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Action Insight | Written by ActionForex.com | Feb 28 07 07:33 GMT |
Forex Daily Technical Report Yen & Swissy Retreat after Meeting Fibo Resistance

Both Japanese Yen and Swiss Franc retreats mildly today after yesterday’s sharp rally against dollar was temporarily limited by 61.8% retracement resistance. China’s main stock index, which crashed yesterday and is part of the reasons on risk aversion buying in Yen and Franc, opened lower today but recovered quickly and moved into positive territory. Also, the short term overbought yen was limited partly by poor Jan industrial production which dropped 1.5% mom and retail sales which dropped 0.8% yoy.

But still, technically speaking, important tops are there in particular in EUR/JPY and EUR/CHF. EUR/JPY should have completed a diagonal triangle after false breakout to 159.63 and now with lower trend line taken out. EUR/CHF has completed a double top formation with the short term trend line broken too. Today’s consolidation will likely be temporary and further strength should still be seen in yen and franc, at least in near term. And this could just be a start of medium term strength as carry trades continue to unwind.

Also, note that while dollar is pressured against Euro, Yen and Franc, it’s still relatively stable against Sterling. Besides, dollar has also gained against Loonie and Aussie, both pressured by carry trade unwinding and commodity prices. While there are risks of downside surprise in Q4 GDP revision and new home sales today, the market could still be dominated by yen and franc. And, Euro’s upside could be relatively limited by cross selling pressure. EUR/USD

Daily Pivots: (S1) 1.3182; (P) 1.3219; (R1) 1.3279; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/USD’s rally from 1.3078 extended to as high as 1.3258. Subsequent retreat has pushed EUR/USD to below 1.3200 support, indicating that a short term top is formed there at 1.3258 already. Further consolidation will likely follow as long as EUR/USD stays below 1.3258 high. But still, the rise from 1.3078 should be in force as long as downside is contained by 1.3149 support. Break of 1.3258 will indicate rise has resumed for 1.3296 resistance. On the downside, below 1.3149 will indicate the rally from 1.2911 has possibly completed and risk further pull back towards 1.3078 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 1.2822 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, 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) 1.9584; (P) 1.9628; (R1) 1.9664; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

At this point, cable remains the weaker one among European majors as upside is still limited at 1.9672, well below mentioned 1.9731 resistance. Subsequent retreat from 1.9672 has now pushed cable through 1.9593 resistance with 4 hours MACD dragged below signal line, indicating that the rebound from 1.9429 has likely completed. At this point, intraday bias is turned back to the downside and 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 1.9732) indicates the rally from 1.8517 should have already completed at 1.9913. Hence, further correction cannot be ruled out 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) 1.2107; (P) 1.2205; (R1) 1.2270; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.

USD/CHF’s sharp decline from 1.2436 has extended to as low as 1.2142, meeting mentioned 61.8% retracement of 1.1878 to 1.2571 at 1.2143 as expected, before recovering mildly. At this point, short term risk remains on the downside and consolidation should be brief as long as upside of recovery is limited below 1.2257 cluster resistance (38.2% retracement from 1.2436 to 1.2142 at 1.2254).

On the downside, sustained break of 1.2143 support will encourage further fall towards next fibo support of 78.6% retracement of 1.1878 to 1.2571 at 1.2211) first. On the upside, touching of 1.2257 will indicate a short term low is formed and bring lengthier consolidation. But a break above 1.2231 resistance is needed to turn short term outlook back to neutral, otherwise, further decline is still expected to follow after 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) 116.67; (P) 118.70; (R1) 119.95; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/JPY’s sharp fall from 121.61 extends further to as low as 117.47, just inches above mentioned downside target of 61.8% retracement of 114.41 to 122.17 at 117.37. Subsequent recovery indicates an intraday low is formed at 117.47 already and further consolidation might follow. However, as long as recovery is limited by 119.17 resistance, consolidation should still be brief and fall is expected to resume sooner rather than later towards next downside target of medium term rising channel support (now at 116.70).

On the upside, touching of 119.17 will indicate a short term low is already formed and should bring lengthier consolidation. But still, a break above 120.32 resistance. is needed to turn short term outlook back to upside, otherwise, further decline is still in favor.

In the bigger picture, much focus will be on the mentioned medium term rising channel (108.99, 114.41, 117.87, lower channel at 116.70 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 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 USD/JPY could still make a new high above 122.17 as such rally goes.

Forex News Digest

http://www.bloomberg.com/apps/news?pid=20601083&sid=alh4m6P3_v6Q&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=aflK8w_06xjE&refer=currency

http://c.moreover.com/click/here.pl?r826173361
Wed, 28 Feb 2007 03:05:00 GMT from Herald Sun

http://c.moreover.com/click/here.pl?r826138924
Wed, 28 Feb 2007 02:24:00 GMT from ABC Money

http://c.moreover.com/click/here.pl?r826092626
Wed, 28 Feb 2007 01:32:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r826087245
Wed, 28 Feb 2007 01:26:00 GMT from The Australian

http://c.moreover.com/click/here.pl?r826055088
Wed, 28 Feb 2007 00:53:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r826047195
Wed, 28 Feb 2007 00:46:00 GMT from stuff.co.nz

http://c.moreover.com/click/here.pl?r826029501
Wed, 28 Feb 2007 00:30:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r826021176
Wed, 28 Feb 2007 00:23:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r826019413
Wed, 28 Feb 2007 00:21:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r826018949
Wed, 28 Feb 2007 00:20:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r825987374
Tue, 27 Feb 2007 23:44:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r825973678
Tue, 27 Feb 2007 23:31:00 GMT from Bloomberg

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
Previous Revised
53 N/A 53.4
-1.50% -1.90% 0.90%
-0.80% 0.10% -0.30% -0.20%
0.7% 0.50% 0.30%
9.40% 9.50%
-40K -106K
20 20
109.1 109.2
5 5
1.41 1.4
-0.50% 0.40%
1.90% 1.90%
7.40% 7.50%
-8 -7
1.7 1.71
2.30% 3.50%
1.50% 1.50%
4.20% 4.40%
N/A 2.10%
50 48.8
1.08 M 1.12 M
-3.40% 4.80%

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

Daily Report: Yen & Swissy Retreat after Meeting Fibo Resistance

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