Ben Bernanke’s testimony today makes it clear he’s just looking for a reason to push through a Federal Reserve rate cut, said Jim Cramer on the TheStreet.com TV’s Wall Street Confidential video. Cramer told Wall St. Confidential host Gregg Greenberg that he wanted to scream as he watched how the conventional media misinterpreted Bernanke’s Congressional testimony as a possibility that he might raise rates. “He’s looking for an excuse to cut,” Cramer...
Weekly Outlook: Dollar to Draw Further Strength from US Data and FOMC Statement
February 15, 2007 on 3:13 pm | In |
Action Insight | Written by ActionForex.com | Jan 27 07 09:03 GMT |
Forex Weekly Review and Outlook Dollar to Draw Further Strength from US Data and FOMC Statement
Dollar staged a broad based rebound last week after solid data as well as weakness in other majors. The greenback will look forward to a busy economic schedule that feature a series of important US economic data including GDP, ISM and NFP as well as FOMC meeting to draw further strength to extend the rebound that started early this year. On the other hand, Sterling tumbled across the board last week after a much less hawkish than expected MPC meeting minutes and vote outcome. Yen was volatility on G7 rumors. Australian dollar fell sharply after disappointing Q4 inflation data that dimmed hope for a Feb hike.
Prev Week’s High Prev Week’s Low Prev Week’s Close Last Week’s High Last Week’s Low Last Week’s Close Change (pips) Change (%)
EURUSD 1.3000 1.2895 1.2965 1.3044 1.2876 1.2916 -49 -0.38%
GBPUSD 1.9777 1.9570 1.9744 1.9914 1.9556 1.9599 -145 -0.73%
USDCHF 1.2547 1.2415 1.2477 1.2569 1.2375 1.2532 55 0.44%
USDJPY 121.57 120.06 121.23 121.77 120.19 121.54 31 0.26%
USDCAD 1.1774 1.1646 1.1718 1.1851 1.1712 1.1801 83 0.71%
AUDUSD 0.7906 0.7813 0.7899 0.7937 0.7720 0.7735 -164 -2.08%
EURJPY 157.66 155.07 157.18 158.61 155.77 157.01 -17 -0.11%
EURGBP 0.6606 0.6552 0.6566 0.6603 0.6535 0.6590 24 0.37%
EURCHF 1.6198 1.6110 1.6178 1.6222 1.6123 1.6189 11 0.07%
GBPJPY 240.05 234.96 239.36 241.49 236.33 238.25 -111 -0.46%
GBPCHF 2.4690 2.4413 2.4633 2.4757 2.4481 2.4566 -67 -0.27%
AUDJPY 95.85 94.13 95.74 96.41 93.61 94.00 -174 -1.82%
The US economic calendar was light last week but nevertheless, dollar was supported by solid durable goods orders report and housing data. Dec headline durable goods orders were up 3.1% on a year-to-year basis, much better than consensus expectations of 2.5% growth, and far outpaced Nov’s upwardly revised 2.2% gain. Ex-transport orders were also up 2.3% beating expectation of 0.5%. New home sales rebounded further in Dec by 4.8% to 1.12m annualized rate, above expectation of 1.05M. Existing homes sales, despite being a touch below expectation and recorded 6.22M, is still staying above Sep’s low of 6.21M.
Euro failed to extend it’s rebound but instead reversed to end the week lower against dollar despite some solid data that continues to strengthen the case of a Mar hike from ECB. German Ifo business climate, despite giving up modest ground in Jan and fell to 107.9 from a 16 year high of 108.7, retained a firm overall tone and suggest that condition remains healthy for German investors in spite of the VAT hike. In addition, Dec eurozone M3 figures point to continued expansion in the money supply, accelerated to 9.7 yoy growth from 9.3% in prior month, further bolstering the view that the ECB will retain its tightening bias and deliver another hike in Mar.
The yen saw much volatility last week. Yen was boosted initially by carry trade liquidation, in particular against Australian dollar after a worse than expected Australian CPI. Rumors of yen’s weakness being a topic of discussion at the upcoming G7 meeting has triggered further carry trade liquidation that pushed the yen higher. However, market sentiments quickly reversed again after European and Japanese officials denied such rumor. Yen was pushed lower further after a weak inflation report which with Dec headline CPI being flat and core CPI growth rising a mere 0.1%.
Sterling carried on its strength initially last week and rose to fresh 30-months high against Euro and a 14 year high against dollar. However, sentiments reversed after MPC minutes which revealed that the surprise rate hike in Jan was done by a much tighter than expected vote of 5-4, instead of market expectation of 7-2. BoE Chief Economist Charles Bean, BoE Deputy Governor Rachel Lomax, Paul Tucker and David Blanchflower dissented in favor of no change. The overall debate centers around whether preemption is better than waiting for additional evidence. Jan’s move should have basically eliminated another hike again in first quarter and markets are quickly scaling back the bets on it. Opinions on whether there will be another hike in second quarter is divided and focus will be back on fundamental data including earnings growth and inflationary expectations. Sterling fell sharply across the board since then. Not even the better than expected UK GDP report which showed GDP GDP growth accelerated to 0.8% qoq and 3.0% yoy was enough to reverse its fortune.
Canadian dollar remains pressured and weakened against dollar last week after disappointing inflation report. In particular, core CPI dropped 0.2% mom in Dec, dragging the yoy growth back to 2.0%. BoC will clearly keep rates on hold for the next few months and the Loonie will likely remains weak.
Aussie tumbled sharply after downside surprise in Q4 CPI that actually dropped 0.1% qoq, dragging yoy increase to 3.3%. This has disappointed the Aussie bulls who expect another hike from RBA in Feb and looked for a 0.2% qoq, 3.6% yoy increase in consumer inflation. Meanwhile, RBA’s own measure of underlying inflation, weighted mean and trimmed mean both rose 0.5% qoq, taking yoy grow to 3% and 2.9% respectively. Opinion is divided on whether RBA will hike in Feb. Based on the current inflation outlook, even if RBA does hike in Feb, this would likely be the last one in the current cycle.
RBNZ kept rate unchanged at 7.25% as widely expected. Governor Bollard remained hawkish as he said that “in the absence of clear indications of a moderation in housing and domestic demand, it is likely that further policy tightening will be required.” However, inflation is expected to “decrease considerably” this year as energy prices fall even though is will accelerate again in 2008 and be in the upper end of his target range of 1-3%. So, it’s still a close call on whether RBNZ will raise rates again in first quarter and that will very much depends on the upcoming housing and domestic growth data. Nevertheless, kiwi was boosted mildly after the announcement.
Suggested Readings
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/currency_currents%3a_breakout_or_shakeout?_2007012616415/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/yen_carry_trade%3a_fact_or_fiction?_2007012616440/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/japanese_markets_relatively_undaunted_by_tepid_cpi_2007012616417/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/fx_briefing%3a_ecb_could_reach_its_inflation_target_this_year_2007012616430/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/germany%3a_vat_bust_dents_confidence_2007012516355/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/boe_minutes_weaken_sterling_2007012416293/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/sterling_tumbles_on_tight_mpc_vote_but_supported_by_gdp_2007012416289/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/fx_crossroads%3a_both_reserve_banks_on_hold_-_the_rba_firmly%2c_the_rbnz_less_so_2007012416306/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/rbnz_ocr_review%3a_when_%22could%22_becomes_%22likely%22_2007012416326/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/australian_weekly%3a_no_rate_move_in_2007%2c_upside_risks_2007012616409/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/further_aussie_unwinding_ahead_2007012616413/ The Week Ahead
A heavy US economic calendar with be featured that will dominate the focus this week and likely trigger a lot of volatility in the markets. FOMC meeting will be one of the major focus of the week. Fed is widely expected to keep rates unchanged at 5.25%. Since the last meeting in Dec, there has been a serious of rather upbeat data. Hence, the focus of attention will be any positive change in growth outlook in the accompanying statement. Though Fed will still likely keeps rate unchanged at least throughout first half, the evolution of Fed’s voting member’s view on growth and inflation will continue to shift expectation on policy directions in the second half of the year.
