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Mid−Day Forex Technical Report − Markets Still in Range after Existing Home Sales Beat Expectation

Mon, Aug 25 2008, 14:23 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Markets Still in Range after Existing Home Sales Beat Expectation

Markets paid little attention to the Existing home sales report from US and remains bounded in tight range in early US session. Dollar gives back some of the earlier gains. More noticeably, some strength is seen in the Japanese yen and Swiss Franc on risk aversion as US stock markets open lower. Though, the strength is so far mild. Existing home sales rebounded strongly by 3.1% to 5.0m annualized rate in Jul, above expectation of 4.9M.

Elsewhere, other news saw IMF revised down growth forecasts for Eurozone in 2008 from 1.7% to 1.4%. 2008 growth for US was unchanged at 1.3% but 2009 GDP was revised down from 0.8% to 0.7%. Global growth in 2008 was revised down from 4.1% to 3.9%. In an interview view NY times, Philly Fed Plosser said he might consider to vote for a hike and may face a risk to Fed's credibility if FOMC doesn't reverse the accommodative stance sooner. BoJ Shirakawa said that growth will likely remain sluggish due to high energy and materials prices and weaker export but expect Japanese to return to a moderate growth path as commodity prices levels out.

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USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 108.90; (P) 109.52; (R1) 110.72; More.

USD/JPY continues to stay in tight range in early US session. But as discussed before, correction from 110.66 might have completed at 108.13 already, after being supported slightly above 38.2% retracement of 103.76 to 110.66. Intraday outlook remains cautiously bullish for retest of 110.66 high. Break will confirm that recent rally has resumed for next target of 61.8% projection of 95.77 to 108.58 from 103.76 at 111.68. On the downside, below 109.22 minor support will suggest that correction from 110.66 is still in progress for 107.28 support before completion. Though, downside of this correction is expected to be contained above 106.04 support and bring rally resumption.

In the bigger picture, USD/JPY has made a medium term bottom after down trend from 124.13 has just met 76.4% retracement of 79.75 to 147.68 at 95.78. Rebound from 95.77 is still in progress and should be targeting 61.8% projection of 95.77 to 108.58 from 103.76 at 111.68 first. Break will bring further rise to 61.8% retracement of 124.13 to 95.77 at 113.30.

However, considering bearish divergence condition in daily MACD, break of 106.04 support and sustained trading below the trend line support (99.57, 103.75, now at 106.21) will argue that whole medium term rebound from 95.77 has completed. Focus will then be turned back to 103.76 support and bring will confirm this case and turn outlook bearish again.

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Published on  Mon, Aug 25 2008, 14:28 GMT