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Daily Forex Technical Report

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Daily Forex Technical Report − Dollar Recovery Lost Steam, Back Under Pressure

Thu, Sep 25 2008, 07:23 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar Recovery Lost Steam, Back Under Pressure

Dollar weakens again in early European session with GBP/USD taking the lead in breaking this week's high. Markets remains concerned on the status of Paulson's TARP and are uncertain on the impact to the markets even if it's approved. As Bernanke, Paulson and Bush warned, without the rescue plan, there will be tremendous risk of recessions in the US economy but on the other hand, the widened budged deficit is also a concern for the value of dollar. Technically speaking, the recovery in dollar this week is so far looking corrective in nature which argues that a bottom is not in place. As mentioned before, the greenback needs to stage a strong rally around this level to keep the medium term bullish view intact. Or, further selloff and breaking of key support levels will indicate that the medium term trend in dollar has possibly reversed. The development in the rest of the week is important to the medium term outlook.

Released from Japan, Corporate Services Price index beat expectation and climbed further form 1.3% to 1.4% in Aug. Trade balance turned deficit to -324b in Aug due to sharp slowdown in exports from 8.l1% yoy to 0.3% yoy. Import grew 17.3%. Germany Gfk consumer confidence unexpected improved from 1.5 to 1.8, giving Euro a lift against dollar.

Looking ahead, Eurozone M3 money supply grow is expected to slow from 9.3% yoy to 9.1%. Durable goods in US is expected to contract -1.6% in Aug with ex transport orders dropping -0.5%. New home sales is expected to drop slightly from 0.52m to 0.51m annualized rate in Aug. Jobless claims is expected to drop slightly from 455k to 448k.

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GBP/USD Daily Outlook

Daily Pivots: (S1) 1.8412; (P) 1.8508; (R1) 1.8560; More

GBP/USD's rally resumes by taking out 1.8641 and edges higher to 1.8668. At this point, intraday bias is on the upside as long as 1.8457 minor support holds and further rise could still be seen. Nevertheless, focus remains on reversal signal as GBP/USD approaches key near term resistance of 1.8794 (50% retracement of 2.0158 to 1.7445 at 1.8802). Below 1.8457 will flip intraday bias back to the downside. Further break of 1.7916 support will confirm rebound from 1.7445 has finished and bring retest of this low and long term fibonacci level of 50% retracement of 1.3680 to 2.1161 at 1.7421.

In the bigger picture, while there rebound from 1.7445 might be strong, there is no change in the medium term outlook yet. Fall from 2.1161 (07 high) is expected to develop into a five wave decline before making a medium term bottom. Rebound from 1.7445 is expected to be limited by mentioned 1.8794 (50% retracement of 2.0158 to 1.7445 at 1.8802) and bring another fall. Break of 1.7421/45 support zone will confirm that this fall has resumed for next target of 61.8% retracement of 1.3680 to 2.1161 at 1.6538 first. However, sustained break of 1.8794 will dampen this view and further break of 1.9337 support turned resistance will confirm that whole decline from 2.1161 has completed.

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Published on  Thu, Sep 25 2008, 07:38 GMT