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Action Insight | Written by ActionForex.com | Jan 31 07 07:40 GMT |
Forex Daily Technical Report Markets Look Forward to US GDP and FOMC Statement

Dollar remains bounded in tight range ahead of FOMC announcement and a handful of economic data today. Markets will likely remain quiet before US Q4 GDP data where volatility should jump up. A solid 2.9% growth is expected in the Q4 GDP and if that’s confirmed, dollar will likely be boosted as expectation will then be built up for a more upbeat FOMC statement that reflect recent improvements of growth outlook.

Fed is widely expected to keep its target rate unchanged at 5.25% today. Once again the focus will be on the accompanying statement. There were three major developments since last meeting in Dec. Economic indicators has be resilient and showed that the US economy grew near potential in the fourth quarter. Inflation eased moderately but the pace certainly slow. More importantly, Fed members has shifted to a more hawkish stance in their speeches, saying that growth outside housing sector remains firm and inflation pressure may moderate slower than they would like to see. Hence, the statement’s wordings on inflation is not expected to change but the wordings about “recent indicators have been mixed” could be modified to reflect the current growth outlook, leaving the statement a slightly more hawkish statement than the prior one.

A series of better than expected key economic data, in particular the retails sales and trade balance, pointed to a stronger growth in the US economy in the last quarter of 2006. Consensus expects that US GDP has grown at a quicker pace of 2.9% in Q4, comparing to prior quarter’s 2.0%. GDP price index growth is expected to drop from 1.9% to 1.7% while core PCE rise is expected to stay at 2.2%, suggesting that price pressure continues to moderate slowly. Chicago PMI is expected to rise slightly from 51.6 to 52.0 in Jan while construction spending is expected to rebound from Nov’s -0.2% to 0.1% rise in Dec. ADP employment data, which is used as preview to Non-farm payroll, is expected to 122k job growths in Jan.

Euro was steady after yesterday’s Germany CPI data which saw a surprised drop of -0.1% mom in Jan. Just released, Germany retail sales rose much more than expected by 2.4% in Dec, comparing to prior -0.7% and expectation of 1.3%. More data from the Eurozone will be featured today including Germany and Eurozone unemployment, Eurozone consumer confidence. HICP inflation is expected to accelerate from Dec’s 1.9% to Jan’s 2.1%.

Swiss franc remains pressured on carry trade and is pressing record low against euro with EUR/CHF at 1.6253. KOF Leading indicator, which serves as a predictor of further economic activities, is expected to continues it’s downtrend that started last Jul and fell further from 1.6 to 1.56 in Jan. UK Gfk consumer confidence is expected to drop further from -8 to -9 in Jan. EUR/USD

Daily Pivots: (S1) 1.2948; (P) 1.2964; (R1) 1.2986; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Outlook remains unchanged as EUR/USD stays in tight range today. With a short term low in place at 1.2876, with 4 hours MACD staying above signal line, further recovery cannot be ruled out. Break above 1.3000 resistance will indicate that the consolidation from 1.2865 is indeed still in progress. In such case, focus will be back to 1.3042 high and 1.3052 cluster resistance (38.2% retracement of 1.3364 to 1.2867 at 1.3057). However, below 1.2905 support will indicate the recovery has completed and bring retest of 1.2865 low and then trend line support at 1.2845. Break will confirm that whole fall from 1.3364 has resumed for next downside target of 1.2760 support.

In the bigger picture, an important medium term top could be in place at 1.3364 already, with bearish divergence condition in weekly MACD and RSI. Sustained break of 1.2760 support, which will also have medium term rising channel line (now at 1.2748) taken out too, will add much weight to the case that whole medium term up trend from 1.1639 has completed. Focus will then be on 1.2483 cluster support (50% retracement of 1.1639 to 1.3364 at 1.2502). Decisive break of 1.2483 cluster support will confirm this case and have medium term outlook turned bearish.

However, decisive break of 1.3052 cluster resistance will indicate the fall from 1.3364 has possibly completed after drawing support from resistance line (1.2978 to 1.2937, now at 1.2845). This will also save the case that medium term up trend from 1.1639 is still in progress with EUR/USD kept inside the rising channel. Break of 1.3296 resistance will suggest the rise from 1.2483 has possibly resumed and EUR/USD could make a new high above 1.3364 before finally making a top on above mentioned bearish divergence condition in weekly chart.

GBP/USD

Daily Pivots: (S1) 1.9583; (P) 1.9638; (R1) 1.9682; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Cable is also bounded in tight range today. Rebound from 1.9547 lacked decisive momentum and was limited at 1.9695. Nevertheless, with 4 hours MACD pushed back above signal line, a short term top could be formed at 1.9547 low and hence, further rebound is still in favor to come as long as cable stays above this low. On the upside, Break of 1.9735 resistance will encourage a retest of 1.9913 high. Meanwhile, break of 1.9547 low will indicate fall from 1.9913 has resumed for rising trend line support (1.8517 to 1.8834, now at 1.9480).

