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Daily Forex Technical Report

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Mid−Day Forex Technical Report − Euro and Sterling Plummet

Mon, Jan 19 2009, 14:21 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report Report

Euro and Sterling Plummet

Both Euro and Sterling drop sharply today on negative news from Europe. On the other hand, the Japanese yen, and to a lesser extent dollar, reverses earlier losses rise across the board. Last week's pullback in Yen and greenback seems to be over already even though today's move might be exaggerated by thin holiday trading. Nevertheless, traders are advised to keep an eye of near term levels for signal on resumption of dollar and yen's recent rise.

European Commission forecasts the Eurozone economy to shrink -1.9% in 2009, a sharp downward revision from Nov's estimate of 0.1% growth. Such expectation is even more pessimistic than ECB's forecasts of -0.5% contraction made last month. More downgrade

S&P said today that they also downgraded Spain's AAA sovereign credit rating as its budget deficit swells. The rating was downgrade to AA+ and was assigned a "stable" outlook. Five days earlier, S&P cut Greece's rating to A- and threatened to downgrade's Portugal's debts too.

UK Government announced the second bank rescue plan earlier today, hoping to unfreeze lending. Treasury authorized BoE to buy 50b pounds of assets in banks and plans to raise its stakes in RBS. In return to government support, banks are require to increase lending and that will have "legal binding ". All in all, the new measures would add at least 100b to the 250b committed by Prime Minister Brown in October.

On the data front, retail sales in Switzerland dropped 1.4%, the first decline since July, in December from a year ago. The gauge came in much weaker than expected as consensus predicted it to have grown 1.5% yoy after November's +2.9% yoy. Although sales of food and tobacco increased, it's offset by decline in spending in clothing and shoes. Japan's industrial production in November was revised downward to -8.5% mom from initial reading of -8.1%. On yearly basis, it dropped 16.6%, also worse than preliminary figure of -16.2%.

More Forex Technical Analysis Reports Here.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.4578; (P) 1.4779; (R1) 1.4932; More

GBP/USD's sharp fall today is consistent with the view that recovery from 1.4469 has completed at 1.4980 already. Break of 1.4669 will bring fall to 1.4350 low first. As discussed before, we're still favoring the case that consolidation from 1.4557 has either completed at 1.5722 or 1.5372. Break of 1.4350 low will confirm that medium term down trend has resumed. However, above 1.4980 will argue that more sideway trading could be seen in mentioned range of 1.4350/5722 before resuming medium term down trend.

In the bigger picture, interpretations of the fall from 2.0158 is that first wave has completed at 1.7445, second at 1.8668, third at 1.4557. Fourth wave consolidation might have completed with three wave to 1.5722 or it's an expanding triangle that's completed at 1.5372. In either case, break of 1.4350 low will confirm down trend resumption to 1.3680 long term support (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667). On the upside, though, above 1.5372 will indicate that such consolidation is still in progress but upside should still be limited by 1.5722 resistance and bring down trend resumption.

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Published on  Mon, Jan 19 2009, 14:51 GMT