Action Insight | Written by ActionForex.com | Apr 10 07 13:35 GMT |
Forex Mid-Day Technical Report Dollar and Japanese Yen Remain Pressured, Aussie Strong

Dollar and yen remains pressured today with yen falling to record low against euro and new 10 year low against aussie. Aussie also ride on M&A and carry trade flows and surged to new 17 year high against dollar. Meanwhile dollar gave back the post NFP gains against European majors. A couple of dollar negative developments happened in the last 24 hours including concern of escalation in tension in trade relations between US and China. Also, there are renewed concerns on spill over of the sub-prime mortgage problem after American Home Mortgage announced earnings warnings. Also, there are news that Tehran announced its capability of producing nuclear fuel on industrial scale.

More dollar weakness could be seen in short term but both EUR/USD and GBP/USD upside momentum is not convincing. it seems like the commodity currencies including Aussie and Kiwi, and probably the Canadian too, will be the main beneficiary of the current weakness in dollar. No important economic data is scheduled to release in the US session today and the greenback will probably remains pressured till tomorrow’s FOMC minutes. EUR/USD

Daily Pivots: (S1) 1.3334; (P) 1.3357; (R1) 1.3375; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/USD remains firm today and continues to press 1.3440 high. However, as discussed before, with bearish divergence conditions remaining in 4 hours MACD and RSI, price actions from 1.3253 could be developing into a diagonal triangle which could end the whole rally from 1.2865. Upside of the current rally could be limited and hence short term outlook remains neutral.

On the upside, sustained trading above 1.3440 high is needed to confirm short term strength and indicate rally from 1.2865 is still in progress for 1.2865 high. Otherwise, risk of a short term reversal remains significant. On the downside, break of 1.3336 support will indicate that the whole rise from 1.2865 has possibly made a top at 1.3440 already and encourage further decline towards 1.3253 cluster support (50% retracement of 1.3070 to 1.3440 at 1.3255). Touching of 1.3253 cluster support, with short term rising channel (now at 1.3308) taken out too, will confirm this case. Further correction should be then seen towards 55 days EMA (now at 1.3216) before completion.

In the bigger picture, outlook remains unchanged as long as 1.3086 cluster support (61.8% retracement of 1.2865 to 1.3440 at 1.3085) remains intact. EUR/USD is still trading comfortably within medium term rising channel (1.1639, 1.2483, 1.2978) and medium term up trend from 1.1639 is still in progress. Such up trend is interpreted as having first move completed with three waves up to 1.2978, subsequent sideway consolidation completed at 1.2483. Rise from 1.2483 has made a top at 1.3364 but subsequent correction has completed with three waves down to 1.2865 already. The current rise from 1.2865 should represent resumption of this whole up trend and further rise is still in favor to retest 1.3668 (04 high).

However, sustained break of 1.3086 cluster support will indicate that the rally from 1.2865 has possibly completed and should turn focus back to the medium term rising channel (now at 1.2909). Sustained break of this channel will indicate that the whole medium term up trend from 1.1639 has completed and medium term outlook will then be turned bearish for 1.2483 support first.

GBP/USD

Daily Pivots: (S1) 1.9590; (P) 1.9623; (R1) 1.9657; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Cable’s rebound from 1.9591 continues today and break of 1.9724 resistance indicates that the correction from 1.9824 has likely completed and further rise should be seen to retest 1.9824 high. However, since a short term top is in place at 1.9824 with bearish divergence in 4 hours MACD and RSI as well as breaking of the rising channel, firm break of this 1.9824 resistance is needed to confirm recent rally has resumed for 1.9913 high. Otherwise, short term outlook remains consolidative and another fall would still be seen before finishing the consolidation. On the downside, below 1.9591 again will indicate correction from 1.9824 has resumed for 1.9545 support. But downside of the correction should be contained by 1.9434 cluster support (1.9183 to 1.9824 at 1.9428) and bring another rally.

In the bigger picture, rise from 1.8090 is still in progress after corrective fall from 1.9913, which should have completed with three waves down to 1.9183, was supported by 1.9215/17 cluster support (50% retracement of 1.8517 to 1.9913 at 1.9215, 38.2% retracement of 1.8090 to 1.9913 at 1.9217). The rise from there should represent resumption the whole rally from 1.8090 and hence further upside is expected. However, with bearish divergence conditions being displayed in weekly RSI and daily MACD a medium term top could be around the corner. The up trend from 1.7047 could make a top after reaching 2.0046/0106 cluster resistance zone (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067, 61.8% projection of 1.8517 to 1.9913 from 1.9183 at 2.0046. And hence, focus will be on reversal signal as cable approaches these levels.

On the downside, below 1.9434 cluster support will dampen the above view and argue that the whole rise from 1.9183 has completed. Focus will then be turned back to 1.9215/17 cluster support and sustained break will indicate that the whole up trend from 1.7047 might have completed earlier then we thought and should the bring deeper correction to 1.8517 support first.

