Q2 GDP report from UK. There has been a growing concern that the UK economy is entering a recession. Indeed, the National Institute for Economic and Social Research (NIESR), which research clients include the Treasury and BoE, said the UK economy is facing its worst performance since the 1990s recession. Markets expect today's report to show 0.2% qoq, 1.6% yoy growth in Q2 GBP, down from prior 0.3% qoq, 2.3% yoy.

Euro stabilized against the greenback overnight and recovers mildly. The common currency also rebounds against Sterling but is sharply lower against the Japanese yen. Focus turns to Jun M3 money supply growth which is expected to slow from 10.5% yoy to 10.3% yoy.

A number of economic data are scheduled to release in US today. Durable goods orders is expected to show 0.2% growth but ex-transport orders is expected to drop -0.2% in Jun. New home sales is expected to drop another -1.8% in Jun to 503k annualized rate. U of Michigan consumer sentiment is expected to finalize at 56.4 in Jul.

Japan national CPI beat expectation and climbed 2.0% yoy in Jun. Corporate Service Price Index rose 1.2%, much stronger than expectation of 0.6%. The yen, along with the swissy, is boosted by risk aversion today. Aussie's correction continues after National Australia Bank said it will set aside more funds for U.S. credit losses.

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GBP/USD Daily Outlook

Daily Pivots: (S1) 1.9789; (P) 1.9894; (R1) 1.9971; More

Cable continues to struggle in tight range around inner channel support (now at 1.9853) even though sterling is being sold off in crosses. Outlook remains basically unchanged. Further decline could still be seen as long as 2.0030 resistance holds. Nevertheless, downside is expected to be contained well above 1.9647 support and bring rally resumption. On the upside, break of 2.0030 will suggest that such correction from 2.0158 has completed and rise from 1.9408 has resumed for 161.8% projection of 1.9363 to 1.9852 from 1.9408 at 2.0199 first and probably extends further to retest 2.0391 resistance.

In the bigger picture, down trend from 2.1161 have made a low at 1.9337. The corrective nature of the rise from 1.9337 to 2.0391 and fall from 2.0391 to 1.9363 suggests that price actions from 1.9337 are developing into sideway consolidation to whole fall from 2.1161. Though, the structure and length of this consolidation could either be in form of a three wave sideway consolidation or in form of five wave triangle pattern. But in either case, another rise is still expected to test 2.0391 resistance. Nevertheless upside of such consolidation should still be limited by 61.8% retracement of 2.1161 to 1.9337 at 2.0464. On the downside, though, below 1.9647 support will be the first signal that the final rise in the consolidation pattern has completed. Sustained break of 1.9337/63 support zone will indicate that decline from 2.1161 has resumed.

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Published on  Fri, Jul 25 2008, 07:29 GMT

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