Right before FOMC announcement on Wed, Q4 GDP data will be released. Expectation for this piece of data is high after a stronger of stronger than expected key data was released recently, in particular retails sales and trade balance. Economists expect growth to accelerate to 2.9%. Meanwhile, core PCE is expected to stay at 2.2%.
ISM manufacturing index and employment report will also be closely watched. ISM manufacturing index is expected to rebound further to 52.0 in Jan. Meanwhile, NFP report is expected to show 149k job growths in Jan, with unemployment rate staying at 4.5% and average hourly earnings growth to slow slightly from 0.5% to 0.3%. Other important economic indicators include Conference Board Consumer Confidence, Chicago PMI, Construction Spending, Dec PCE and Factory orders.
From Eurozone, German and Eurozone inflation data will be featured together with Manufacturing PMI. The UK calendar includes house price data, manufacturing PMI as well as Gfk consumer confidence. Swiss KOF leading indicator will also be closely watched. Japanese data will center around consumer spending, retail sales, in the earlier part of this week together with employment report, industrial production as well as housing data.
Suggested Readings:
- http://www.actionforex.com/forex_analysis_and_forecasts/economic_calendar/summary_1%1028_-_2%101_2007012616447/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/weekly_focus%3a_fed_to_remain_sidelined_in_a_busy_week_2007012616437/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/federal_reserve_welcomes_new_voters%3a_what_does_this_mean_for_monetary_policy_2007012516377/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/fomc_decision_highlights_risks_to_us_dollar_strength_2007012616450/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/economic_outlook%3a_the_us_-_economic_indicators_-_are_we_any_wiser?_2007012616414/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/fx_pole_position%3a_listen_to_the_grapevine_2007012616406/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/oil_on_troubled_waters_2007012516344/ EUR/USD
Despite initial rebound, EUR/USD’s upside was limited at 1.3042, below 1.3052 cluster resistance (38.2% retracement of 1.3364 to 1.2867 at 1.3057) as expected and EUR/USD weakened to as low as 1.2876 since then. From a short term point of view, initial bias for this week remains on the downside as long as EUR/USD stays below 1.2935 minor resistance. Further decline is expected to follow to retest 1.2865 low and trend line support at 1.2851. Break will confirm whole fall from 1.3364 has resumed for next downside target of 1.2760 support.
Above 1.2935 will turn intraday outlook consolidative but upside should be limited below 1.3000 resistance and bring decline resumption. It will take a break above 1.3000 to indciate that consolidation from 1.2865 low is still in progress and in such case, put focus back to 1.3052 resistance.
In the bigger picture, the whole medium term rise from 1.1639 has lost momentum as bearish divergence condition is being displayed in weekly MACD and RSI. An important medium term top could be in place at 1.3364 already, after meeting 61.8% projection of 1.1639 to 1.2978 from 1.2483 at 1.3311. Sustained break of 1.2760 will have medium term rising channel line (now at 1.2747) taken out too. This 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.
On the upside, a 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 1.2851). 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.
In the longer term picture, it’s still early to conclude whether medium term rally from 1.1639 represents resumption of multi-year up trend from 0.8223 or just part of a large scale consolidation that started at 1.3668. But, the three wave corrective nature of the rise from 1.1639 to 1.2978 suggest that this whole rally from 1.1639 will be corrective in nature, thus, favoring the latter case. Decisive break of 1.2483 cluster support will also confirm this and bring much further weakness towards 1.1639 low.
GBP/USD
Despite initial strength, a short term top is formed at 1.9913 last week on bearish divergence condition in 4 hours MACD. Cable reversed fortune and fell sharply to as low as 1.9558 and is now pressing mentioned 1.9588 cluster support (50% retracement of 1.9261 to 1.9913 at 1.9587). From a short term angle, further decline is still in favor as long as cable stays below 1.9679 minor resistance. Sustained break of 1.9588 will bring further weakness towards rising trend line support (1.8517 to 1.8834, now at 1.9444).
On the upside, above 1.9679 resistance is needed to indicate that fall from 1.9913 has completed after drawing support from 1.9588 cluster support. Rebound should follow in such case. But still, break of 1.9913 is needed to indicate recent rise from 1.9261 has resumed for 138.2% projection of 1.8090 to 1.9142 from 1.8517 at 1.9971 and then 2.0000 psychological resistance. Otherwise, risk of another fall remains.
In the bigger picture, as discussed before, in case of further rise, 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
USD/CHF retreats initially last week but downside was contained at 1.2374, supported by short term rising channel. Rally from 1.1878 then resumed by breaking marginally higher to 1.2563 to close the week strongly. From a short term angle, further rise is expected to follow as long as USD/CHF stays above 1.2486 support. Sustained break of medium term falling trend line resistance (1.3238 to 1.2768, now at 1.2549) should bring further rise towards 1.2768 cluster resistance (61.8% retracement of 1.3283 to 1.1878 at 1.2746)
Below 1.2486 will turn intraday outlook consolidative first but pullback should be contained above 1.2422 support and bring rally resumption. A break below 1.2422 support is needed to shift focus back to the downside to 1.2374 low. Otherwise, consolidation should be brief and rally should resume sooner rather than later.
In the bigger picture, decisive break of 1.2501/49 resistance zone (100% projection of 1.1878 to 1.2268 from 1.2111 at 1.2501 and medium term falling trend line resistance, 1.3238 to 1.2768, now at 1.2549) will indicate 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, below 1.2374 will have the short term rising channel (now at 1.2393) taken out too and will indicate the whole rebound from 1.1878 has possible made a top after failing to break 1.2501/49 resistance zone decisively. Deeper correction should then be seen towards 1.2268 resistance turned support in such case.
USD/JPY
It’s been an extremely volatile week for USD/JPY. The choppy correction from 121.77 was contained at 120.16 last week, after drawing support from short term rising channel and rebounded strongly. Though, after all, USD/JPY is still kept in established range below 121.77 high. From a short term angle, further rally is still in favor as long as USD/JPY stays above 120.88 support. However a break of 121.77 high is needed to signal rally from 114.41 has resumed for next upside target of 123.23/29 cluster projection level.
On the downside, below 120.88 will suggest that consolidation from 121.77 is still in progress and could bring another fall to 120.16 or lower. In such case, also with sustained break of the short term rising channel (now at 120.66), and with bearish divergence condition in 4 hours MACD and RSI as background, the rise from 114.41 has likely completed at 121.77 already and deeper correction should be seen towards 117.96 support (50% retracement of 114.41 to 121.77 at 118.09).
In the bigger picture, fall from 121.38 to 108.99, with its three wave nature, should either represent the correction to whole year long up trend from 101.65 to 121.38, or part of such correction. That is, the medium term rally from 108.99 is either resumption of the whole up trend from 101.65 or a rising leg of consolidation pattern that started at 121.38. Favor is still in the former case as medium term rally from 108.99 is still in force.
Also, note that the current rally has pushed USD/JPY above multi-year falling trend line (147.68 to 135.20) again. Sustained trading above 121.38 resistance will confirm that whole up trend from 101.65 has resumed. 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).
However, decisive break of 117.96 support will rise some doubt about this case. In such case, a deeper decline should follow to retest medium term rising channel (now at 115.68) first.
