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Daily Forex Technical Report

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Daily Forex Technical Report − Dollar Weakens Further as Stocks Rise

Mon, Dec 15 2008, 07:29 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Dollar Weakens Further as Stocks Rise

Dollar weakens again as the week starts on improved risk appetite on hope for renewed hope for automaker bailout from US government as well as various announcements from Japan, China and Korea to stimulate the economy in the global financial crisis. Dollar index dips mildly is pressing 83 level. Canadian dollar is supported by recovery in crude oil price and lead the rise against dollar today. Meanwhile, European majors are generally firm against both the greenback and the yen.

Technically speaking, the case that dollar is already topped out in medium term continues to build up. Dollar index is now marginally below mentioned 83.11 support. Further decline is still expected in short term as long as 84.02 minor resistance holds and sustained trading below 83.11 will confirm that whole medium term rise from 71.31 has completed, after completing the mentioned head and shoulder top. In such case, deep correction could be seen to 75.88/80.38 support zone. USD/CHF's break of 1.746 cluster support also serves as an early alert that it's medium term rise from 1.0010 has topped out too. Also, EUR/USD soars to as high as 1.3499 so far remains firm.

Released in Asian, Japan's Tankan big manufacturing sentiment fell to -24 in Q4, worse than market expectation of -23 and Q3's -3. This is the biggest quarterly decline since 1974 and the outlook survey indicates further deterioration in sentiment to -36 in 1Q09. Furthermore, Q4 Tankan capex came in at 0.2% (consensus: -0.5%, Q3: +1.7%) while Tankan non-manufacturing was inline with forecast at -9. The awful Tankan report prompts some speculations that BoJ will cut rates again this week.

In UK, December's Rightmove house prices dropped -2.3% MoM and -6.3% YoY, slightly better than November's -2.9% and -7.1%, respectively. Also, the agency said house prices will fall by 10% more next year. BOE released a quarterly bulletin which indicated many households faced difficulties in accessing credits. The articles also stated that investment in dwellings will remain weak for some time. Later in European session, Switzerland's Nov combined PPI is expected to moderate further from 2.9% yoy to 1.9% yoy.

In US session, Empire state manufacturing in December should have dropped further to -27, after falling to -25.43 in November. October's net LT TIC flows should have declined to US$40B from US$66.2B in the previous month. Due to recession and global economic slowdown, US' capacity utilization in November should be reduced to 76% from 76.4% in October while November's industrial production is anticipated to have plunged to -0.5% from 1.3% in October. Considering the housing market, US' NAHB housing market index for January is forecast to come in at 9, same as previous reading.

More Forex Technical Analysis Reports Here.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.3274; (P) 1.3345; (R1) 1.3438; More

EUR/USD's rally extends further to 1.3499 today and is now pressing medium term falling trend line resistance (1.6038, 1.4867, now at 1.3467). At this moment, intraday bias remains on the upside as long as 1.3250 minor support holds and further rise should be seen to 100% projection of 1.2329 to 1.3290 from 1.2549 at 1.3510. Though, as price actions from 1.3239 is still treated as correction in the medium term down trend only, the current rise is still expected to be limited below 1.3768 cluster resistance and bring down trend resumption. Below 1.3250 will flip intraday bias back to the downside for 4 hours 55 EMA (now at 1.3033) first.

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 with first wave completed at 1.3881, second at 1.4867, third at 1.2329. 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, however, sustained break of 1.3768 cluster resistance (38.2% retracement of 1.6038 to 1.2329 at 1.3746) will invalidate this view and indicate that whole decline from 1.6038 has made a medium term bottom. In such case, stronger rally should be seen, targeting 55 weeks EMA (now at 1.4222).

For Crude Oil and Gold analysis, click here

Published on  Mon, Dec 15 2008, 07:38 GMT