Mid-Day Report: Sterling Boosted by CPI, ZEW Limits Euro’s Rebound
March 24th, 2008 by 
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Action Insight | Written by ActionForex.com | Nov 13 07 13:43 GMT |
Forex Mid-Day Technical Report Sterling Boosted by CPI, ZEW Limits Euro’s Rebound
Most currencies recover against dollar and yen today as carry trade unwinding takes a breath. In particular, Sterling was boosted by stronger than expected inflation data. Meanwhile, Euro’s rebound was limited after disappointing ZEW. The net result can also be seen in the pullback in EUR/GBP cross today. Further consolidation is likely today with a light economic calendar in US with Fed budget and pending home sales featured only.
Sterling continues to rebound today, riding on stronger than expected CPI inflation report. Headline CPI accelerated much faster than expectation to 2.1% yoy, comparing to consensus of 1.9% and breached BoE’s target rate of 2.0%. Retail price index also accelerated to 4.2% yoy. The data suggests that there is little room for BoE to cut rates. Attention will turn to tomorrow’s Quarterly Inflation Report from BoE for updated projections. The positive impact on Sterling was partly offset by weaker than expected RICS house prices growth.
Euro attempted a rebound earlier today but upside is so far limited after disappointing data from Eurozone. German investors sentiments worsened much more than expected in November. The ZEW Economic Sentiment index dropped to a 15 year low of -32.5 in Nov, much weaker than consensus of -20. Eurozone ZEW also dropped steeply to -30 comparing to consensus of -20. ZEW president Wolfgang Franz said that the depreciation of dollar is putting a burden on German exports and economic development may lose “considerable speed”. Eurozone Sep industrial production dropped -0.7% mom, dragging yoy rate to 3.5%, also missed expected of -0.2% mom, 4.7% yoy.
Overnight, BoJ left rates unchanged at 0.50% as widely expected. The vote split was again 8-1, with ultra-hawk Atsushi Mizuno continued to be the sole dissenting vote in favor of an interest rate rise, the same as in the past six meetings. In the monthly report, BoJ continues to expect that Japanese economy is expanding moderately. BoJ Governor Fukui downplayed the downside risk of the global economy to Japan and referred to today’s release of stronger than expected Q3 GDP figures. But he reiterated again that there is no preset time for raising interest rates. EUR/USD
Daily Pivots: (S1) 1.4480; (P) 1.4577; (R1) 1.4629; «www.actionforex.com»
EUR/USD’s retreat from 1.4571 was supported by 4 hours 55 EMA and short term rising channel and recovers from there. As discussed before, an intraday low is in place and further recovery should be seen towards 1.4663 resistance. Break will indicate that correction from 1.4571 has completed and encourage retest of this high. On the downside, below 1.4519 will indicate that correction from 1.4751 is still in progress. But rise from 1.4014 should still be in force as long as 1.4414 clusters support (50% retracement of 1.4124 to 1.4751 at 1.4438) remains intact
However, note that break of 1.4441 will firstly indicate that rise from 1.4014 has completed on mild bearish divergence condition in 4 hours MACD and RSI. Secondly, this will warn that whole rise from 1.3360 has completed with a five wave rally to 1.4751, after meeting 100% projection of 1.3550 to 1.4281 from 1.4014 at 1.4745. In such case, a medium term top is likely in place. Lengthier consolidation could then be seen with a dip into 1.4014/4282 support zone before resuming the medium term up trend.
The long term view remains unchanged. Regardless of internal structure, medium term up trend from 1.1639 remains in force and is treated as resumption of long term up trend from 0.8223 (00 low) to 1.3668 (04 high), with subsequent correction ended at 1.1639. Such rally is expected to extend further to 61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004 which will overlap with 1.5 psychological resistance. A break below 1.3851 is resistance turned support is needed to be the first signal that such rally has completed. Otherwise, medium term outlook remains bullish.
GBP/USD
Daily Pivots: (S1) 2.0412; (P) 2.0640; (R1) 2.0756; «www.actionforex.com»
Cable’s fall from 2.1161 was contained by 2.0538 cluster support (50% retracement of 1.9879 to 2.1161 at 2.0520) and recovers from there. As discussed before, an intraday low is in place and further recovery should be seen towards 2.0773 cluster resistance. Also, rise from 1.9879 remains in force as long as 2.0520/38 cluster support holds. Break of 2.0773 will indicates that correction from 2.1161 has likely completed and bring stronger rally to retest this high.
However, note that decisive break of 2.0520/38 cluster support will indicate that whole rise from 1.9652 has already completed, after touching medium term rising channel resistance. In such case, focus will be back to medium term rising channel support (now at 1.9986).
In the bigger picture, medium term rally from 1.7047, regardless of internal structure, is treated as resumption of long term up trend from 1.3680 (01 low) to 1.9554 (04 high) with subsequent correction ended at 1.7047. Break of 61.8% projection level at 2.0677 now encourages further medium term rally to next projection target of 100% projection 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.2921. On the downside, decisive break of the medium term rising channel is needed to signal that such medium term rally has made a top. Otherwise, medium term outlook remains bullish.
USD/CHF
Daily Pivots: (S1) 1.1233; (P) 1.1266; (R1) 1.1316; «www.actionforex.com».
USD/CHF continues to consolidate above 1.1187. Further decline is still in favor as long as 1.1340 minor resistance holds. Below 1.1187 will encourage fall to test next important medium term support at 1.1100 (95 low). On the upside, above 1.1340 will indicate that a short term bottom is possibly formed and bring recovery to 4 hours 55 EMA (now at 1.1389) and above. But upside should be limited below 1.1597 support turned resistance and bring another fall.
