Action Insight | Written by ActionForex.com | Mar 12 07 07:19 GMT |
Forex Daily Technical Report Yen Edges Lower into European Session, UK PPI Eyed

The Japanese yen was steady against dollar and euro after mixed data from Japan but renewed selling is seen into European session. Q4 GDP was revised more than expected to a stellar 5.5% annualized growth rate, up from prior estimate of 4.9%. The biggest adjustment was made to capital expenditure which increased from 2.2% qoq to 3.1%. This confirmed that the growth is Q4 was robust. However, some concerns were on the relatively weak private consumption and that Q1’s growth may be dragged down by moderation in capital spending.

Japan’s Corporate Goods Price Index (CGPI) was flat in Feb with yoy rate slowed from 1.9% to 1.8%. The headline growth rate has been falling steadily since peaking at 3.6% last Sep as oil price moderates. The current picture suggests that inflationary pressures in Japan remains virtually non-existent.

Major focus today will be on PPI inflation data from UK. PPI input, which unexpectedly dropped -2.0% mom in Jan, is expected to rebound by 0.6% in Feb and pushed yoy rate from -1.7% to -0.9%. However, PPI output is expected to moderate slightly from 0.3% to 0.2% mom, keeping yoy rate at 2.1%. With such inflationary picture, BoE will likely continue to wait-and-see for a while before another hike later this year to bring inflation back to 2.0% by the end of 07. EUR/USD

Daily Pivots: (S1) 1.3081; (P) 1.3119; (R1) 1.3156; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/USD recovers mildly today but still, at this point, further decline cannot be ruled out as long as EUR/USD stays below 1.3159 minor resistance. Another test of 1.3070 low could still be seen. However, break above 1.3159 will suggest that the fall from 1.3185 has completed and should then bring further rise to 1.3185 cluster resistance (61.8% retracement of 1.3258 to 1.3070 at 1.3186). Break, will indicate the rise from 1.3070 has resumed for next cluster resistance of 1.3258 (78.6% retracement of 1.3364 to 1.2865 at 1.3257).

As discussed before, rise from 1.2865 has made a top at 1.3258 with bearish divergence condition in 4 hours MACD and RSI. As long as 1.3070/85 cluster support holds, subsequent price actions from 1.3258 could be developing into sideway consolidation only. However, a firm break above 1.3258 cluster resistance is needed to confirm that rise from 1.2865 has resumed for 1.3296 resistance. Otherwise, consolidation could still extend further. On the downside, sustained break of 1.3070 cluster support (50% retracement of 1.2911 to 1.3258 at 1.3085) will complete a short term head and shoulder top (ls: 1.3187, h: 1.3258, rs: 1.3185). Being a reliable reversal pattern, this will strongly suggest that the whole rise from 1.2865 has already completed. Deeper decline should be seen towards 100% projection of 1.3258 to 1.3070 from 1.3185 at 1.2997 and then 1.2939 support.

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 1.2854 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, sustained break of mentioned 1.3070 support will dampen this view and suggest that rebound from 1.2865 is indeed a correction to the fall from 1.3364 only. Further break of 1.2939 support will add more weight to this case and push the rising channel line back into focus again.

GBP/USD

Daily Pivots: (S1) 1.9276; (P) 1.9307; (R1) 1.9348; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Cable edges higher as the week starts and as discussed before, further recovery is still in favor as long as it stays above 1.9261 minor support. But still, with 1.9412 resistance remains intact, short term outlook remains bearish. Below 1.9261 support will indicate recovery from 1.9183 has completed and should bring retest of this low. Break will encourage further fall towards 100% projection of 1.9913 to 1.9400 from 1.9672 at 1.9159. However, firm break of 1.9412 resistance will warn that the whole correction from 1.9913 has completed and will put 1.9672 resistance into focus.

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 support zone between 23.6% retracement of 1.7047 to 1.9913 at 1.9237 and 100% projection of 1.9913 to 1.9400 from 1.9672 at 1.9159. Decisive break of this support zone will add much weight to the case that whole medium term up trend from 1.7047 has already completed and 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.

However, strong rebound from 1.9159/9237 support zone or break of 1.9672 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) 1.2279; (P) 1.2316; (R1) 1.2379; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.

USD/CHF remains bounded in tight range today so far. At this point, intraday bias remains on the upside and rise from 1.2157 is expected to extend further towards 1.2393/94 (61.8% retracement of 1.2571 to 1.2108 at 1.2394 and 161.8% projection of 1.2108 to 1.2254 from 1.2157 at 1.2393). Touching of 1.2315 minor support will suggest an intraday top is formed and bring further consolidation. But break below 1.2255 support is needed to indicate rise from 1.2108 has completed and bring deeper decline. Otherwise, further rise is still in favor.

As discussed before, sharp rally from 1.2157 has taken out short term falling trend line (1.2550 to 1.2436). And more importantly, such rebound should have completed a short term head and shoulder bottom formation (ls: 1.2142, h: 1.2108, rs: 1.2157). Plus, breaking of previous week’s high has also completed a single week reversal. Such development, confirmed that the fall from 1.2571 has completed at 1.2108 and hence further strength should be seen in short term. However, medium term outlook is turned mixed.

In the bigger picture, sustained break of 1.2393/94 cluster resistance will indicate that rally from 1.2108 should be of impulsive nature and thus favor the case that it should represent resumption of whole rise from 1.1878 after correction from 1.2571 has completed at 1.2108. In such case, focus will be back to medium term falling trend line (1.3283 to 1.2760, now at 1.2468) and 1.2571 high. Firm break of these levels will encourage firm rally towards 1.2768 cluster resistance (61.8% of 1.3283 to 1.1878 at 1.2746).

