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Daily Forex Technical Report

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Daily Forex Technical Report − Sterling Pressured in Risk Averse Markets, BoE Minutes and UK Job Report Awaited

Wed, Jan 21 2009, 07:52 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Sterling Pressured in Risk Averse Markets, BoE Minutes and UK Job Report Awaited

The forex markets stabilize a bit in Asian session but risk aversion remains the main theme. Asian stocks are generally lower, with Nikkei down another 2% following 4% decline in DOW overnight. Note that both Euro and Aussie have taken out last week's lows against dollar and yen, and that serve as another indication of weaknesses. As discussed before, we're expecting to global stock markets to extend current fall to retest last Oct/Nov's low and hence, further dollar and yen strength is favored.

Dollar index retreats mildly from 86.39 after hitting near term channel resistance. Nevertheless, intraday bias remains on the upside as long as 85.31 minor support holds. The current rise from 77.69 is still expected to extend further towards 88.46 high. A drop below 85.31 minor support will turn intraday outlook neutral and bring consolidation. But short term outlook will remain bullish as long as 83.44 support holds.

Sterling remains the biggest loser this week, dropping over 7% against yen and over 6% against dollar. BoE Governor King said that it's sensible for MPC to prepare for the possibility to "move beyond" conventional instrument as downside risks of inflation remains high even though the bank has 'big cuts' in the interest rate already. This is affirming market's expectation that BoE will soon follow BoJ and Fed to enter quantitative easing. Also King said that UK officials may start buying assets within weeks to loosen credit markets as the record low interest rates in UK fails to avert a marked recession.

BOE will release MPC minutes for the meeting on Jan 8. Markets expect an unanimous 9-0 vote to cut interest rate by 50 bps to 1.5%. Moreover, the minutes will indicate the central bank remains bearish on the nation's economy. The ILO unemployment rate should have edged higher to 6.1% in November from 6% a month ago. Other employment data are 3-month average earnings (November) and claimant count rate (December). While the former is anticipated to remain at 3.3%, the latter should have risen by 85K from 75.7K in November. PSNCR in December probably widened to 17.8B pound from 10.32B pounds in the previous month.

In Canada, economists forecast wholesale sales would have contracted 1.5% in November following a drop of 1.8% in October. The US' NAHB housing market index should have remained unchanged at a record low of 9 in January.

Released overnight, New Zealand's retail sales remained unchanged in November from the previous month, better than market expectation of a drop of -1.2% and October's -1.3% fall. The 325 bps cut in interest rate since July 2008, reduction in income tax and sharp fall in oil price helped boost consumer spending. In Australia, Westpac consumer confidence slid by2.2%, the first decline in 3 months, in January after rising 7.5% in December. According to the survey, Australian consumer became more optimistic on their household finance. However, they are worry much about global economic outlook. Germany PPI dropped -1.0% mom in Dec and moderated from 5.3% yoy to 4.3% yoy.

More Forex Technical Analysis Reports Here.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3713; (P) 1.4077; (R1) 1.4293; More

GBP/USD recovers mildly after hitting as low as 1.3811 but still intraday bias remains on the downside as long as 1.4055 minor resistance holds. Current fall from 1.5372 is expected to extends further to 1.3680 long term support (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667) next. On the upside, above 1.4055 will turn intraday outlook neutral and bring stronger rebound. But upside should be limited below 1.4469 support turned resistance and bring at least on more fall before making a bottom.

In the bigger picture, break of 1.4350 low confirms that medium term fall from 2.0158 has resumed. Such decline is interpreted as developing into a five wave sequence (1.7445, 1.8668, 1.4557, 1.5722) and should now be in the five wave decline. Further fall should be seen to 1.3680 long term support (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667). Some support could be seen there to make a medium term bottom. On the upside, above 1.4980 resistance will be the first alert that a medium term bottom is already in place and bring large scale consolidation. However sustained break of 1.3680 will path the way to deeper medium term fall to 61.8% projection of 1.8668 to 1.4557 from 1.5722 at 1.3186.

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Published on  Wed, Jan 21 2009, 08:04 GMT