In the bigger picture, medium term down trend from 1.3283 (05 high) has now breached medium term support of 1.1288. The current preferred interpretation is that fall from 1.3282 was initially contained at 1.1919 and turned into sideway triangle consolidation that completed at 1.2467, where the medium term down trend resumed. With this interpretation, next downside target is 1.1100 clusters support (95 low and 100% projection of 1.3283 to 1.1919 from 1.2467 at 1.1103). Hence, downside could be supported there initially on oversold condition and bring rebound.
On the upside, even though a stronger rebound would be seen in case of a break of 1.1597 resistance, break of 1.1891 resistance is needed to indicate fall from 1.2467 has completed. Otherwise, further decline is still in favor after correction.
USD/JPY
Daily Pivots: (S1) 108.75; (P) 109.77; (R1) 110.42; «www.actionforex.com».
USD/JPY continues to consolidate above 109.12 low today, after being support slightly above 108.99 medium term support. At this point, further decline is still expected as long as 110.74 resistance holds. Sustained break of 108.99 will encourage further decline to next short term target of 100% projection of 124.13 to 111.59 from 117.94 at 105.40. On the upside, above 110.74 will indicate a short term bottom is possibly in place and bring recovery to 112.04/113.39 resistance zone. But upside should be limited there and bring another fall.
In the bigger picture, the three wave structure of the up trend from 101.65 to 124.13 suggests that it’s corrective in nature. Such development flipped favor to the case that the rally from 101.65 could indeed be the final leg of a long term triangle formation (147.68, 101.22, 135.20, 101.65, 124.13). The break of falling trend line (147.68, 135.20) was merely a throwover in the last leg. Sustained trading below 108.99 low will add more credence to this case and put key long term support zone of 101.22/65 into focus. On the upside, break of 115.91 resistance is needed to be the first signal that fall from 124.13 has completed. Otherwise, medium term outlook remains bearish.
EUR/JPY
Daily Pivots: (S1) 157.76; (P) 160.04; (R1) 161.26; «www.actionforex.com»
EUR/;JPY made an intraday low after reaching 158.67. At this point, further consolidation and recover could be seen. However, as long as upside is limited below 164.00 resistance, current recovery from 158.67 is treated as correction to fall from 167.62 only and another decline is still in favor. Below 158.67 will encourage further fall towards 61.8% retracement of 149.27 to 167.72 at 156.31 first.
Also, note that prior break of 160.67 clusters support (38.2% retracement of 149.27 to 167.77 at 160.70) indicates that EUR/JPY is probably still bounded in large scale consolidation pattern that started at 168.93. That is, the current fall from 167.72 represents the last falling leg of such consolidation and retest of 149.27 could be seen before completing this consolidation.
In the bigger picture, break of trend line support (137.16, 150.75) confirmed that medium term rally rally from 130.60 has made an important medium term top at 168.93. However, subsequent sharp correction from there to 149.27 was supported by long term rising channel. Hence, long term up trend from 88.97 (00 low) remains intact. But break of 168.93 high is needed to confirm such up trend has resumed. Meanwhile, on the downside, break of 149.27 low will also have the long term rising channel taken out, which in turn add much weight to the case that rise from 88.97 has indeed completed at 168.83 and bring much deeper medium term decline.
Forex News Digest
«c.moreover.com»
Tue, 13 Nov 2007 10:42:00 GMT from International Herald Tribune
«c.moreover.com»
Tue, 13 Nov 2007 10:37:00 GMT from Metronews
«c.moreover.com»
Tue, 13 Nov 2007 10:22:00 GMT from Reuters
«c.moreover.com»
Tue, 13 Nov 2007 09:57:00 GMT from Reuters
«c.moreover.com»
Tue, 13 Nov 2007 09:44:00 GMT from Canoe Money
«c.moreover.com»
Tue, 13 Nov 2007 09:36:00 GMT from Marketing News International
«www.actionforex.com» Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
JPY BOJ rate decision 0.50% 0.50% 0.50%
23:50 JPY Japan GDP annualized Q3 2.60% 1.80% -1.20% -1.60%
23:50 JPY GDP Q/Q Q3 0.60% 0.50% -0.30% -0.30%
23:50 JPY GDP deflator Y/Y Q3 -0.30% -0.30% -0.30%
00:01 GBP U.K. RICS house prices Oct -22.2 -18.00% -14.60% -14.9
06:00 JPY BOJ Monthly report
09:30 GBP U.K. CPI M/M Oct 0.50% 0.30% 0.10%
09:30 GBP U.K. CPI Y/Y Oct 2.10% 1.90% 1.80%
09:30 GBP U.K. RPI M/M Oct 0.40% 0.30% 0.30%
09:30 GBP U.K. RPI Y/Y Oct 4.20% 4.10% 3.90%
09:30 GBP U.K. RPI - X M/M Oct 0.40% 0.30% 0.30%
09:30 GBP U.K. RPI - X Y/Y Oct 3.10% 3.00% 2.80%
10:00 EUR Eurozone Industrial prod’n M/M Sep -0.70% -0.20% 1.20%
10:00 EUR Eurozone Industrial prod’n Y/Y Sep 3.50% 4.70% 4.30%
10:00 EUR Eurozone ZEW Econ. Sent. Nov -30 -20 -19
10:00 EUR Germany ZEW Econ. Sent. Nov -32.5 -20 -18.1
19:00 USD U.S. Fed budget Oct -54.0B -49.32B
20:00 USD U.S. Pending home sales M/M Sep -2.50% -6.50%
20:00 USD U.S. Pending home sales Sep N/A 85.5
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