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Daily Forex Technical Report

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Dollar and Yen Higher But Lack Follow Through Buying

Mon, Jan 26 2009, 07:43 GMT
by ActionForex.com Team

ActionForex.com

Dollar and yen gap higher as the week starts but lack follow through buying. Markets are quiet with most Asian markets closed, except Japan, for Lunar New Year Holiday. The economic calendar is light today with main focus on US housing data. Existing home sales continued its downward spiral and probably plunged -2% to 4.4M units in December from 4.9M units in the previous month. The recently issued Beige Book stated an increase in home cancellations in a few districts raised the likelihood of sales decline in December. Leading indicators should have declined 0.3% in December, pressured by reduction in manufacturing working hours, less factory orders, falling stocks, etc, from -0.4% in November.

Elsewhere, New Zealand's services industry contracted for a ninth consecutive month in Dec, with the performance of services index dropping from 48.0 to 47.3. The Kiwi remains soft ahead of RBNZ rate decision on Thursday which is expected to have another 100bps cut in the OCR from 5.00% to 4.00%. According to a newspaper report Australia may considering further stimulus measures after pledging A$4b to help commercial property companies. According to Mainichi newspaper survey, 65% of Japanese voters disapprove of the performance of Prime Mister Taro Aso, up 7% from Dec. Aso's approval rating dropped 2% to 19%.

Dollar index continues to stay in range of 85.23 and 86.81 today. While upside momentum might be diminishing, further rise is still expected as long as 85.23 support holds. The current rise is expected to extend further to retest 88.46 high first. Below 85.23 will put focus to channel support at 84.01 and break will argue that a short term top is formed.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6440; (P) 0.6513; (R1) 0.6607;

AUD/USD's sideway trading is still expected to be relatively brief as long as 0.6656 minor resistance holds. Considering that consolidation from 0.6008 should have completed with three waves to 0.7267, decline from there should extend further to retest 0.6008 on resumption. Below 0.6418 will target 0.6292 support first.

However, note that a break of 0.6840 resistance will argue that fall from 0.7267 has completed. More importantly, this will suggest that such fall is merely part of consolidation from 0.6008, which is still in progress. In other words, stronger rise could then be seen for another test of 0.7267 and above before completing the consolidation from 0.6008.

In the bigger picture, price actions from 0.6008 is treated as consolidation to the impulsive decline from 0.9849 only and has possibly completed at 0.7267 already. Sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for another five wave medium term decline, targeting 0.4773 (01 low) next. Above 0.7267 will suggest that such consolidation is still in progress, possibly for another rise to 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completion.