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Daily Forex Technical Report

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Mid−Day Forex Technical Report − Dollar Firm Despite Poor Data

Fri, Oct 31 2008, 14:36 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Dollar Firm Despite Poor Data

Dollar remains firm in the US session after a bag of poor economic data. Consumer spending dropped more than expected by -0.3% in Sep while income grew more than expected by 0.2%. The drop in consumer spending is indeed the biggest in four years. Inflation continued to moderated with headline PCE dropping to 4.2% yoy in Sep while core CPI dropped to 2.4% yoy. Chicago PMI deteriorated more than expected to 37.8 in Oct, worst reading since 2001. U of Michigan consumer sentiment was finalized at 57.6, lowest since the 56.4 recorded in Jun. Employment cost index rose 0.7% in Q3.

Other data released today saw Canada GDP dropped -0.3% in Aug Swiss KOF leading indicator continued to the downtrend in Oct and fell from 0.52 to 0.35, the 15th consecutive month of decline and hit a five year low. Eurozone HICP flash moderated to 3.2% yoy as expected while unemployment was unchanged at 7.5%. Germany retail sales dropped more than expected by -2.3% mom in Sep. Gfk consumer confidence dropped more than expected to -36 in Oct, hitting the lowest level since at least 1974.

Sep Japanese national CPI moderated to 2.3% yoy as expected and economists are expecting inflation to moderate in a steeper path in the near future. Unemployment rate unexpectedly dropped to 4.0% in Sep but economists generally expect it to bounce up again as Japan enters into recession.

BoJ cut benchmark interest rate by 20bps to 0.3% in a split decision. The monetary policy statement said the decision was split at 4-4 with governor Shirakawa cast the deciding vote. Though, Shirakawa later clarified that three members of the board voted for a stronger cut of 25bps while one called for no change. In the semi annual economic outlook report, BoJ expect economic growth to average between 0.1-0.2% this fiscal year before picking up to 0.3-0.7% in 2009. Medium term inflations are stable but would remain "relatively high" in short term. Though, the bank saw no emergence of second-round effects.

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USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.1231; (P) 1.1355; (R1) 1.1514; More

USD/CHF's rebound extends further to as high as 1.1604 in early US session. As discussed before, correction from 1.1746 could have completed at 1.1208 already. At this point, intraday bias remains on the upside as long as 1.1471 minor support holds. Retest of 1.1746 high should be seen and break will confirm that medium term up trend has resumed for next target of 1.1878 cluster resistance. On the downside, below 1.1471 will turn intraday outlook neutral again.

In the bigger picture, while a short term top is in place, there is no confirmation of a medium term reversal yet as long as the mentioned rising trend line support (1.0010, 1.0693, now at 1.1089) holds. Medium term rise from 0.9634 is still expected to extend further to 1.1878 (61.8% retracement of 1.3283 to 0.9634 at 1.1889) after completing the current correction. However, sustained break of the trend line support will argue that the medium term rise might have finished and will turn focus back to 1.0693 support.

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Published on  Fri, Oct 31 2008, 14:44 GMT