Action Insight | Written by ActionForex.com | Mar 02 07 06:59 GMT |
Forex Daily Technical Report No Inspiration from Japanese Data

The Japanese yen turned sideway after a mixed bag of data from Japan failed to trigger further rally. On the one hand, household spending rebounded strongly by 0.6% in Jan, much better than expectation of -0.4% fall. Unemployment rate also dropped from 4.1% to 4.0% but real wages were down a further 1% yoy. On the other hand, CPI inflation in Jan remains at 0%, dragging the yoy rate from 0.3% to 0.0% too. There is a chance that Japan is heading to another mild bout of deflation over the coming months.

Technically speaking, dollar’s boost from stronger than expected ISM Manufacturing index was mild only. EUR/USD and USD/CHF were both kept by near term support and resistance which makes the price actions from 1.3258 and 1.2142 corrective. GBP/USD edged lower by is still bounded in tight range. Also, while EUR/JPY remains weak and is set to have another fall today, EUR/CHF seems stabilized. The correlations between the pairs are at a very interesting point now.

Data in the upcoming sessions include Eurozone PPI in Jan and U of Michigan consumer confidence survey as well as Canadian Q4 GDP. EUR/USD

Daily Pivots: (S1) 1.3148; (P) 1.3193; (R1) 1.3232; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/USD’s correction from 1.3258 has reached as low as 1.3153 before stabilizing after drawing support from 4 hours 55 EMA (now at 1.6134). With 1.3149 support remains intact, further rally is still in favor after finishing the current correction. Break of 1.3237 resistance will indicate that such correction has completed and rise from 1.2911 has resumed with a retest of 1.3258 high first, and then 1.3296 resistance.

However, with bearish divergence conditions in 4 hours MACD and RSI, break of 1.3149 will indicate the whole rise from 1.2911 has possibly completed with five waves up to 1.3258 and should bring pull back to 1.3078 support or below.

In the bigger picture, the corrective fall from 1.3364 has completed with three waves down to 1.2865. With EUR/USD staying within medium term rising channel (lower channel line at 1.2830 now), medium term up trend from 1.1639 is still in progress. Current rally is being treated as resumption of this up trend. Break of 1.3296 resistance will add more credence to this view and should push EUR/USD to a new high above 1.3364. However, a drop below 1.2939 will dampen this view and indicate the correction from 1.3364 is likely still in progress instead.

Also, with bearish divergence condition in weekly MACD and RSI, a medium term top could be around the corner. Upside of this medium term rally could be limited by resistance zone of 1.3668 (04 high) and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. But clear reversal pattern or a break of the lower channel line is needed to indicate a medium term top is formed, otherwise, further rise is still in favor.

GBP/USD

Daily Pivots: (S1) 1.9540; (P) 1.9595; (R1) 1.9636; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Cable weakens mildly into European session but after all, it’s still kept inside established range of 1.9429 and 1.9679. As discussed before, with 4 hours MACD staying below signal line, the corrective rise from 1.9429 should have completed at 1.9672 already. Hence, further decline should be seen to retest 1.9429 support. Above 1.9672 is needed to indicate this rebound from 1.9429 has resumed for 1.9731 resistance.

Also, previous break of rising trend line support (1.8517 to 1.8834, now at 1.9766) indicates the rally from 1.8517 should have already completed at 1.9913. Hence, further correction should still be seen as long as cable stays below 1.9731 resistance. Below 1.9429 will indicate corrective fall from 1.9913 has resumed for 1.9237/61 cluster support (23.6% retracement of 1.7047 to 1.9913 at 1.9237).

In the bigger picture, bearish divergence conditions are being displayed in weekly RSI, daily MACD and RSI already, suggesting that the whole up trend from 1.7047 might have completed before reaching mentioned 2.0106 cluster resistance (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067). Focus is still on 1.9237/61 cluster support. Decisive break of 1.9237/61 cluster support will add much weight to the case that whole medium term up trend from 1.7047 has already completed much deeper decline should be seen towards next cluster support at 1.8834 (38.2% retracement of 1.7047 to 1.9913 at 1.8818) first.

Strong rebound from 1.9237/61 cluster support or break of 1.9731 resistance will indicate that the corrective fall from 1.9913 is merely correction to the rise from 1.8517 only and cable could make another high above 1.9913 and attempt to meeting 2.0106 cluster resistance before having a medium term reversal.

