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Daily Forex Technical Report

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Daily Forex Technical Report − Dollar Soft Following US Rescue Package

Mon, Sep 22 2008, 07:41 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar Soft Following US Rescue Package

The forex markets are pretty steady with dollar trading in a soft tone today as the story continues. Bush administration has finalized the $700B rescue package and sent to Congress. The scope is widened from mortgage and related assets to "troubled assets". US's debt ceiling will be increased by 6.6% to $11.3T. $400b funds will be provided to guarantee money-market mutual funds. Fed approved Goldman Sachs and Morgan Stanley request to become bank holding companies, ending the era of investment banks. Though some noticeable weakness is seen in USD/JPY which was limited by 108 level.

BoJ minutes released showed members generally agreed that US economic outlook is considerably uncertain. "Members shared the view that global financial markets remained unstable due mainly to concerns about further losses that U.S. and European financial institutions might incur". Also, "members agreed that there was considerable uncertainty regarding when and how the negative-feedback loop between financial markets, asset prices and economic activity would diminish."

Data released saw UK rightmove house prices dropped -1.0% mom in Sep with yoy rate -3.3%. Japanese all industry index rose 0.8% in Jul as expected. Economic calendar is pretty light today. main feature will be Canadian retail sales which is expected to climb 0.2% mom in Jul with ex-auto sales growing 0.4%. Focus will remain on further announcements from the US government on the rescue package.

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USD/JPY Daily Outlook

Daily Pivots: (S1) 105.87; (P) 106.94; (R1) 108.49; More.

USD/JPY's rebound from 103.54 was limited by mentioned 107.98 resistance and retreats against. Break of 106.63 minor support indicates that an intraday top is in place and intraday outlook is turned neutral for the moment. Short term outlook remains mixed. As discussed before, the failure to sustain below 103.76 support and the corrective nature of the fall from 110.66 to 103.54 argues that it's mere a correction to the rise from 95.77. In other words, such medium term rebound from 95.77 is possibly still in progress despite losing upside momentum. However, break sustained break of 108 level is needed to confirm this case. On the downside, below 105.39 minor support will argue that rebound from 103.54 is probably corrective in nature and indicate that fall from 110.66 is still in progress.

In the bigger picture, the failure to sustain below 103.76 support and subsequent strong rebound from there argues that fall from 110.66 is corrective in nature. In other words, medium term rebound from 95.77 might still be in progress. Break of 107.79 will affirm this case and bring retest of 110.66 high first. Break will confirm medium term rebound from 95.77 has resumed.

However, once again, note upside momentum is seen diminishing with bearish divergence condition in daily MACD. Even though the rise from 95.77 might extend further, a top is still expected to be around the corner. Upside will likely be limited by 61.8% retracement of 124.13 to 95.77 at 113.30 to complete rise from 95.77. Below 103.54/76 support zone will confirm this case and bring further fall to test 95.77 low.

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Published on  Mon, Sep 22 2008, 07:48 GMT