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The British Pound received a boost today when the Central Bank of England raised interest rates to 5.25%, which represents parity with American interest rates. The move shocked investors and traders who expected the Bank to leave rates unchanged. Risk-averse investors are now fully incentivized to move funds to Britain since interest rate levels there are now among the most competitive in the industrialized world. Further, as the British economy still hasnt peaked, it is possible that the Bank of...
Weekly Outlook: Dollar to Draw Further Strength from US Data and FOMC Statement
February 15, 2007 on 3:13 pm | In |
Action Insight | Written by ActionForex.com | Jan 27 07 09:03 GMT |
Forex Weekly Review and Outlook Dollar to Draw Further Strength from US Data and FOMC Statement
Dollar staged a broad based rebound last week after solid data as well as weakness in other majors. The greenback will look forward to a busy economic schedule that feature a series of important US economic data including GDP, ISM and NFP as well as FOMC meeting to draw further strength to extend the rebound that started early this year. On the other hand, Sterling tumbled across the board last week after a much less hawkish than expected MPC meeting minutes and vote outcome. Yen was volatility on G7 rumors. Australian dollar fell sharply after disappointing Q4 inflation data that dimmed hope for a Feb hike.
Prev Week’s High Prev Week’s Low Prev Week’s Close Last Week’s High Last Week’s Low Last Week’s Close Change (pips) Change (%)
EURUSD 1.3000 1.2895 1.2965 1.3044 1.2876 1.2916 -49 -0.38%
GBPUSD 1.9777 1.9570 1.9744 1.9914 1.9556 1.9599 -145 -0.73%
USDCHF 1.2547 1.2415 1.2477 1.2569 1.2375 1.2532 55 0.44%
USDJPY 121.57 120.06 121.23 121.77 120.19 121.54 31 0.26%
USDCAD 1.1774 1.1646 1.1718 1.1851 1.1712 1.1801 83 0.71%
AUDUSD 0.7906 0.7813 0.7899 0.7937 0.7720 0.7735 -164 -2.08%
EURJPY 157.66 155.07 157.18 158.61 155.77 157.01 -17 -0.11%
EURGBP 0.6606 0.6552 0.6566 0.6603 0.6535 0.6590 24 0.37%
EURCHF 1.6198 1.6110 1.6178 1.6222 1.6123 1.6189 11 0.07%
GBPJPY 240.05 234.96 239.36 241.49 236.33 238.25 -111 -0.46%
GBPCHF 2.4690 2.4413 2.4633 2.4757 2.4481 2.4566 -67 -0.27%
AUDJPY 95.85 94.13 95.74 96.41 93.61 94.00 -174 -1.82%
The US economic calendar was light last week but nevertheless, dollar was supported by solid durable goods orders report and housing data. Dec headline durable goods orders were up 3.1% on a year-to-year basis, much better than consensus expectations of 2.5% growth, and far outpaced Nov’s upwardly revised 2.2% gain. Ex-transport orders were also up 2.3% beating expectation of 0.5%. New home sales rebounded further in Dec by 4.8% to 1.12m annualized rate, above expectation of 1.05M. Existing homes sales, despite being a touch below expectation and recorded 6.22M, is still staying above Sep’s low of 6.21M.
Euro failed to extend it’s rebound but instead reversed to end the week lower against dollar despite some solid data that continues to strengthen the case of a Mar hike from ECB. German Ifo business climate, despite giving up modest ground in Jan and fell to 107.9 from a 16 year high of 108.7, retained a firm overall tone and suggest that condition remains healthy for German investors in spite of the VAT hike. In addition, Dec eurozone M3 figures point to continued expansion in the money supply, accelerated to 9.7 yoy growth from 9.3% in prior month, further bolstering the view that the ECB will retain its tightening bias and deliver another hike in Mar.
The yen saw much volatility last week. Yen was boosted initially by carry trade liquidation, in particular against Australian dollar after a worse than expected Australian CPI. Rumors of yen’s weakness being a topic of discussion at the upcoming G7 meeting has triggered further carry trade liquidation that pushed the yen higher. However, market sentiments quickly reversed again after European and Japanese officials denied such rumor. Yen was pushed lower further after a weak inflation report which with Dec headline CPI being flat and core CPI growth rising a mere 0.1%.
Sterling carried on its strength initially last week and rose to fresh 30-months high against Euro and a 14 year high against dollar. However, sentiments reversed after MPC minutes which revealed that the surprise rate hike in Jan was done by a much tighter than expected vote of 5-4, instead of market expectation of 7-2. BoE Chief Economist Charles Bean, BoE Deputy Governor Rachel Lomax, Paul Tucker and David Blanchflower dissented in favor of no change. The overall debate centers around whether preemption is better than waiting for additional evidence. Jan’s move should have basically eliminated another hike again in first quarter and markets are quickly scaling back the bets on it. Opinions on whether there will be another hike in second quarter is divided and focus will be back on fundamental data including earnings growth and inflationary expectations. Sterling fell sharply across the board since then. Not even the better than expected UK GDP report which showed GDP GDP growth accelerated to 0.8% qoq and 3.0% yoy was enough to reverse its fortune.
Canadian dollar remains pressured and weakened against dollar last week after disappointing inflation report. In particular, core CPI dropped 0.2% mom in Dec, dragging the yoy growth back to 2.0%. BoC will clearly keep rates on hold for the next few months and the Loonie will likely remains weak.
Aussie tumbled sharply after downside surprise in Q4 CPI that actually dropped 0.1% qoq, dragging yoy increase to 3.3%. This has disappointed the Aussie bulls who expect another hike from RBA in Feb and looked for a 0.2% qoq, 3.6% yoy increase in consumer inflation. Meanwhile, RBA’s own measure of underlying inflation, weighted mean and trimmed mean both rose 0.5% qoq, taking yoy grow to 3% and 2.9% respectively. Opinion is divided on whether RBA will hike in Feb. Based on the current inflation outlook, even if RBA does hike in Feb, this would likely be the last one in the current cycle.
RBNZ kept rate unchanged at 7.25% as widely expected. Governor Bollard remained hawkish as he said that “in the absence of clear indications of a moderation in housing and domestic demand, it is likely that further policy tightening will be required.” However, inflation is expected to “decrease considerably” this year as energy prices fall even though is will accelerate again in 2008 and be in the upper end of his target range of 1-3%. So, it’s still a close call on whether RBNZ will raise rates again in first quarter and that will very much depends on the upcoming housing and domestic growth data. Nevertheless, kiwi was boosted mildly after the announcement.
Suggested Readings
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/currency_currents%3a_breakout_or_shakeout?_2007012616415/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/yen_carry_trade%3a_fact_or_fiction?_2007012616440/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/japanese_markets_relatively_undaunted_by_tepid_cpi_2007012616417/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/fx_briefing%3a_ecb_could_reach_its_inflation_target_this_year_2007012616430/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/germany%3a_vat_bust_dents_confidence_2007012516355/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/boe_minutes_weaken_sterling_2007012416293/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/sterling_tumbles_on_tight_mpc_vote_but_supported_by_gdp_2007012416289/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/fx_crossroads%3a_both_reserve_banks_on_hold_-_the_rba_firmly%2c_the_rbnz_less_so_2007012416306/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/rbnz_ocr_review%3a_when_%22could%22_becomes_%22likely%22_2007012416326/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/australian_weekly%3a_no_rate_move_in_2007%2c_upside_risks_2007012616409/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/further_aussie_unwinding_ahead_2007012616413/ The Week Ahead
A heavy US economic calendar with be featured that will dominate the focus this week and likely trigger a lot of volatility in the markets. FOMC meeting will be one of the major focus of the week. Fed is widely expected to keep rates unchanged at 5.25%. Since the last meeting in Dec, there has been a serious of rather upbeat data. Hence, the focus of attention will be any positive change in growth outlook in the accompanying statement. Though Fed will still likely keeps rate unchanged at least throughout first half, the evolution of Fed’s voting member’s view on growth and inflation will continue to shift expectation on policy directions in the second half of the year.