USD/CHF

Daily Pivots: (S1) 1.2228; (P) 1.2255; (R1) 1.2293; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/CHF’s fall continues today, reaching as low as 1.2157 so far. With 4 hours MACD dragged to below signal line, intraday bias remains on the downside and further fall should be seen to retest 1.2082 support. Above 1.2212 minor resistance will turn intraday outlook consolidative first. However, note that consolidation from 1.2029 could still be in progress as long as USD/CHF stays above 1.2082 support. Another rise towards next cluster resistance at 1.2354 (61.8% retracement of 1.2550 to 1.2029 at 1.2351) cannot be ruled out. On the downside, below 1.2082 is needed to indicate that consolidation from 1.2029 has completed and bring retest of this cluster support (78.6% retracement of 1..1878 to 1.2571 at 1.2026).

In the bigger picture, medium term outlook remains bearish with USD/CHF staying below both 55 days EMA and 55 weeks EMA. Daily and weekly MACD is still staying negative, supporting this view too. The preferred interpretation at this point is that the whole down trend from 1.3283 is still in progress with the first move from 1.3283 finished with three waves down to 1.1919. Subsequent rebound to 1.2768 was the interim correction and price actions from there represent resumption of such down trend. Further decline should be seen to 1.1878 low and sustained break will add more credence to this view and bring further medium term weakness towards 100% projection of 1.3283 to 1.1919 from 1.2768 at 1.1404.

However, note that USD/CHF is still bounded in wide range of 1.1878 to 1.2768. A rebound to above 1.2354 resistance will dampen this view and indicate that the fall from 1.2571 has completed after meeting 1.2027 fibo support. Another rise could then be seen to retest this high and then the upper end of the range at 1.2768.

USD/JPY

Daily Pivots: (S1) 119.19; (P) 119.29; (R1) 119.39; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/JPY continues to trade sideway after rise from 116.38 was limited 119.38, below mentioned 119.48 fibo resistance (61.8% retracement of 122.17 to 115.13). As discussed before, break of inner rising trend line with bearish divergence condition in 4 hours MACD suggests that a short term top is formed at 119.38. Short term outlook is turned neutral at this point. On the downside, break of 118.46 will add more credence to the case that a top is formed and, more importantly, the corrective rise from 115.13 could have completed and should then bring further decline towards 117.20 support and then 116.38. However, Sustained break of 119.48 fibo resistance will indicate that stronger rebound is still underway, probably with a retest of 122.17 high.

In the bigger picture, our view remains unchanged. 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.

However, decisive break of 119.48 fibo resistance (61.8% retracement of 122.17 to 115.13) will argue that the price actions from 122.17 is developing into large range consolidation instead of correction to rise from 108.99. 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) 159.18; (P) 159.39; (R1) 159.54; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/JPY’s rally extends further to 160.09 today. At this point, intraday bias remains on the upside and further rally is still expected to follow towards cluster projection target of 100% projection of 150.75 to 155.72 from 152.64 at 160.68 and 100% projection of 152.64 to 158.801 from 155.34 at 160.71. However, below 159.01 minor support will suggest that the rise from 155.34 has possibly completed. More important, this will be the first warning that whole rally from 150.75 has ended after meeting 159.63 resistance. Focus, will then turn to short term rising channel (now at 157.89).

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 with a diagonal triangle 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). The current rise from 150.75 should represent the final rally in the whole move targeting upper boundary of the medium term channel (now at 161.51). Attention will be paid to reversal signal as EUR/JPY approaches this resistance.

On the downside, break of the short term rising channel will open up two short term bearish scenarios where the medium term top could be formed already or correction from 159.63 is not finished and is developing in to wide range consolidation instead. In either case, a retest of 150.75 low would likely be seen.

Forex News Digest

http://c.moreover.com/click/here.pl?r880490520
Tue, 10 Apr 2007 10:00:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r880490247
Tue, 10 Apr 2007 09:59:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r880477301
Tue, 10 Apr 2007 09:42:00 GMT from The Australian

http://c.moreover.com/click/here.pl?r880470979
Tue, 10 Apr 2007 09:34:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r880456389
Tue, 10 Apr 2007 09:19:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r880437471
Tue, 10 Apr 2007 08:56:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r880386272
Tue, 10 Apr 2007 08:02:00 GMT from AP via MSN Money

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
JPY BOJ Rate Decision 0.50% 0.50% 0.50%
05:45 CHF Swiss Unemployment rate Mar 3.00% 3.10% 3.20%
06:00 JPY Japan Machine Tool Orders Mar Y/Y 9.50% N/A 16.50%
06:00 EUR Germany Trade balance (euro) Feb 14.2B 15.0B 16.2B
06:00 EUR Germany Current accout (euro) Feb 8.4B 10.6B 11.0 B 11.2B
06:00 EUR Germany Exports Feb 1.90% 1.10% 0.00% 0%
06:00 EUR Germany Imports Feb 5.60% 1.00% -1.80% -1.80%
13:30 USD Fed’s Mishkin Speaks
17:20 USD Fed’s Fisher Speaks
23:01 GBP UK BRC Retail Sales Monitor Y/Y 3.90% 3.30%
23:30 USD Fed’s Plosser Speaks

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