In the bigger picture, a strong break above 1.9679 resistance will save the case that rally from 1.9261 is still in progress. In such case, further rise could be seen to retest 1.9913 high and break will confirm whole rally from 1.8517 has resumed. But still, close attention will be paid to sign of loss of upside momentum and reversal pattern formation as cable approaches key 2.0106 cluster resistance (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067) as the whole medium term up trend from 1.7047 could complete at or below this level.

Right now, we already have bearish divergence conditions in weekly RSI, daily MACD and RSI. Sustained break of 1.9588 cluster support will be the a warning that whole rise from 1.8517 has completed earlier than we thought. Break of mentioned rising trend line support will confirm such case and bring much deeper decline towards 1.9237/61 cluster support (23.6% retracement of 1.7047 to 1.9913 at 1.9237). Decisive break of this 1.9237/61 cluster support 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).

USD/CHF

Daily Pivots: (S1) 1.2491; (P) 1.2517; (R1) 1.2538; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.

USD/CHF’s retreat from 1.2545 was contained above mentioned 1.2486 support and strengthens mildly today. Though, it’s still bounded in recently established range as USD/CHF hasn’t taken out medium term falling trend line resistance (1.3238 to 1.2768, now at 1.2546) yet. At this point, further rally is still in favor as long as USD/CHF stays above 1.2486 minor support. Sustained break of the trend line resistance should bring further rise towards 1.2768 cluster resistance (61.8% retracement of 1.3283 to 1.1878 at 1.2746). On the downside, below 1.2486 will turn intraday outlook consolidative first but pullback should be contained above 1.2422 support and bring rally resumption.

In the bigger picture, decisive break of medium term trend line resistance will also indicate that whole medium term down trend from 1.3283 has already completed at 1.1878. Further rally should be seen towards 1.2768 cluster resistance first. Decisive break of 1.2768 cluster resistance will add much weight to the case that whole corrective rise from 1.1288 (04 low) has resumed and further rally should be seen towards 1.3283 (06 high) or above.

On the downside, break of 1.2422 support will also have short term rising channel (now at 1.2448) taken out too. With bearish divergence conditions in 4 hours MACD and RSI as background, this could indicate that the whole rise from 1.1878 has completed, after failing to break mentioned medium term falling trend line. Deeper correction should then be seen towards 1.2268 resistance turned support in such case.

USD/JPY

Daily Pivots: (S1) 121.38; (P) 121.68; (R1) 121.88; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/JPY’s retreat from 122.17 continues today and is now pressing 121.22 support as expected . At this point, further consolidation cannot be ruled out but, rise from 114.41 is still in force as long as USD/JPY stays within short term rising channel (lower channel line at 120.98 now) and any interim consolidation should be brief. Above 121.72 will indicate the retreat has completed and should bring retest of 122.17 high. Break of 122.17 high will indicate recent rise has resumed for 123.23/29 cluster projection level

In the bigger picture, as medium term rally from 108.99 is still in force, such rally is treated as resumption of whole up trend from 101.65 for the moment. With price actions from 117.87 to 114.41 treated as interim consolidation, next upside target will be 123.23/29 cluster projection level (100% projection of 114.41 to 119.68 from 117.96 at 123.23. 100% projection of 108.99 to 117.87 from 114.41 at 123.29).

On the downside, sustained break of the short term rising channel will indicate a short term top is formed. With bearish divergence condition in 4 hours MACD and RSI as background, that would indicate that the whole rally from 114.41 has already completed. Hence, deeper decline is expected to be seen towards 117.96 support in such case.

Forex News Digest

http://c.moreover.com/click/here.pl?r789412395
Wed, 31 Jan 2007 00:15:00 GMT from American Economic Alert

http://c.moreover.com/click/here.pl?r789406061
Wed, 31 Jan 2007 00:04:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r789404971
Wed, 31 Jan 2007 00:03:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r789389886
Tue, 30 Jan 2007 23:44:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r789386457
Tue, 30 Jan 2007 23:40:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r789385606
Tue, 30 Jan 2007 23:39:00 GMT from The Australian

http://c.moreover.com/click/here.pl?r789371860
Tue, 30 Jan 2007 23:09:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r789353752
Tue, 30 Jan 2007 22:38:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r789349111
Tue, 30 Jan 2007 22:32:00 GMT from Bloomberg

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
Consensus Previous Revised
53.4 N/A 53.1
-5.6% N/A 9.20%
10.2% 9.80% 4.00%
2.4% 1.30% -0.70%
9.70% 9.80%
-6 -6
2.10% 1.90%
7.60% 7.60%
1.56 1.6
-9 -8
122 K -40 K
2.90% 2.00%
1.70% 1.90%
2.20% 2.20%
0.40% -0.40%
52 51.6
0.10% -0.20%
5.25% 5.25%

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

Daily Report: Markets Look Forward to US GDP and FOMC Statement

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