Right before FOMC announcement on Wed, Q4 GDP data will be released. Expectation for this piece of data is high after a stronger of stronger than expected key data was released recently, in particular retails sales and trade balance. Economists expect growth to accelerate to 2.9%. Meanwhile, core PCE is expected to stay at 2.2%.
ISM manufacturing index and employment report will also be closely watched. ISM manufacturing index is expected to rebound further to 52.0 in Jan. Meanwhile, NFP report is expected to show 149k job growths in Jan, with unemployment rate staying at 4.5% and average hourly earnings growth to slow slightly from 0.5% to 0.3%. Other important economic indicators include Conference Board Consumer Confidence, Chicago PMI, Construction Spending, Dec PCE and Factory orders.
From Eurozone, German and Eurozone inflation data will be featured together with Manufacturing PMI. The UK calendar includes house price data, manufacturing PMI as well as Gfk consumer confidence. Swiss KOF leading indicator will also be closely watched. Japanese data will center around consumer spending, retail sales, in the earlier part of this week together with employment report, industrial production as well as housing data.
Suggested Readings:
- http://www.actionforex.com/forex_analysis_and_forecasts/economic_calendar/summary_1%1028_-_2%101_2007012616447/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/weekly_focus%3a_fed_to_remain_sidelined_in_a_busy_week_2007012616437/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/federal_reserve_welcomes_new_voters%3a_what_does_this_mean_for_monetary_policy_2007012516377/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/fomc_decision_highlights_risks_to_us_dollar_strength_2007012616450/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/economic_outlook%3a_the_us_-_economic_indicators_-_are_we_any_wiser?_2007012616414/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/fx_pole_position%3a_listen_to_the_grapevine_2007012616406/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/oil_on_troubled_waters_2007012516344/ EUR/USD
Despite initial rebound, EUR/USD’s upside was limited at 1.3042, below 1.3052 cluster resistance (38.2% retracement of 1.3364 to 1.2867 at 1.3057) as expected and EUR/USD weakened to as low as 1.2876 since then. From a short term point of view, initial bias for this week remains on the downside as long as EUR/USD stays below 1.2935 minor resistance. Further decline is expected to follow to retest 1.2865 low and trend line support at 1.2851. Break will confirm whole fall from 1.3364 has resumed for next downside target of 1.2760 support.
Above 1.2935 will turn intraday outlook consolidative but upside should be limited below 1.3000 resistance and bring decline resumption. It will take a break above 1.3000 to indciate that consolidation from 1.2865 low is still in progress and in such case, put focus back to 1.3052 resistance.
In the bigger picture, the whole medium term rise from 1.1639 has lost momentum as bearish divergence condition is being displayed in weekly MACD and RSI. An important medium term top could be in place at 1.3364 already, after meeting 61.8% projection of 1.1639 to 1.2978 from 1.2483 at 1.3311. Sustained break of 1.2760 will have medium term rising channel line (now at 1.2747) taken out too. This 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.
On the upside, a 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 1.2851). 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.
In the longer term picture, it’s still early to conclude whether medium term rally from 1.1639 represents resumption of multi-year up trend from 0.8223 or just part of a large scale consolidation that started at 1.3668. But, the three wave corrective nature of the rise from 1.1639 to 1.2978 suggest that this whole rally from 1.1639 will be corrective in nature, thus, favoring the latter case. Decisive break of 1.2483 cluster support will also confirm this and bring much further weakness towards 1.1639 low.
GBP/USD
Despite initial strength, a short term top is formed at 1.9913 last week on bearish divergence condition in 4 hours MACD. Cable reversed fortune and fell sharply to as low as 1.9558 and is now pressing mentioned 1.9588 cluster support (50% retracement of 1.9261 to 1.9913 at 1.9587). From a short term angle, further decline is still in favor as long as cable stays below 1.9679 minor resistance. Sustained break of 1.9588 will bring further weakness towards rising trend line support (1.8517 to 1.8834, now at 1.9444).
On the upside, above 1.9679 resistance is needed to indicate that fall from 1.9913 has completed after drawing support from 1.9588 cluster support. Rebound should follow in such case. But still, break of 1.9913 is needed to indicate recent rise from 1.9261 has resumed for 138.2% projection of 1.8090 to 1.9142 from 1.8517 at 1.9971 and then 2.0000 psychological resistance. Otherwise, risk of another fall remains.
In the bigger picture, as discussed before, in case of further rise, 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
USD/CHF retreats initially last week but downside was contained at 1.2374, supported by short term rising channel. Rally from 1.1878 then resumed by breaking marginally higher to 1.2563 to close the week strongly. From a short term angle, further rise is expected to follow as long as USD/CHF stays above 1.2486 support. Sustained break of medium term falling trend line resistance (1.3238 to 1.2768, now at 1.2549) should bring further rise towards 1.2768 cluster resistance (61.8% retracement of 1.3283 to 1.1878 at 1.2746)
Below 1.2486 will turn intraday outlook consolidative first but pullback should be contained above 1.2422 support and bring rally resumption. A break below 1.2422 support is needed to shift focus back to the downside to 1.2374 low. Otherwise, consolidation should be brief and rally should resume sooner rather than later.
In the bigger picture, decisive break of 1.2501/49 resistance zone (100% projection of 1.1878 to 1.2268 from 1.2111 at 1.2501 and medium term falling trend line resistance, 1.3238 to 1.2768, now at 1.2549) will indicate 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, below 1.2374 will have the short term rising channel (now at 1.2393) taken out too and will indicate the whole rebound from 1.1878 has possible made a top after failing to break 1.2501/49 resistance zone decisively. Deeper correction should then be seen towards 1.2268 resistance turned support in such case.
USD/JPY
It’s been an extremely volatile week for USD/JPY. The choppy correction from 121.77 was contained at 120.16 last week, after drawing support from short term rising channel and rebounded strongly. Though, after all, USD/JPY is still kept in established range below 121.77 high. From a short term angle, further rally is still in favor as long as USD/JPY stays above 120.88 support. However a break of 121.77 high is needed to signal rally from 114.41 has resumed for next upside target of 123.23/29 cluster projection level.
On the downside, below 120.88 will suggest that consolidation from 121.77 is still in progress and could bring another fall to 120.16 or lower. In such case, also with sustained break of the short term rising channel (now at 120.66), and with bearish divergence condition in 4 hours MACD and RSI as background, the rise from 114.41 has likely completed at 121.77 already and deeper correction should be seen towards 117.96 support (50% retracement of 114.41 to 121.77 at 118.09).
In the bigger picture, fall from 121.38 to 108.99, with its three wave nature, should either represent the correction to whole year long up trend from 101.65 to 121.38, or part of such correction. That is, the medium term rally from 108.99 is either resumption of the whole up trend from 101.65 or a rising leg of consolidation pattern that started at 121.38. Favor is still in the former case as medium term rally from 108.99 is still in force.
Also, note that the current rally has pushed USD/JPY above multi-year falling trend line (147.68 to 135.20) again. Sustained trading above 121.38 resistance will confirm that whole up trend from 101.65 has resumed. 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).
However, decisive break of 117.96 support will rise some doubt about this case. In such case, a deeper decline should follow to retest medium term rising channel (now at 115.68) first.