However, one must note that weekly MACD is still negative and USD/CHF is still being kept below mentioned medium term falling trend line and 55 weeks EMA (now at 1.2437). Hence, further medium term weakness could still be seen. In particular, sharp bounce off from mentioned 1.2393/94 cluster resistance or break of 1.2255 support will argue that whole rebound from 1.2108 has completed and put focus back to this low first.

USD/JPY

Daily Pivots: (S1) 117.45; (P) 117.90; (R1) 118.74; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

After consolidating for most of Asian session, USD/JPY strengths again into European session. At this point, intraday bias remains on the upside and further rise should be seen towards 61.8% retracement of 122.17 to 155.13 at 119.48. Touching of 117.88 will turn intraday outlook consolidative first. However, further rally is still in favor as long as consolidation is contained by 116.88 resistance turned support.

In the bigger picture, our view remains unchanged even though the current rebound is stronger than we expected. Previous break of medium term rising channel support (108.99, 114.41, 117.87) indicates the whole up trend from 108.99 has completed at 122.17. Weekly MACD’s stay below signal line is still supporting this. The corrective nature of the rise from 108.99 swings favors back to the case that such medium term rally is merely part of a large scale consolidation that started at 121.38, with first leg completed at 108.99 and second leg completed at 122.17. The fall from 121.17 should then the third leg of such consolidation and deeper decline should at least be seen to below 114.02/41 support zone (61.8% retracement of 108.99 to 122.17 at 114.02) first with much possibility of further fall to retest 108.99 low.

Hence, we’ll pay close attention to short term reversal signal as USD/JPY approaches 119.48 fibo resistance. But still, clear reversal pattern needs to be formed or a break below 116.88 resistance turned support is needed to indicate the completion of rebound from 115.13 first. Otherwise, further rise cannot be ruled out.

On the upside, decisive break of 119.48 fibo resistance will argue that the price actions from 122.17 is developing into large range consolidation instead. A retest of 122.17 high could be seen in such case. But still, firm break above this resistance is needed to confirm medium term rally from 108.99 has resumed. Otherwise, medium term outlook will be neutral at best.

EUR/JPY

Daily Pivots: (S1) 154.25; (P) 154.73; (R1) 155.65; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/JPY edges further higher to 115.43 in early European session and at this point, intraday bias remains on the upside as long as EUR/JPY stays above 154.78 minor support. Further rise is still in favor towards 61.8% retracement of 159.63 to 150.75 at 156.24 first. Touching of 154.78 will turn intraday outlook consolidation and risk further pull back.

In the bigger picture, we’re treating the whole year long rise from 130.60 as resumption of the long term up trend with first wave ended at 143.60, subsequent correction ended at 137.167. The third wave up could have ended at 159.63 already. Fall from 159.63 should represent the fourth wave correction and has already met it’s target of 38.2% retracement of 137.16 to 159.63 at 151.05) and lower channel line (143.60 to 159.63, 137.16, now at 150.89). Strong rebound from the channel line is so far consistent with this view.

On the upside, firm break of 155.19 cluster resistance will add more weight to this view and EUR/JPY should make a new high before finally forming a medium term top. However, below 152.23 support again will indicate the rebound from 150.35 has likely complete and put the channel support back into focus. Sustained break of the channel will dampen this view and suggest that much deeper decline is underway towards 147.71 support first.

Forex News Digest

http://c.moreover.com/click/here.pl?r841733778
Mon, 12 Mar 2007 04:07:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r841732674
Mon, 12 Mar 2007 04:06:00 GMT from The Australian

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Mon, 12 Mar 2007 04:06:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r841701939
Mon, 12 Mar 2007 03:13:00 GMT from Reuters

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Mon, 12 Mar 2007 03:07:00 GMT from Bloomberg

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Mon, 12 Mar 2007 01:42:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r841627972
Mon, 12 Mar 2007 01:25:00 GMT from Reuters

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:50 JPY Japan GDP annualised rev. Q4 5.50% 5.10% 4.80%
23:50 JPY Japan GDP rev. Q/Q Q4 1.20% 1.30% 1.20%
23:50 JPY Japan Trade balance (jpy) Jan 114B 134.5 B 1218.9 B
23:50 JPY Japan Current account (jpy) Jan 1194B 1025.0 B 1776.8 B
23:50 JPY Japan Export price index M/M Feb 0.00% N/A 1.40% 1.30%
23:50 JPY Japan Import price index M/M feb -2.20% N/A 2.80% 2.90%
23:50 JPY Japan Domestic CGPI M/M Feb 0.00% 0.00% -0.20%
23:50 JPY Japan Domestic CGPI Y/Y Feb 1.80% 1.90% 2.20%
5:00 JPY Japan Consumer confidence Feb 48.4 N/A 48.4
9:30 GBP U.K. PPI core M/M Feb 0.20% 0.20%
9:30 GBP U.K. PPI core Y/Y Feb 2.30% 2.20%
9:30 GBP U.K. PPI input M/M Feb 0.80% -2.00%
9:30 GBP U.K. PPI input Y/Y Feb -0.70% -1.70%
9:30 GBP U.K. PPI output M/M Feb 0.30% 0.30%
9:30 GBP U.K. PPI output Y/Y Feb 2.10% 2.10%
9:30 GBP U.K. DCLG hse prices Y/Y Jan 9.60% 9.90%
18:00 USD Fed budget Feb -116.0 B -119.24B

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