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Daily Forex Technical Report − EUR/USD Decline Resumes after Ifo Disappointment, US Housing and FOMC Minutes Next

Tue, Aug 26 2008, 08:19 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

EUR/USD Decline Resumes after Ifo Disappointment, US Housing and FOMC Minutes Next

Euro dives again after the release of much weaker than expected Germany Ifo report. The business climate index dropped much more than expected to 94.8 in Aug, much weaker than expectation of 97.1. Business expectation index also deteriorated to 87.0. EUR/USD took out 1.4629 low and is set to have further decline to next target of 1.4309 key support. Other data from Eurozone saw Germany Gfk consumer confidence dropped more than expected to 1.5. Q2 GDP in Germany was finalized at -0.5% qoq, 3.1% yoy.

FOMC minutes will take center stage today and focus will be particularly on the division of opinion of the board member and thus on the balance on focus of growth and inflation. Housing data will be the main focus in early US session with new home sales, and house price indices featured. Also, markets will look into whether consumer confidence will recover in Aug.

Technically speaking with dollar breaking through prior top against, Euro, Sterling, Swissy and Aussie, recent rally should have resumed. In particular, USD/CHF has taken out an important near term resistance at 1.1 level. Focus will be on whether AUD/USD will break 0.8512 key support and GBP/USD will break 1.83 key support level respectively. Break will reaffirm underlying strength in the greenback.

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EUR/USD Daily Outlook

Daily Pivots: (S1) 1.4696; (P) 1.4752; (R1) 1.4809; More

EUR/USD's decline from 1.6038 resumed today by taking out 1.4629 low. At this point, intraday bias remains on the downside as long as 1.4759 minor resistance holds. Further fall is expected to key medium term support at 1.4309. On the upside, above 1.4759 will turn intraday outlook neutral first. Further break of 1.4908 resistance will indicate that EUR/USD has finally made a short term bottom and bring stronger rebound to test 1.5284 double top neckline resistance before staging another fall.

In the bigger picture, the double top reversal pattern (1.6019, 1.6038) serves as an important signal of completion of medium term rise from 1.1639 (05 low), which is supported by the decisive break of 55 weeks EMA While it's still early to conclude, recent development continues to build up the case of a medium term reversal. Focus will now be on a) whether key support level of 1.4309, (38.2% retracement of 1.1639 (05 low) to 1.6038 at 1.4358, 61.8% retracement of 1.3262 to 1.6038 at 1.4322) will hold; b) whether next trend line support (1.1825, 1.2483, now at 1.4359) will hold; c) whether weekly MACD will turn negative and d) whether monthly MACD will cross below signal line.

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Published on  Tue, Aug 26 2008, 08:25 GMT