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Daily Report: Quiet Start to the Week »Action Insight | Written by ActionForex.com | Jan 22 07 08:26 GMT | Forex Daily Technical Report Quiet Start to the Week The forex markets start the week in quiet manner with dollar hovering at 4 year high against the Japanese yen. Elsewhere, markets remain bounded in tight ranges. Dec German PPI was flat mom, with yoy growth slowed to 4.4%. Released earlier, UK rightmove house prices increased 0.5% mom, 13.5% yoy in Jan. Dec Swiss combined PPI was flat with yoy growth at 2.6%, below...
This column was originally published on RealMoney on Feb. 2 at 11:00 a.m. EST. It’s being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here. Well, January sure made a lot of very serious bears look pretty silly. During the first month of 2007, the S&P 500 advanced 1.53%, the Dow Jones Industrial Average advanced 1.18% and the Nasdaq 100 outpaced both, running 1.87% higher. Turns out that Wall of Worry had a...
Weekly Outlook: Dollar to Draw Further Strength from US Data and FOMC Statement
February 4, 2007 on 8:04 pm | In |
Action Insight | Written by ActionForex.com | Jan 27 07 09:03 GMT |
Forex Weekly Review and Outlook Dollar to Draw Further Strength from US Data and FOMC Statement
Dollar staged a broad based rebound last week after solid data as well as weakness in other majors. The greenback will look forward to a busy economic schedule that feature a series of important US economic data including GDP, ISM and NFP as well as FOMC meeting to draw further strength to extend the rebound that started early this year. On the other hand, Sterling tumbled across the board last week after a much less hawkish than expected MPC meeting minutes and vote outcome. Yen was volatility on G7 rumors. Australian dollar fell sharply after disappointing Q4 inflation data that dimmed hope for a Feb hike.
Prev Week’s High Prev Week’s Low Prev Week’s Close Last Week’s High Last Week’s Low Last Week’s Close Change (pips) Change (%)
EURUSD 1.3000 1.2895 1.2965 1.3044 1.2876 1.2916 -49 -0.38%
GBPUSD 1.9777 1.9570 1.9744 1.9914 1.9556 1.9599 -145 -0.73%
USDCHF 1.2547 1.2415 1.2477 1.2569 1.2375 1.2532 55 0.44%
USDJPY 121.57 120.06 121.23 121.77 120.19 121.54 31 0.26%
USDCAD 1.1774 1.1646 1.1718 1.1851 1.1712 1.1801 83 0.71%
AUDUSD 0.7906 0.7813 0.7899 0.7937 0.7720 0.7735 -164 -2.08%
EURJPY 157.66 155.07 157.18 158.61 155.77 157.01 -17 -0.11%
EURGBP 0.6606 0.6552 0.6566 0.6603 0.6535 0.6590 24 0.37%
EURCHF 1.6198 1.6110 1.6178 1.6222 1.6123 1.6189 11 0.07%
GBPJPY 240.05 234.96 239.36 241.49 236.33 238.25 -111 -0.46%
GBPCHF 2.4690 2.4413 2.4633 2.4757 2.4481 2.4566 -67 -0.27%
AUDJPY 95.85 94.13 95.74 96.41 93.61 94.00 -174 -1.82%
The US economic calendar was light last week but nevertheless, dollar was supported by solid durable goods orders report and housing data. Dec headline durable goods orders were up 3.1% on a year-to-year basis, much better than consensus expectations of 2.5% growth, and far outpaced Nov’s upwardly revised 2.2% gain. Ex-transport orders were also up 2.3% beating expectation of 0.5%. New home sales rebounded further in Dec by 4.8% to 1.12m annualized rate, above expectation of 1.05M. Existing homes sales, despite being a touch below expectation and recorded 6.22M, is still staying above Sep’s low of 6.21M.
Euro failed to extend it’s rebound but instead reversed to end the week lower against dollar despite some solid data that continues to strengthen the case of a Mar hike from ECB. German Ifo business climate, despite giving up modest ground in Jan and fell to 107.9 from a 16 year high of 108.7, retained a firm overall tone and suggest that condition remains healthy for German investors in spite of the VAT hike. In addition, Dec eurozone M3 figures point to continued expansion in the money supply, accelerated to 9.7 yoy growth from 9.3% in prior month, further bolstering the view that the ECB will retain its tightening bias and deliver another hike in Mar.
The yen saw much volatility last week. Yen was boosted initially by carry trade liquidation, in particular against Australian dollar after a worse than expected Australian CPI. Rumors of yen’s weakness being a topic of discussion at the upcoming G7 meeting has triggered further carry trade liquidation that pushed the yen higher. However, market sentiments quickly reversed again after European and Japanese officials denied such rumor. Yen was pushed lower further after a weak inflation report which with Dec headline CPI being flat and core CPI growth rising a mere 0.1%.
Sterling carried on its strength initially last week and rose to fresh 30-months high against Euro and a 14 year high against dollar. However, sentiments reversed after MPC minutes which revealed that the surprise rate hike in Jan was done by a much tighter than expected vote of 5-4, instead of market expectation of 7-2. BoE Chief Economist Charles Bean, BoE Deputy Governor Rachel Lomax, Paul Tucker and David Blanchflower dissented in favor of no change. The overall debate centers around whether preemption is better than waiting for additional evidence. Jan’s move should have basically eliminated another hike again in first quarter and markets are quickly scaling back the bets on it. Opinions on whether there will be another hike in second quarter is divided and focus will be back on fundamental data including earnings growth and inflationary expectations. Sterling fell sharply across the board since then. Not even the better than expected UK GDP report which showed GDP GDP growth accelerated to 0.8% qoq and 3.0% yoy was enough to reverse its fortune.
Canadian dollar remains pressured and weakened against dollar last week after disappointing inflation report. In particular, core CPI dropped 0.2% mom in Dec, dragging the yoy growth back to 2.0%. BoC will clearly keep rates on hold for the next few months and the Loonie will likely remains weak.
Aussie tumbled sharply after downside surprise in Q4 CPI that actually dropped 0.1% qoq, dragging yoy increase to 3.3%. This has disappointed the Aussie bulls who expect another hike from RBA in Feb and looked for a 0.2% qoq, 3.6% yoy increase in consumer inflation. Meanwhile, RBA’s own measure of underlying inflation, weighted mean and trimmed mean both rose 0.5% qoq, taking yoy grow to 3% and 2.9% respectively. Opinion is divided on whether RBA will hike in Feb. Based on the current inflation outlook, even if RBA does hike in Feb, this would likely be the last one in the current cycle.
RBNZ kept rate unchanged at 7.25% as widely expected. Governor Bollard remained hawkish as he said that “in the absence of clear indications of a moderation in housing and domestic demand, it is likely that further policy tightening will be required.” However, inflation is expected to “decrease considerably” this year as energy prices fall even though is will accelerate again in 2008 and be in the upper end of his target range of 1-3%. So, it’s still a close call on whether RBNZ will raise rates again in first quarter and that will very much depends on the upcoming housing and domestic growth data. Nevertheless, kiwi was boosted mildly after the announcement.
