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Daily Forex Technical Report

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Daily Forex Technical Report − Markets Indecisive after Dramatic Reversal

Fri, Nov 14 2008, 07:16 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Markets Indecisive after Dramatic Reversal

The US stock markets had a dramatic reversal in late trading yesterday. S&P 500 was down to a 5 year low and then staged a strong rebound to close 7% higher. Dow also rebounded from an intraday low of 7956 to close at 8835, up 6.6%. The reversal in stock markets triggered sharp reversal in Euro, Aussie as well as the yen. Dollar index also reversed sharply after making a new high at 87.98 briefly. Meanwhile, Sterling remained the biggest loser, lacking any decisive strength in rebound and even fell to new record low of 0.8660 against Euro. However, the momentum in the markets diminished as Asian stocks has mild reactions to the overnight happenings only. Dollar and yen recovers mildly across the board and remains in tight range entering into European session.

Technically speaking the development so far argues that recent consolidation in the financial markets are still in progress. DOW is still in range of 7884 and 9785. While further rise could now be seen to test the upper end of the range, we'd still expect the consolidation from 7884 to complete there and bring down trend resumption. Dollar index's failure to sustain above 87.87 didn't change the scenario that triangle consolidation has completed at 85.06 and we'd still expect rally to resume sooner rather than later after pull back. However, break of 85.06 will open up a few different bearish scenario that could at least bring retest of 83.11 low.

However, development in EUR/USD and AUD/USD argues that corrections from 1.2329 and 0.6008 are possibly still in progress for another rise to above 1.3290 and 0.7014 respectively before completion. Outlook in EUR/JPY and AUD/JPY are similar. Outlook USD/CAD is a bit mixed and could follow the course of EUR/USD and AUD/USD.

Looking ahead, main focus will remain on whether US stock markets could extend yesterday's rebound. On the data front, Germany HICP is finalized at -0.3% mom, 2.5% yoy in Oct. Eurozone preliminary GDP in Q3 is expected to contract -0.2% qoq, with annual rate slowed to 0.7% yoy. Eurozone HICP is expected to finalize at 0.1% mom, 3.2% yoy in Oct. From US, retail sales is the main focus and is expected to contract for the fourth consecutive month by -2.0% in Oct. Ex-auto sales is expected to contract for the third consecutive months by -1.2%. Import/export price index, U of michigan consumer sentiment and business inventories will also be released.

More Forex Technical Analysis Reports Here.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.2488; (P) 1.2672; (R1) 1.2955; More

EUR/USD's strong rebound from 1.2389 indicates that an intraday low is in place and more importantly, it invalidated the triangle breakout scenario and suggests that consolidation from 1.2329 is still in progress. Intraday bias is flipped back to the upside and further rebound could be seen towards 1.3290 high. Though, there is no change in the broader view that price actions from 1.2329 is merely consolidation in the larger down trend. Upside of the current rise from 1.2389 is still expected to be limited below 1.3768 cluster resistance and bring down trend resumption. On the downside, below 1.2591 will turn intraday outlook neutral again. Further break of 1.2389 will be an important indication that recent down trend has resumed for next target of 50% retracement of 0.8223 to 1.6038 at 1.2131

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.

Published on  Fri, Nov 14 2008, 08:51 GMT