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Daily Forex Technical Report

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Daily Forex Technical Report − Sterling Remains Weak in Otherwise Mixed Markets

Fri, Aug 29 2008, 07:48 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Sterling Remains Weak in Otherwise Mixed Markets

The forex markets continue to be generally mixed this week without follow through buying or selling. The exception is Sterling which remains pressured in particular against yen and euro. Note that GBP/JPY is now trying to get rid of 199.78 support level while EUR/GBP is now back above 0.8 level and is set to take on recent high at 0.8098. UK Gfk consumer confidence unexpectedly improved from -39 to -36 in Aug. There are some speculations that Chancellor Darling and Housing Minister Flint are proposing to announce emergency measures for the UK mortgage market. But neither of the news offer much support to the pound.

Euro remains steady but lacks follow through buying against the greenback and yen. Focus will turn to flash HICP inflation in Aug which is expected to slow slightly to 3.9% yoy. Unemployment rate is expected to be unchanged at 7.3% in Jul. Sentiments indicators are expected to deteriorate slightly in Aug. After all, the direction in Euro will likely be driven by that is dollar and yen. Swiss KOF indicator will also be featured in European session and is expected to drop from 0.9 to 0.83 in Aug.

Dollar continues to be bounded in tight range against most major currencies. The anticipated confirmation of short term bottom in EUR/USD and AUD/USD hasn't happened yet but risk in both pairs are still on the upside. Indecisive moves in the energy markets are not giving a clear direction to the greenback neither. Though, there are rumors that Russia may cut oil flow to Western Europe in the coming days and if that happens, will likely be dollar negative. On the data front, personal income and spending report will catch most attention from US today and is expected to show -0.2% fall and 0.2% rise in Jul respectively. Headline PCE is expected to climb further to 4.4% yoy and core PCE is expected to climb to 2.4% yoy. Chicago PMI is expected to drop slightly to 50 in Aug. U of Michigan survey is expected to finalize at 62, slightly above preliminary reading of 61.7.

Canadian GDP will also be another focus in the US session and is expected to recover by 0.1% mom in Jun with annualized rate at 0.7% in Q2.

Data released from Japan showed general improvements. Unemployment rate dropped from 4.1% to 4.0% in Jul. Retail sales jumped more than expected by 1.9%. Housing starts rise further to 19% yoy. INdustrial production unexpected posted 0.9% mom gain in Jul, with yoy rate at 2.0%. Manufacturing PMI dropped less than expected to 46.9. More importantly, national CPI climbed to decades high of 2.3% yoy in Jul. But after all, markets showed little reaction to Japanese data as usual.

More Technical Analysis Reports Here

GBP/JPY Daily Outlook

Daily Pivots: (S1) 199.68; (P) 200.41; (R1) 201.02; More

GBP/JPY's down trend is still in progress and breaches mentioned 199.78 support today. At this point, further decline is still expected as long as 202.28 minor resistance holds. As discussed before, break of 199.78 is now encouraging deeper fall to test 192.60 medium term bottom. ON the upside, though, above 202.28 will indicate that a short term bottom is possibly in place and bring rebound towards 206.51 resistance before staging another fall.

In the bigger picture, medium term rebound from 192.60 has completed at 215.87 after being limited below 100% projection of 192.60 to 208.99 from 199.78 at 216.17 as well as 55 weeks EMA, on bearish divergence condition in daily MACD. The three wave structure of rise from 192.60 to 215.87 is consistent with the view that it's merely a correction to the the medium term down trend from 241.35. Break of 199.78 support confirms this case and bring retest of 192.60 low. On the upside, above 210.54 structure resistance is needed to indicate fall from 215.87 has completed. Otherwise, another decline is still expected even in case of strong rebound.

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Published on  Fri, Aug 29 2008, 07:49 GMT