Suggested Readings
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/currency_currents%3a_breakout_or_shakeout?_2007012616415/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/yen_carry_trade%3a_fact_or_fiction?_2007012616440/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/japanese_markets_relatively_undaunted_by_tepid_cpi_2007012616417/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/fx_briefing%3a_ecb_could_reach_its_inflation_target_this_year_2007012616430/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/germany%3a_vat_bust_dents_confidence_2007012516355/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/boe_minutes_weaken_sterling_2007012416293/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/sterling_tumbles_on_tight_mpc_vote_but_supported_by_gdp_2007012416289/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/fx_crossroads%3a_both_reserve_banks_on_hold_-_the_rba_firmly%2c_the_rbnz_less_so_2007012416306/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/rbnz_ocr_review%3a_when_%22could%22_becomes_%22likely%22_2007012416326/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/australian_weekly%3a_no_rate_move_in_2007%2c_upside_risks_2007012616409/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/further_aussie_unwinding_ahead_2007012616413/ The Week Ahead
A heavy US economic calendar with be featured that will dominate the focus this week and likely trigger a lot of volatility in the markets. FOMC meeting will be one of the major focus of the week. Fed is widely expected to keep rates unchanged at 5.25%. Since the last meeting in Dec, there has been a serious of rather upbeat data. Hence, the focus of attention will be any positive change in growth outlook in the accompanying statement. Though Fed will still likely keeps rate unchanged at least throughout first half, the evolution of Fed’s voting member’s view on growth and inflation will continue to shift expectation on policy directions in the second half of the year.
Right before FOMC announcement on Wed, Q4 GDP data will be released. Expectation for this piece of data is high after a stronger of stronger than expected key data was released recently, in particular retails sales and trade balance. Economists expect growth to accelerate to 2.9%. Meanwhile, core PCE is expected to stay at 2.2%.
ISM manufacturing index and employment report will also be closely watched. ISM manufacturing index is expected to rebound further to 52.0 in Jan. Meanwhile, NFP report is expected to show 149k job growths in Jan, with unemployment rate staying at 4.5% and average hourly earnings growth to slow slightly from 0.5% to 0.3%. Other important economic indicators include Conference Board Consumer Confidence, Chicago PMI, Construction Spending, Dec PCE and Factory orders.
From Eurozone, German and Eurozone inflation data will be featured together with Manufacturing PMI. The UK calendar includes house price data, manufacturing PMI as well as Gfk consumer confidence. Swiss KOF leading indicator will also be closely watched. Japanese data will center around consumer spending, retail sales, in the earlier part of this week together with employment report, industrial production as well as housing data.
Suggested Readings:
- http://www.actionforex.com/forex_analysis_and_forecasts/economic_calendar/summary_1%1028_-_2%101_2007012616447/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/weekly_focus%3a_fed_to_remain_sidelined_in_a_busy_week_2007012616437/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/federal_reserve_welcomes_new_voters%3a_what_does_this_mean_for_monetary_policy_2007012516377/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/fomc_decision_highlights_risks_to_us_dollar_strength_2007012616450/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/economic_outlook%3a_the_us_-_economic_indicators_-_are_we_any_wiser?_2007012616414/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/fx_pole_position%3a_listen_to_the_grapevine_2007012616406/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/oil_on_troubled_waters_2007012516344/ EUR/USD
Despite initial rebound, EUR/USD’s upside was limited at 1.3042, below 1.3052 cluster resistance (38.2% retracement of 1.3364 to 1.2867 at 1.3057) as expected and EUR/USD weakened to as low as 1.2876 since then. From a short term point of view, initial bias for this week remains on the downside as long as EUR/USD stays below 1.2935 minor resistance. Further decline is expected to follow to retest 1.2865 low and trend line support at 1.2851. Break will confirm whole fall from 1.3364 has resumed for next downside target of 1.2760 support.
Above 1.2935 will turn intraday outlook consolidative but upside should be limited below 1.3000 resistance and bring decline resumption. It will take a break above 1.3000 to indciate that consolidation from 1.2865 low is still in progress and in such case, put focus back to 1.3052 resistance.
In the bigger picture, the whole medium term rise from 1.1639 has lost momentum as bearish divergence condition is being displayed in weekly MACD and RSI. An important medium term top could be in place at 1.3364 already, after meeting 61.8% projection of 1.1639 to 1.2978 from 1.2483 at 1.3311. Sustained break of 1.2760 will have medium term rising channel line (now at 1.2747) taken out too. This 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.
On the upside, a 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 1.2851). 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.
In the longer term picture, it’s still early to conclude whether medium term rally from 1.1639 represents resumption of multi-year up trend from 0.8223 or just part of a large scale consolidation that started at 1.3668. But, the three wave corrective nature of the rise from 1.1639 to 1.2978 suggest that this whole rally from 1.1639 will be corrective in nature, thus, favoring the latter case. Decisive break of 1.2483 cluster support will also confirm this and bring much further weakness towards 1.1639 low.
GBP/USD
Despite initial strength, a short term top is formed at 1.9913 last week on bearish divergence condition in 4 hours MACD. Cable reversed fortune and fell sharply to as low as 1.9558 and is now pressing mentioned 1.9588 cluster support (50% retracement of 1.9261 to 1.9913 at 1.9587). From a short term angle, further decline is still in favor as long as cable stays below 1.9679 minor resistance. Sustained break of 1.9588 will bring further weakness towards rising trend line support (1.8517 to 1.8834, now at 1.9444).
On the upside, above 1.9679 resistance is needed to indicate that fall from 1.9913 has completed after drawing support from 1.9588 cluster support. Rebound should follow in such case. But still, break of 1.9913 is needed to indicate recent rise from 1.9261 has resumed for 138.2% projection of 1.8090 to 1.9142 from 1.8517 at 1.9971 and then 2.0000 psychological resistance. Otherwise, risk of another fall remains.
In the bigger picture, as discussed before, in case of further rise, 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
USD/CHF retreats initially last week but downside was contained at 1.2374, supported by short term rising channel. Rally from 1.1878 then resumed by breaking marginally higher to 1.2563 to close the week strongly. From a short term angle, further rise is expected to follow as long as USD/CHF stays above 1.2486 support. Sustained break of medium term falling trend line resistance (1.3238 to 1.2768, now at 1.2549) should bring further rise towards 1.2768 cluster resistance (61.8% retracement of 1.3283 to 1.1878 at 1.2746)
Below 1.2486 will turn intraday outlook consolidative first but pullback should be contained above 1.2422 support and bring rally resumption. A break below 1.2422 support is needed to shift focus back to the downside to 1.2374 low. Otherwise, consolidation should be brief and rally should resume sooner rather than later.
In the bigger picture, decisive break of 1.2501/49 resistance zone (100% projection of 1.1878 to 1.2268 from 1.2111 at 1.2501 and medium term falling trend line resistance, 1.3238 to 1.2768, now at 1.2549) will indicate 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, below 1.2374 will have the short term rising channel (now at 1.2393) taken out too and will indicate the whole rebound from 1.1878 has possible made a top after failing to break 1.2501/49 resistance zone decisively. Deeper correction should then be seen towards 1.2268 resistance turned support in such case.
USD/JPY
It’s been an extremely volatile week for USD/JPY. The choppy correction from 121.77 was contained at 120.16 last week, after drawing support from short term rising channel and rebounded strongly. Though, after all, USD/JPY is still kept in established range below 121.77 high. From a short term angle, further rally is still in favor as long as USD/JPY stays above 120.88 support. However a break of 121.77 high is needed to signal rally from 114.41 has resumed for next upside target of 123.23/29 cluster projection level.
On the downside, below 120.88 will suggest that consolidation from 121.77 is still in progress and could bring another fall to 120.16 or lower. In such case, also with sustained break of the short term rising channel (now at 120.66), and with bearish divergence condition in 4 hours MACD and RSI as background, the rise from 114.41 has likely completed at 121.77 already and deeper correction should be seen towards 117.96 support (50% retracement of 114.41 to 121.77 at 118.09).
In the bigger picture, fall from 121.38 to 108.99, with its three wave nature, should either represent the correction to whole year long up trend from 101.65 to 121.38, or part of such correction. That is, the medium term rally from 108.99 is either resumption of the whole up trend from 101.65 or a rising leg of consolidation pattern that started at 121.38. Favor is still in the former case as medium term rally from 108.99 is still in force.
