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Daily Forex Technical Report

Mid−Day Forex Technical Report − Dollar Extends Weakness after Poor Data

Wed, Nov 5 2008, 15:47 GMT
by ActionForex.com Team

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Action Insight Mid-Day Report

Dollar Extends Weakness after Poor Data

Another round of selling in the greenback is seen in early US session after a series of poor economic data. ISM non-manufacturing index dropped more than expected to new cyclical low of 44.4 in Oct. Employment data released today is also poor. The ISM non-manufacturing index employment component dropped deeper into contraction region at 41.5. Other job market data released today also points to steep contraction in the markets. ADP employment report showed sharp -157K contraction in Oct. Challenger report showed a 78.9% annual increase in planned job cuts in Oct, more than 17k jobs. Dollar is sold off on speculation that Friday's Non-Farm Payroll would be even worse than expectation of -200k contraction.

Obama won the US presidential election and became the first African-American US president in history. Obama got 53% of popular vote and wong the electoral college by a big margin of 349-159. US stock markets opens mildly lower with DOW dropped around 100 pts. Dollar index dived steeply to below 84 level on poor data. On the other hand, crude oil and Gold are mixed in tight range.

UK Services PMI plunged more than expected to record low of 42.4 in Oct. Industrial production fell less than expected by -2.3% yoy in Sep but manufacturing production fell faster than expected by -2.3% yoy. Nationwide consumer confidence unexpectedly improved to 55 in Oct. Eurozone Services PMI was revised lower to 42.4 in Oct. Australia trade surplus widened to record 1460M in Sep.

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EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2655; (P) 1.2851; (R1) 1.3177; More

EUR/USD's rise from 1.2525 extends further to 1.3114 after mild retreat today. At this point, intraday bias remains on the upside as long as 1.2797 minor support holds. As discussed before, the corrective structure of the fall from 1.3290 to 1.2525 suggests that rebound from 1.2329 is resuming and further upside is in favor to retest 1.3290 high first. On the downside, though, below 1.2525 will flip intraday bias back to the downside for retesting 1.2329 low.

As discussed before, there is no doubt that a short term bottom is in place at 1.2329. With EUR/USD just missed 38.2% retracement of 1.4867 to 1.2329 at 1.3299, it's believed that fall from 1.4867 has completed too and EUR/USD is developing into choppy sideway consolidation in the larger down trend from 1.6038. Note that the path and length of the current consolidation could be quite unpredictable. Nevertheless, firstly, intraday upside momentum should start to diminish again in 1.3258/3768 resistance zone even in case of another rise. Secondly, as long as 1.2329 low holds, such consolidation could extend further. A break out on either side is needed to confirm that the consolidation has completed.

In the bigger picture, as discussed before, the strength of the fall from 1.6038 reinforces the case that whole decline from 1.6038 is developing into a five wave impulsive fall. The completed decline from 1.4867 to 1.2329 might represent the third wave decline in the five wave sequence. Consolidation from 1.2329 might represent the fourth wave consolidation. Hence, another decline is still expected before making a medium term bottom. Below 1.2329 will target next long term fibonacci level of 50% retracement of 0.8223 to 1.6038 at 1.2131 or even further to 1.1639 key medium term support. On the upside, sustained break of 1.3768 cluster resistance (38.2% retracement of 1.6038 to 1.2329 at 1.3746) is needed to invalidate this view and indicate that whole decline from 1.6038 has made a medium term bottom.

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Published on  Wed, Nov 5 2008, 16:04 GMT

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