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Action Insight | Written by ActionForex.com | Jan 31 07 14:17 GMT |
Forex Mid-Day Technical Report Dollar Firm after Strong GDP Growth, Awaiting Upbeat FOMC Statement

Dollar remains firm in early US session after stronger than expected Q4 GDP report that showed the US economy grew faster than expected by 3.5%, up from 2.0% in Q3. This was well above consensus expectation of 2.9%. The improvements was mainly due to strong consumption, exports and governments spending that offset the negative contributions from housing and inventories. Though, price index and core PCE both increased slower than expected, suggesting moderation of inflation is still on the right track. Nevertheless, the strong GDP report is raising the expectation that FOMC will deliver an upbeat statement later today.

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. Chicago PMI and Construction spending will be featured before FOMC announcement.

The Swiss Franc was lifted briefly after better than expected Swiss KOF leading indicate which came with a reading of 1.71 versus expectation of 1.56. However, that didn’t change that fact that this leading indicate has now had a seventh straight decline in a row since prior month’s reading was revised up from 1.60 to 1.75.

UK Gfk consumer confidence also came in slightly better than expected at -7 versus expectation of -9. This suggested that consumer confidence improved mildly in Jan. However, the rise was largely owing to a sharp upswing in the climate for major purchases sub-index, which rose from -4 in December to 10 in January. However, expectation for the next 12 months did drop from 11 to 9 with Future saving intentions rising from 28 to 34. Present financial situation also deteriorated from -1 to -3.

Data from Eurozone were mixed today, with better than expected retails sales and unemployment in Germany. However, sentiments in Europe generally weakened in Jan with Economic Sentiment Index dropping from 109.8 to 109.2. Sub-indices all dropped except Services confidence. Meanwhile, HICP inflation came in at 1.9%, missing consensus of 2.1%. 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/

EUR/USD edges lower in early US session as recovery was limited well below 1.3000 resistance so far. With 4 hours MACD showing sign of turning south, recovery could have already ended at 1.2980. Break of 1.2905 will add much credence to this case 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.

On the upside, 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).

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’s recovery from 1.9545 was limited at 1.9695 and falls sharply today, reaching as low as 1.9480 so far, pressing mentioned rising trend line support (1.8517 to 1.8834, now at 1.9480) now. Break of 1.9545 low indicates fall from 1.9913 has resumed. At this point, Further decline is expected to follow as long as cable stays below 1.9556 resistance.

As discussed before, sustained break of the trend line support will confirm that whole rise from 1.8517 has completed at 1.9913 and deeper decline is expected to follow towards 1.9237/61 cluster support (23.6% retracement of 1.7047 to 1.9913 at 1.9237).

On the upside, above 1.9556 will turn intraday outlook consolidative but a strong rebound to above 1.9695 resistance is needed to shift focus back to the upside. Otherwise, further decline is still expected to follow.

In the bigger picture, we already have bearish divergence conditions in weekly RSI, daily MACD and RSI. Sustained break of 1.9588 cluster support is 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. 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 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/.

Despite edging higher to 1.2569 earlier today, USD/CHF lacks decisive momentum to resume recent rally and take out medium term falling trend line resistance (1.3238 to 1.2768, now at 1.2546) and retreated back to established range. Nevertheless, 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 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 was supported by mentioned 121.22 support and recovers mildly in early US session. As discussed before, further consolidation cannot be ruled out, but still, rise from 114.41 is still in force as long as USD/JPY stays within short term rising channel (lower channel line at 121.09 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://www.bloomberg.com/apps/news?pid=20601087&sid=apn2MCgnrANs&refer=home

http://c.moreover.com/click/here.pl?r789903605
Wed, 31 Jan 2007 10:35:00 GMT from Houston Chronicle

http://c.moreover.com/click/here.pl?r789883436
Wed, 31 Jan 2007 10:07:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r789881552
Wed, 31 Jan 2007 10:05:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r789899885
Wed, 31 Jan 2007 10:30:00 GMT from Globe Investor

http://c.moreover.com/click/here.pl?r789783487
Wed, 31 Jan 2007 08:18:00 GMT from Washington Post

http://c.moreover.com/click/here.pl?r789775611
Wed, 31 Jan 2007 08:10:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r789734063
Wed, 31 Jan 2007 07:22:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r789725247
Wed, 31 Jan 2007 07:05:00 GMT from Los Angeles Times

http://c.moreover.com/click/here.pl?r789687051
Wed, 31 Jan 2007 06:09:00 GMT from ABC Money

http://c.moreover.com/click/here.pl?r789629880
Wed, 31 Jan 2007 04:50:00 GMT from Los Angeles Times

http://c.moreover.com/click/here.pl?r789548940
Wed, 31 Jan 2007 03:00:00 GMT from Federal Reserve Bank of Richmon

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
Consensus Previous Revised
53.4 N/A 53.1
-5.60% N/A 9.20%
10.20% 9.80% 4.00%
2.40% 1.30% -0.70%
9.50% 9.70% 9.80%
-7.00% -6 -6
1.90% 2.10% 1.90%
7.50% 7.60% 7.60%
1.71% 1.56 1.6 1.75
-7 -9 -8
152K 122 K -40 K
3.50% 2.90% 2.00%
1.50% 1.70% 1.90%
2.10% 2.20% 2.20%
0.20% 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/

Mid-Day Report: Dollar Firm after Strong GDP Growth, Awaiting Upbeat FOMC Statement

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