Also, note that the current rally has pushed USD/JPY above multi-year falling trend line (147.68 to 135.20) again. Sustained trading above 121.38 resistance will confirm that whole up trend from 101.65 has resumed. 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).
However, decisive break of 117.96 support will rise some doubt about this case. In such case, a deeper decline should follow to retest medium term rising channel (now at 115.68) first.
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Weekly Outlook: Dollar to Draw Further Strength from US Data and FOMC Statement
January 27, 2007 on 4:21 pm | In Currency |
Action Insight | Written by ActionForex.com | Jan 27 07 09:03 GMT |
Forex Weekly Review and Outlook Dollar to Draw Further Strength from US Data and FOMC Statement
Dollar staged a broad based rebound last week after solid data as well as weakness in other majors. The greenback will look forward to a busy economic schedule that feature a series of important US economic data including GDP, ISM and NFP as well as FOMC meeting to draw further strength to extend the rebound that started early this year. On the other hand, Sterling tumbled across the board last week after a much less hawkish than expected MPC meeting minutes and vote outcome. Yen was volatility on G7 rumors. Australian dollar fell sharply after disappointing Q4 inflation data that dimmed hope for a Feb hike.
Prev Week’s High Prev Week’s Low Prev Week’s Close Last Week’s High Last Week’s Low Last Week’s Close Change (pips) Change (%)
EURUSD 1.3000 1.2895 1.2965 1.3044 1.2876 1.2916 -49 -0.38%
GBPUSD 1.9777 1.9570 1.9744 1.9914 1.9556 1.9599 -145 -0.73%
USDCHF 1.2547 1.2415 1.2477 1.2569 1.2375 1.2532 55 0.44%
USDJPY 121.57 120.06 121.23 121.77 120.19 121.54 31 0.26%
USDCAD 1.1774 1.1646 1.1718 1.1851 1.1712 1.1801 83 0.71%
AUDUSD 0.7906 0.7813 0.7899 0.7937 0.7720 0.7735 -164 -2.08%
EURJPY 157.66 155.07 157.18 158.61 155.77 157.01 -17 -0.11%
EURGBP 0.6606 0.6552 0.6566 0.6603 0.6535 0.6590 24 0.37%
EURCHF 1.6198 1.6110 1.6178 1.6222 1.6123 1.6189 11 0.07%
GBPJPY 240.05 234.96 239.36 241.49 236.33 238.25 -111 -0.46%
GBPCHF 2.4690 2.4413 2.4633 2.4757 2.4481 2.4566 -67 -0.27%
AUDJPY 95.85 94.13 95.74 96.41 93.61 94.00 -174 -1.82%
The US economic calendar was light last week but nevertheless, dollar was supported by solid durable goods orders report and housing data. Dec headline durable goods orders were up 3.1% on a year-to-year basis, much better than consensus expectations of 2.5% growth, and far outpaced Nov’s upwardly revised 2.2% gain. Ex-transport orders were also up 2.3% beating expectation of 0.5%. New home sales rebounded further in Dec by 4.8% to 1.12m annualized rate, above expectation of 1.05M. Existing homes sales, despite being a touch below expectation and recorded 6.22M, is still staying above Sep’s low of 6.21M.
Euro failed to extend it’s rebound but instead reversed to end the week lower against dollar despite some solid data that continues to strengthen the case of a Mar hike from ECB. German Ifo business climate, despite giving up modest ground in Jan and fell to 107.9 from a 16 year high of 108.7, retained a firm overall tone and suggest that condition remains healthy for German investors in spite of the VAT hike. In addition, Dec eurozone M3 figures point to continued expansion in the money supply, accelerated to 9.7 yoy growth from 9.3% in prior month, further bolstering the view that the ECB will retain its tightening bias and deliver another hike in Mar.
The yen saw much volatility last week. Yen was boosted initially by carry trade liquidation, in particular against Australian dollar after a worse than expected Australian CPI. Rumors of yen’s weakness being a topic of discussion at the upcoming G7 meeting has triggered further carry trade liquidation that pushed the yen higher. However, market sentiments quickly reversed again after European and Japanese officials denied such rumor. Yen was pushed lower further after a weak inflation report which with Dec headline CPI being flat and core CPI growth rising a mere 0.1%.
Sterling carried on its strength initially last week and rose to fresh 30-months high against Euro and a 14 year high against dollar. However, sentiments reversed after MPC minutes which revealed that the surprise rate hike in Jan was done by a much tighter than expected vote of 5-4, instead of market expectation of 7-2. BoE Chief Economist Charles Bean, BoE Deputy Governor Rachel Lomax, Paul Tucker and David Blanchflower dissented in favor of no change. The overall debate centers around whether preemption is better than waiting for additional evidence. Jan’s move should have basically eliminated another hike again in first quarter and markets are quickly scaling back the bets on it. Opinions on whether there will be another hike in second quarter is divided and focus will be back on fundamental data including earnings growth and inflationary expectations. Sterling fell sharply across the board since then. Not even the better than expected UK GDP report which showed GDP GDP growth accelerated to 0.8% qoq and 3.0% yoy was enough to reverse its fortune.
Canadian dollar remains pressured and weakened against dollar last week after disappointing inflation report. In particular, core CPI dropped 0.2% mom in Dec, dragging the yoy growth back to 2.0%. BoC will clearly keep rates on hold for the next few months and the Loonie will likely remains weak.
Aussie tumbled sharply after downside surprise in Q4 CPI that actually dropped 0.1% qoq, dragging yoy increase to 3.3%. This has disappointed the Aussie bulls who expect another hike from RBA in Feb and looked for a 0.2% qoq, 3.6% yoy increase in consumer inflation. Meanwhile, RBA’s own measure of underlying inflation, weighted mean and trimmed mean both rose 0.5% qoq, taking yoy grow to 3% and 2.9% respectively. Opinion is divided on whether RBA will hike in Feb. Based on the current inflation outlook, even if RBA does hike in Feb, this would likely be the last one in the current cycle.
RBNZ kept rate unchanged at 7.25% as widely expected. Governor Bollard remained hawkish as he said that “in the absence of clear indications of a moderation in housing and domestic demand, it is likely that further policy tightening will be required.” However, inflation is expected to “decrease considerably” this year as energy prices fall even though is will accelerate again in 2008 and be in the upper end of his target range of 1-3%. So, it’s still a close call on whether RBNZ will raise rates again in first quarter and that will very much depends on the upcoming housing and domestic growth data. Nevertheless, kiwi was boosted mildly after the announcement.
Suggested Readings
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/currency_currents%3a_breakout_or_shakeout?_2007012616415/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/yen_carry_trade%3a_fact_or_fiction?_2007012616440/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/japanese_markets_relatively_undaunted_by_tepid_cpi_2007012616417/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/fx_briefing%3a_ecb_could_reach_its_inflation_target_this_year_2007012616430/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/germany%3a_vat_bust_dents_confidence_2007012516355/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/boe_minutes_weaken_sterling_2007012416293/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/sterling_tumbles_on_tight_mpc_vote_but_supported_by_gdp_2007012416289/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/fx_crossroads%3a_both_reserve_banks_on_hold_-_the_rba_firmly%2c_the_rbnz_less_so_2007012416306/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/rbnz_ocr_review%3a_when_%22could%22_becomes_%22likely%22_2007012416326/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/australian_weekly%3a_no_rate_move_in_2007%2c_upside_risks_2007012616409/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/further_aussie_unwinding_ahead_2007012616413/ The Week Ahead
A heavy US economic calendar with be featured that will dominate the focus this week and likely trigger a lot of volatility in the markets. FOMC meeting will be one of the major focus of the week. Fed is widely expected to keep rates unchanged at 5.25%. Since the last meeting in Dec, there has been a serious of rather upbeat data. Hence, the focus of attention will be any positive change in growth outlook in the accompanying statement. Though Fed will still likely keeps rate unchanged at least throughout first half, the evolution of Fed’s voting member’s view on growth and inflation will continue to shift expectation on policy directions in the second half of the year.
