Mon, Mar 10 2008, 07:35 GMT
by ActionForex.com Team
Action Insight Daily Report
Yen Up on Risk Aversion, Dollar Trading in Soft Tone
The sentiments in the forex markets remain unchanged as the week starts. Yen strengthens mildly across the board, more noticeably against commodity currencies, on risk aversion following close to 2% drop in Nikkei. Meanwhile, dollar continues to trade with an undertone in tight range near to record low against the Euro. Markets are clearly concerned about the risk and depth of recession in the US economy and the spillover to the global economy. Markets continue to expect a 75bps cut from Fed on Mar 18 with interest rate futures showing full pricing of it.
Data released from Japan are rather upbeat. Machine orders grew strongly by 19.6% mom 11.4% yoy comparing to expectation of 2.5% mom, -4.% yoy. Economic watch DI also improved from 31.8 to 33.6 in Feb. FM Nukaga said they're "carefully" watching the FX markets after yen surged to an eight year high against dollar last week. Also he'll also closely watch how the US economy and developments in the financial markets will affect Japan's economy. Muto was nominated by LIberal Democratic Party to succeed Fukui as BoJ Governor last week. The nomination will be up before upper house tomorrow. But there are some opposition Democratic Party of Japan members expressing concerns of Muto's lack of independence and international expertise.
Released from Eurozone, Germany trade surplus came in wider than expected to 17.1b in Jan from downwardly revised 10.7b. Exports grew 3.8% while imports also grew 4.2%, both are much stronger than expectation.
UK data will take the center stage in the European session. Industrial production and manufacturing productions are expected to show mild growth of 0.1% mom and 0.2% mom respectively in Jan, recovering from Dec's contraction. PPI report is expected to show easing input price pressure but increasing output price pressure.
Also, ECB Trichet is expected to hold a press conference later today after meeting with G 10 central bankers. This even will be closely watched in particular after Fed increased the size of its Term Auction Facility last Friday.
Canadian housing starts and US wholesale inventories are the major data to be released in the US session today.
More Technical Analysis Reports Here
GBP/USD Daily Outlook
Daily Pivots: (S1) 2.0072; (P) 2.0143; (R1) 2.0204; More
Cables turns into sideway trading after rise from 1.9720 reached as high as 2.0215. Outlook remains unchanged. Intraday bias is on the upside as long as 2.0095 minor support holds and further rally is expected to 100% projection of 1.9360 to 1.9971 from 1.9720 at 2.0331 first. Meanwhile, below 2.0095 will turn intraday outlook consolidative first but further rise is still expected as long as pull back is contained above 1.9720 support.
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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