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Daily Forex Technical Report

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Daily Forex Technical Report − Carry Trade Pairs Lead Rally against Dollar and Yen

Mon, Nov 3 2008, 07:19 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Carry Trade Pairs Lead Rally against Dollar and Yen

Dollar and yen are generally weaker again today on strength in Asian stock markets. While the Japanese market is on bank holiday, the MSCI Asia Pacific excluding Japan Index rose as much as 6% on anticipation of another round of rate cut from RBA, ECB and BoE later this week. Dollar index's rebound was limited at 86.2 and dropped below 85 level. Though, the greenback still manages to edge higher in USD/JPY. Most major currencies are higher against dollar and yen, with carry trade pairs AUD/JPY and NZD/JPY leading the way.

Markets continue to pay little attention to economic data. Australian retail sales rose a mere 0.2% mom in Sep. Seasonally adjusted sales resulted in a -1.1% mom contraction, worst in three years. House price index dropped much more than expected by -1.8% qoq in Q3, the biggest quarterly decline since 1978. Annual growth rate closed sharply from 8.2% to 2.8%. TD Securities inflation estimation fell for the first time since Feb 2006, by -0.2% mom. Nevertheless, the Aussie strengthens in general.

Looking ahead, manufacturing data will dominate the calendar today. UK Manufacturing PMI is expected to drop to 40.0 in Oct. Eurozone manufacturing PMI is expected to finalize at 41.3 in Oct. Swiss SVME PMI is expected to deteriorate from 47.8 to 45.3 in Oct. US ISM manufacturing index is the main focus in US session and is expected to drop from 43.5 to 41.8 in Oct.

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AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6538; (P) 0.6679; (R1) 0.6812; More

AUD/USD's retreat from 0.6891 was contained at 0.6549 and strengthens again today. Corrective structure of the fall from 0.6891 to 0.6549 indicates that rebound from 0.6008 is still in progress. Above 0.6891 will indicate that such rebound has resumed for 38.2% retracement of 0.9849 to 0.6008 at 0.7475. On the downside, below 0.6549 support will argue that rebound from 0.6008 has possibly completed and flip intraday bias back to the downside to retest this low.

In the bigger picture, the strong rebound from 0.6008 indicates that whole fall from 0.9849 has likely completed the five wave sequence already, with the fifth wave ended at 0.6008. Stronger rebound could be seen to 38.2% retracement of 0.9849 to 0.6008 at 0.7475 or above. Nevertheless, note that the impulsive nature of the fall from 0.9849 to 0.6008 indicate that price actions from 0.6008 is developing into correction/consolidation in a larger down trend only. The long term down trend is still expected to resume after completing the consolidation. On the downside, sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for at least another five wave medium term decline.

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Published on  Mon, Nov 3 2008, 06:27 GMT