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Daily Forex Technical Report

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Daily Forex Technical Report − Sterling in Range, Await GDP to Confirm Recession

Fri, Jan 23 2009, 07:34 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Sterling in Range, Await GDP to Confirm Recession

Sterling and Euro remain in range as markets await important economic data from Europe today. In the UK, the preliminary 4Q08 GDP is anticipated to have contracted -1.2% qoq following a decline of -0.6% in 3Q08. Two consecutive quarters of contraction will confirm technical recession in UK. On annual basis, the UK economy is expected to shrink -1.4%, the largest drop since 1991. Retail sales is expected to dropped -0.6 mom in Dec. GBP/USD is bounded in tight range after hitting a 23 year low of 1.3621 earlier this week, drawing support from 2001 low of 1.3680. Markets seem to be waiting for today's data for either a strong breakout or rebound.

The Eurozone's PMI manufacturing and service are expected to have dropped further to 33.2 and 41.5, from 33.9 and 42.1, respectively. In Germany, the readings should also have weakened to 31.8 and 45 for manufacturing component and service component. Note that EUR/GBP is still struggling around an important near term fibonacci resistance at 0.9493. The chance of making another recover high above 0.9799 will depend of whether EUR/GBP will take out this resistance decisively, or bounce off from the current level.

To be released later today, Canada's inflation continues to ease in December with the CPI anticipated to come in at -0.4% mom from -0.3% in the previous month. On yearly basis, the gauge should have slowed from 2.0% to 1.4%. Concerning core CPI, the reading is expected to have dropped -0.2% mom and rose 2.4% yoy. In the January Monetary Report released yesterday, BOC forecasts total CPI will dip below 0% for 2 quarters in 2009 due to decline in energy prices. However, both total and core inflation will return to target level of 2% yoy by 1H2010.

Released in Asian morning, Japan's all industry index plunged 2.3% mom in November, compared with market expectation of -2.2% and a revised -0.4% in October. Industrial production component remained poor with a reduction of 8.2% while construction and tertiary components dropped 0.8% and 0.9% from the previous month, respectively.

More Forex Technical Analysis Reports Here.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3702; (P) 1.3861; (R1) 1.4035; More

GBP/USD remains bounded in tight range above 1.3621 after recent decline stalled at key support of 1.3680 long term support (50% projection of 1.8668 to 1.4557 from 1.5722 at 1.3667). With an intraday low in place, some more recover could be seen and above 1.4052 will bring stronger rebound. Though, firstly, outlook won't turn bullish before a break of 1.4469 resistance. However, considering the importance of 1.3680 long term support, outlook will remain neutral only until breakout on either side.

In the bigger picture, key long term support of 1.3680 is already met and some support could be seen at the current level. As discussed before, decline from 2.0158 is interpreted as being a five wave sequence (1.7445, 1.8668, 1.4557, 1.5722). Break of 1.4469 support turned resistance will be an important alert that the fifth wave down is also completed. That is, a medium term bottom is at least in place and stronger rise should then be see to 1.5722 and above to correct the whole fall.

On the downside, however, sustained trading below 1.3680 will indicate that such medium term down trend is still in progress and will path the way to next target of 61.8% projection of 1.8668 to 1.4557 from 1.5722 at 1.3186.

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Published on  Fri, Jan 23 2009, 07:46 GMT