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Daily Forex Technical Report

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Mid−Day Forex Technical Report − Dollar and Yen Firm, Eye on Senate Vote

Wed, Oct 1 2008, 14:48 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar and Yen Firm, Eye on Senate Vote

Dollar remains firm in US session after mixed data are released. Risk aversion seems to be back the the market again with yen crosses diving sharply lower, following weakness in US equity markets. All eyes are focusing on Senate vote on the $700b bailout plan this evening. The so called Emergency Economic Stabilization Act of 2008 is sweetened to attract more votes from both the Republicans and the Democrats, including revision to the FDIC's insurance limit from $100k to $250k, and additional homeowner tax breaks and unemployment legislation. The bill will be passed to House on Thursday.

As the impact of credit crisis is spreading over to European, European G8 representatives, along with ECB Trichet and Eurogroup Chairman Juncker, will mean in Paris on Oct 4 to discuss the solutions to the financial turmoil. Juncker said that the result of the weekend meeting is "difficult" to foresee, but that the nations in Europe need to "take a leading role".

After all, there are still much uncertainties in the financial markets as a whole. Though, technically speaking, the trends in the forex markets are intact. Dollar's rally in dollar index remains in force. Renewed selling in yen crosses are giving some support to the greenback too. In short, more upside is expected from dollar and yen in short term.

Economic data from US were mixed. On the one hand, ADP employment report showed much less than expected job cuts of -8k in Sep versus consensus of -55k, lifting some hope of a better than expected Non-Farm Payroll on Friday. On the other hand, ISM manufacturing index plunged sharply to 43.5 in Sep, worst reading since Oct 2001, suggesting that deterioration in the economy is accelerating. Employment component also dropped sharply from 49.7 to 41.8 while Price paid component dropped from 77.0 to 53.5.

Data from Europe were generally disappointing. In particular, UK manufacturing PMI plummeted to record low of 41 in Sep. Unemployment rate in Eurozone climbed from 7.3% to 7.5% in Aug. Swiss SVME PMI dropped to 47.8 in Sep. Quarterly Tankan survey showed confidence among Japanese businesses continued to deteriorate in Q3. Large manufacturing index dropped sharply from 5 to -3, hitting the first negative result in more than five years. Large manufacturing index dropped from 10 to 1. Capex growth slowed from 2.4% to 1.7%, much worse than expectation of 2.5%.

More Forex Technical Analysis Reports Here.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.7668; (P) 1.7893; (R1) 1.8030; More

GBP/USD's fall resumes in early US session and dives to as low as 1.7634. At this point, intraday bias remains on the downside as long as 1.7873 minor resistance holds. Further fall is expected to retest 1.7445 low and long term fibonacci level of 50% retracement of 1.3680 to 2.1161 at 1.7421. On the upside, above 1.7873 will turn intraday outlook neutral first but another fall is still expected after brief recovery.

In the bigger picture, as mentioned before, the rebound from 1.7445, which is treated as correction to down trend from 2.1161 only, have completed after meeting target of 1.8512/8794 resistance zone and was limited below key near term resistance of 1.8794 (50% retracement of 2.0158 to 1.7445 at 1.8802). Medium term outlook remains unchanged. Fall from 2.1161 (07 high) is expected to developing into a five wave decline before making a medium term bottom. Sustained 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. Break of 1.9337 support turned resistance is needed to invalidate this view.

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Published on  Wed, Oct 1 2008, 14:51 GMT