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Mid−Day Forex Technical Report − Stocks Set for Lower Open after Poor US data, Yen Retreat Completed?

Wed, Oct 15 2008, 12:48 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Stocks Set for Lower Open after Poor US data, Yen Retreat Completed?

Economic data released from the US are generally poor. Headline retail sales dropped much more than expected by -1.2% mom in Sep versus consensus of -0.7%. Ex-auto sales dropped -0.6%, doubled consensus of -0.3%. Empire state manufacturing index deteriorated much more than expected to -24.6. Headline PPI moderated to 8.7% yoy while core PPI climbed to 4.0% yoy. US stock markets are set to give up further gains of the week and open lower. The Japanese yen strengthens mildly in tight range but could extend gains again in case of another selloff in the equity markets. Dollar also strengthens mildly as crude oil resumes down trend to 74.97 while gold also weakens to 833.1.

Employment data from UK showed that the labor market weakened further in September. Jobless claims rose for the eighth consecutive month and pushed claimant count to 2.9% in Sep. Unemployment rate also rose more than expected to 5.7% in Aug. The job market continued to reflect stresses in the underlying economy.

Eurozone inflationary pressures are easing. Data showed HICP in Sep confirmed to have moderated to 3.6% yoy. Such development should be welcomed by the ECB. However, as inflation is still far above ECB's target of 2%, even though further policy easing is expected, it may not happen until next year since ECB has opted to cut rates by 50bps in a coordinated world central bank rate cut earlier already.

Released earlier today, Japanese trade deficit came in larger than expected at -236b yen. Industrial production dropped -3.5% mom, -6.9% yoy in Aug. Germany HICP is finalized at -0.1% mom, 3.0% yoy in Sep.

More Forex Technical Analysis Reports Here.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 101.34; (P) 102.20; (R1) 102.91; More.

USD/JPY's fall from 103.06 continues today and touching of 100.93 minor support, with 4 hours MACD dragged below signal line argues that rebound from 97.91 might have completed. Intraday bias is flipped back to the down side for a retest of 97.91 low. Break will confirm recent decline has resumed for retesting 95.77 low. On the upside, focus remains on 103.49/54 resistance. As long as this resistance zone holds, the fall from 110.66 should still be in progress. However, sustained break of 103.54 will argue that fall from 110.66 has completed and focus will turn to 106.14 resistance for confirmation.

In the bigger picture, medium term rise from 95.77 has completed at 110.66 with bearish divergence condition in daily MACD. Also, the three wave structure of such rise argues that it's just correction, or part of the consolidation to the down trend from 124.13. Hence, deeper fall is now expected to retest 95.77 low. Break will confirm that whole down trend from 124.13 has resumed and should target 61.8% projection of 124.13 to 95.77 from 110.66 at 93.13 first. On the upside, above 106.14 resistance will indicate that fall from 110.66 has completed. This will suggest that medium term consolidation from 95.77 is still in progress. In such case, another test of 110.66 could be seen before resuming the down trend from 124.13.

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Published on  Wed, Oct 15 2008, 13:06 GMT