Wed, Mar 12 2008, 08:02 GMT
by ActionForex.com Team
Action Insight Daily Report
Dollar and Yen Stabilize after Violent Moves
Dollar stabilizes today after yesterday's stronger rebound follow Fed's extraordinary 200b liquidity package, which also resulted in the biggest stock rally in five years. Traders scaled back some bets on a 75bps rate cut from Fed next week after the announcements but after all, that's still not expected to be the end of the easing cycle. Further rate cut is still expect from Fed even if the bank does cut rates by 50 bps next week only. Overall sentiments in the greenback remains weak. Though, more consolidation will likely be seen before tomorrow's Feb retail sales report.
The yen also stabilizes after the reactions in the Asian stock markets are much milder than that in the US. Data from Japan were mixed. Japanese Q4 GDP was revised much less then expected to 3.5% annualized rate. Trade surplus shrank sharply to 85.8b in Jan but was better than expectation of 73.1b. Domestic CGPI climbed 3.4%, above consensus of 3.3%. Consumer confidence deteriorated to 36.4 versus expectation of 37.7.
BoJ minutes released today offered no surprise. Board member's view on the economy remains unchanged though downside risks to global growth is seen risen. Upper house of Japan voted down BoJ governor nominee Muto and there are still much uncertainties on who will succeed Fukui when he retires in a week.
Looking ahead, UK trade deficit is expected to widely slightly to -4.1b in Jan. Eurozone industrial production is expected to climb 0.4% mom, 2.6% yoy in Jan, better than DEc's 1.3% yoy. Swiss ZEW will also be released.
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GBP/USD Daily Outlook
Daily Pivots: (S1) 1.9969; (P) 2.0090; (R1) 2.0185; More
While much volatility was seen in cable in the past 24 hours, it's still bounded in tight range below 2.0219 high. Consolidation from there is still in progress. Intraday outlook remains neutral for the moment and further pull back could still be seen to 4 hours 55 EMA (now at 1.9984). But still, as long as pull back is contained above 1.9720 support, the rise from 1.9360 is still expected to extend to 100% projection of 1.9360 to 1.9971 from 1.9720 at 2.0331. Break of 2.0219 will indicate that such rise has resumed.
In the bigger picture, break of 2.0099 resistance indicates that fall from 2.1161 have already completed at 1.9337. Sustained trading above both 4 hours 55 EMA and 55 days EMA support this too. However, the question is whether the current rise from 1.9337 is merely correction to fall from 2.1161, or the start of another set of rallies. The structure of this rally, as well as the reaction to resistance zone of 161.8% projection of 1.9337 to 1.9957 from 1.9360 at 2.0363 and 61.8% retracement of 2.1161 to 1.9337 at 2.0464 are critical.
Right now, with 2.0363/0464 resistance zone still holds, the favored case is still that rise from 1.9337 is merely a correction. Though, break of 1.9720 support is needed to signal the completion of rise from 1.9360 first. However, decisive break of 2.0363/0464 will dampen this view and encourage a retest of 2.1161 high.
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