Right before FOMC announcement on Wed, Q4 GDP data will be released. Expectation for this piece of data is high after a stronger of stronger than expected key data was released recently, in particular retails sales and trade balance. Economists expect growth to accelerate to 2.9%. Meanwhile, core PCE is expected to stay at 2.2%.
ISM manufacturing index and employment report will also be closely watched. ISM manufacturing index is expected to rebound further to 52.0 in Jan. Meanwhile, NFP report is expected to show 149k job growths in Jan, with unemployment rate staying at 4.5% and average hourly earnings growth to slow slightly from 0.5% to 0.3%. Other important economic indicators include Conference Board Consumer Confidence, Chicago PMI, Construction Spending, Dec PCE and Factory orders.
From Eurozone, German and Eurozone inflation data will be featured together with Manufacturing PMI. The UK calendar includes house price data, manufacturing PMI as well as Gfk consumer confidence. Swiss KOF leading indicator will also be closely watched. Japanese data will center around consumer spending, retail sales, in the earlier part of this week together with employment report, industrial production as well as housing data.
Suggested Readings:
- http://www.actionforex.com/forex_analysis_and_forecasts/economic_calendar/summary_1%1028_-_2%101_2007012616447/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/weekly_focus%3a_fed_to_remain_sidelined_in_a_busy_week_2007012616437/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/federal_reserve_welcomes_new_voters%3a_what_does_this_mean_for_monetary_policy_2007012516377/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/fomc_decision_highlights_risks_to_us_dollar_strength_2007012616450/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_weekly_reports/economic_outlook%3a_the_us_-_economic_indicators_-_are_we_any_wiser?_2007012616414/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/fx_pole_position%3a_listen_to_the_grapevine_2007012616406/
- http://www.actionforex.com/forex_analysis_and_forecasts/forex_fundamental_analysis_reports/oil_on_troubled_waters_2007012516344/ EUR/USD
Despite initial rebound, EUR/USD’s upside was limited at 1.3042, below 1.3052 cluster resistance (38.2% retracement of 1.3364 to 1.2867 at 1.3057) as expected and EUR/USD weakened to as low as 1.2876 since then. From a short term point of view, initial bias for this week remains on the downside as long as EUR/USD stays below 1.2935 minor resistance. Further decline is expected to follow to retest 1.2865 low and trend line support at 1.2851. Break will confirm whole fall from 1.3364 has resumed for next downside target of 1.2760 support.
Above 1.2935 will turn intraday outlook consolidative but upside should be limited below 1.3000 resistance and bring decline resumption. It will take a break above 1.3000 to indciate that consolidation from 1.2865 low is still in progress and in such case, put focus back to 1.3052 resistance.
In the bigger picture, the whole medium term rise from 1.1639 has lost momentum as bearish divergence condition is being displayed in weekly MACD and RSI. An important medium term top could be in place at 1.3364 already, after meeting 61.8% projection of 1.1639 to 1.2978 from 1.2483 at 1.3311. Sustained break of 1.2760 will have medium term rising channel line (now at 1.2747) taken out too. This 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.
On the upside, a 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 1.2851). 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.
In the longer term picture, it’s still early to conclude whether medium term rally from 1.1639 represents resumption of multi-year up trend from 0.8223 or just part of a large scale consolidation that started at 1.3668. But, the three wave corrective nature of the rise from 1.1639 to 1.2978 suggest that this whole rally from 1.1639 will be corrective in nature, thus, favoring the latter case. Decisive break of 1.2483 cluster support will also confirm this and bring much further weakness towards 1.1639 low.
GBP/USD
Despite initial strength, a short term top is formed at 1.9913 last week on bearish divergence condition in 4 hours MACD. Cable reversed fortune and fell sharply to as low as 1.9558 and is now pressing mentioned 1.9588 cluster support (50% retracement of 1.9261 to 1.9913 at 1.9587). From a short term angle, further decline is still in favor as long as cable stays below 1.9679 minor resistance. Sustained break of 1.9588 will bring further weakness towards rising trend line support (1.8517 to 1.8834, now at 1.9444).
On the upside, above 1.9679 resistance is needed to indicate that fall from 1.9913 has completed after drawing support from 1.9588 cluster support. Rebound should follow in such case. But still, break of 1.9913 is needed to indicate recent rise from 1.9261 has resumed for 138.2% projection of 1.8090 to 1.9142 from 1.8517 at 1.9971 and then 2.0000 psychological resistance. Otherwise, risk of another fall remains.
In the bigger picture, as discussed before, in case of further rise, 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
USD/CHF retreats initially last week but downside was contained at 1.2374, supported by short term rising channel. Rally from 1.1878 then resumed by breaking marginally higher to 1.2563 to close the week strongly. From a short term angle, further rise is expected to follow as long as USD/CHF stays above 1.2486 support. Sustained break of medium term falling trend line resistance (1.3238 to 1.2768, now at 1.2549) should bring further rise towards 1.2768 cluster resistance (61.8% retracement of 1.3283 to 1.1878 at 1.2746)
Below 1.2486 will turn intraday outlook consolidative first but pullback should be contained above 1.2422 support and bring rally resumption. A break below 1.2422 support is needed to shift focus back to the downside to 1.2374 low. Otherwise, consolidation should be brief and rally should resume sooner rather than later.
In the bigger picture, decisive break of 1.2501/49 resistance zone (100% projection of 1.1878 to 1.2268 from 1.2111 at 1.2501 and medium term falling trend line resistance, 1.3238 to 1.2768, now at 1.2549) will indicate 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, below 1.2374 will have the short term rising channel (now at 1.2393) taken out too and will indicate the whole rebound from 1.1878 has possible made a top after failing to break 1.2501/49 resistance zone decisively. Deeper correction should then be seen towards 1.2268 resistance turned support in such case.
USD/JPY
It’s been an extremely volatile week for USD/JPY. The choppy correction from 121.77 was contained at 120.16 last week, after drawing support from short term rising channel and rebounded strongly. Though, after all, USD/JPY is still kept in established range below 121.77 high. From a short term angle, further rally is still in favor as long as USD/JPY stays above 120.88 support. However a break of 121.77 high is needed to signal rally from 114.41 has resumed for next upside target of 123.23/29 cluster projection level.
On the downside, below 120.88 will suggest that consolidation from 121.77 is still in progress and could bring another fall to 120.16 or lower. In such case, also with sustained break of the short term rising channel (now at 120.66), and with bearish divergence condition in 4 hours MACD and RSI as background, the rise from 114.41 has likely completed at 121.77 already and deeper correction should be seen towards 117.96 support (50% retracement of 114.41 to 121.77 at 118.09).
In the bigger picture, fall from 121.38 to 108.99, with its three wave nature, should either represent the correction to whole year long up trend from 101.65 to 121.38, or part of such correction. That is, the medium term rally from 108.99 is either resumption of the whole up trend from 101.65 or a rising leg of consolidation pattern that started at 121.38. Favor is still in the former case as medium term rally from 108.99 is still in force.
Also, note that the current rally has pushed USD/JPY above multi-year falling trend line (147.68 to 135.20) again. Sustained trading above 121.38 resistance will confirm that whole up trend from 101.65 has resumed. 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).
However, decisive break of 117.96 support will rise some doubt about this case. In such case, a deeper decline should follow to retest medium term rising channel (now at 115.68) first.
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