USD/CHF

Daily Pivots: (S1) 1.2163; (P) 1.2198; (R1) 1.2252; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.

USD/CHF rebounds strongly to as high as 1.2246 after failing to break through 1.2142 support yesterday. At this point, since upside of the consolidation from 1.2142 is still limited below mentioned 1.2257 cluster resistance (38.2% retracement from 1.2436 to 1.2142 at 1.2254), we’d expect such consolidation from 1.2142 to be brief and fall from 1.2436 should resume sooner rather than later. sustained break of 1.2143 support will encourage further decline towards next fibo support of 78.6% retracement of 1.1878 to 1.2571 at 1.2211) first.

On the upside, even though further recovery towards 4 hours 55 EMA (now at 1.2288) cannot be ruled, a break above 1.2231 resistance is needed to turn short term focus back to upside. Otherwise, further decline is still expected to follow, only after an extended consolidation.

In the bigger picture, previous break of 1.2374 support should have completed a head and shoulder top formation (with ls: 1.2547, h: 1.2571, rs: 1.2550) and should be an important indication of reversal. Firm break of 1.2268 resistance turned support confirms that the whole rally from 1.1878 has completed after failing to break through mentioned medium term falling trend line (1.3283 to 1.2760). Also, weekly MACD will still be kept negative with daily MACD staying below signal line. This suggest that whole down trend from 1.3283 is still in force. In such case, break of 1.2143 fibo resistance should bring deeper decline towards 1.1878 (06 low).

USD/JPY

Daily Pivots: (S1) 116.74; (P) 117.80; (R1) 118.65; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/JPY recovers mildly after the fall from 121.61 has extended to as low as 116.94 yesterday. As discussed before, intraday bias remains on the downside as long as USD/JPY stays below 118.06 support turned resistance and USD/JPY is still expected to head towards medium term rising channel support (now at 116.80). Above 118.06 will turn intraday outlook consolidative first but a break above 118.84 resistance is needed to indicate a low is formed, otherwise, interim consolidation should be brief and fall should resume sooner rather than later.

In the bigger picture, much focus will be on the mentioned medium term rising channel (108.99, 114.41, 117.87, lower channel at 116.80 now). Sustained break of this channel will indicate that the whole medium term up trend form 108.99 has already completed at 122.17. This will swing favors back to the case that such medium term rally is merely part of a large scale consolidation that started at 121.38. And deeper decline should at least be seen to below 114.41 support first with possibility of further fall to retest 108.99 low.

However, strong rebound from this medium term rising channel will save the case that this rally from 108.99 is still in force and another high above 122.17 resistance cannot be ruled out. . A strong break above 118.84 resistance will be the first warning of such case and turn short term focus back to the upside to 4 hours 55 EMA (now at 119.44) first.

Forex News Digest

http://www.bloomberg.com/apps/news?pid=20601083&sid=axB5IunKL1oc&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=ajIp5eUiSkPo&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=awNARxSrIeL8&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=aSKcemvaX5Dg&refer=currency

http://c.moreover.com/click/here.pl?r828974444
Fri, 2 Mar 2007 03:18:00 GMT from Finance Tech Online

http://c.moreover.com/click/here.pl?r828950061
Fri, 2 Mar 2007 02:48:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r828848938
Fri, 2 Mar 2007 01:02:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r828832387
Fri, 2 Mar 2007 00:47:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r828822869
Fri, 2 Mar 2007 00:37:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r828810570
Fri, 2 Mar 2007 00:24:00 GMT from Reuters

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:30 JPY Japan Household spending Jan 0.60% -0.40% -1.90%
23:30 JPY Japan CPI M/M Jan 0.00% 0.10% -0.10%
23:30 JPY Japan CPI Y/Y Jan 0.00% 0.00% 0.10%
23:30 JPY Japan Unemployment rate Jan 4.00% 4.10% 4.10%
10:00 EUR Eurozone PPI M/M Jan 0.10% 0.00%
10:00 EUR Eurozone PPI Y/Y Jan 2.90% 4.10%
13:30 CAD Canada GDP M/M Dec 0.40% 0.20%
13:30 CAD Canada GDP annualised Q/Q Q4 1.10% 1.70%
15:00 USD U. of Michigan survey Feb 95 96.9

http://www.actionforex.com/general_information/forex_newsletters/forex_newsletter_200507301487/