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Action Insight | Written by ActionForex.com | Jan 11 07 06:37 GMT |
Forex Daily Technical Report Focus on ‘Vigilance’ from ECB

Focus today will be on ECB’s press conference after rate decision. ECB is widely expected to keep rates unchanged at 3.50%. After unexpectedly strong German IFO business climate and M3 money supply growth that accelerated to a 16 year high in November, markets generally expect that ECB’s tightening will continue this year will another hike in first quarter. However, opinion is divided on whether ECB will raise rates in Feb or Mar. Hence, as usually, focus will be on whether ECB President Trichet will use the word ‘vigilance’ to signal a rate hike in the coming month in the press conference after the meeting.

BoE will also be making rate decision today. Markets expect BoE to keep rate unchanged at 5.00% today. No statement will be released in such circumstances in tradition and hence the BoE meeting will likely be a non-event. Focus from US will actually be on November industrial and production data which are both expected to rebound to have 0.3% mom growth.

Earlier today, Australian dollar was lifted by better than expected employment report which showed in December, total employment rose 44.6kon a seasonally adjusted basis, beating expectation of 15.0k. Prior month’s job growth was also revised up from 36.2k to 43.0k. Unemployment rate stayed at 4.6%. Tight labor market condition has added to speculation of a near term rate hike from RBA to 6.50%, probably in Feb. Focus will now be on Q4 CPI to be released later this month.

Overnight, Chicago Fed President Moskow, a new voting member on the FOMC, delivered another hawkish speech from Fed this week. Moskow suggested that economy is performing well outside of the housing market and labor market is still quite strong. Also, because of sturdy growth, Moskow stated that Fed needs to be ‘vigilant’ against the possibility of an increase in inflation pressures. Generally speaking, it’s inline with earlier speech by Kohn and suggest that Fed won’t cut rate in first half this year. EUR/USD

Daily Pivots: (S1) 1.2909; (P) 1.2957; (R1) 1.2983; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/USD’s fall from 1.3052 extended further to 1.2930 but downside momentum is still unconvincing as EUR/USD approaches 1.2922 cluster support. Nevertheless, further decline cannot be ruled out as long as EUR/USD stays below 1.3000 resistance. On the upside, above 1.3000 will indicate a short term bottom is possibly formed and should bring rebound to 1.3052 resistance or higher.

Also, as 1.2922 cluster support (50% retracement of 1.2483 to 1.3362 at 1.2923) remains intact, we’re still holding on to the preferred case that price actions from 1.3362 is merely consolidation to rally from 1.2483. Firm break of 1.3104 resistance will add much credence to the case that fall from 1.3296, and likely the whole consolidation from 1.3362, has completed and should bring further rally to 1.3296 and then 1.3362 high. However, sustained break of 1.2922 cluster support will seriously dampen the preferred case and at least, suggests deeper decline will be seen to challenge 1.2760 support.

In the bigger picture, EUR/USD’s medium term up trend from 1.1639 (06 low) is still in force and is expected to continue towards 1.3668 (04 high) and probably further to 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. However, as it’s unclear whether this 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, close attention will be paid to loss of upside momentum and reversal pattern formation as EUR/USD approaches 1.3668/1.3822 zone. On the downside, break of 1.2760 support will turn medium term outlook neutral and argue that whole medium term rally from 1.1639 has completed.

GBP/USD

Daily Pivots: (S1) 1.9284; (P) 1.9353; (R1) 1.9389; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Cable’s fall from 1.9454 extends further to 1.9316 and is now pressing trend line support (now at 1.9318) again. Intraday bias is still on the downside and further decline towards 1.9261 low is in favor as long as cable stays below 1.9423 resistance. On the downside, break of 1.9261 low will indicate decline from 1.9750 has resumed for 1.9177 cluster support. Meanwhile, on the upside, above 1.9454 will suggest that rebound from 1.9261 has resumed for 1.9564 cluster resistance.

Also, with 1.9177 cluster support (50% retracement of 1.8517 to 1.9846 at 1.9182, 23.6% retracement of 1.7047 to 1.9846 at 1.9185) remains intact, we’re still holding on to the preferred case that price actions from 1.9846 is merely correction to rise from 1.8834 only. Break of 1.9564 cluster resistance will add much credence to the case that fall from 1.9750, and probably the whole correction from 1.9846 too, has completed and should bring further rally to1.9750 and then 1.9846 high. However, sustained break of 1.9177 will dampen this case seriously and should bring further decline to 1.8834 support.

In the bigger picture, cable’s medium term up trend from 1.7047 is still in progress and further rise is expected to follow towards 2.0106 cluster resistance (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067). But close attention will be paid to sign of loss of upside momentum and reversal pattern formation as cable approaches 2.0106 cluster resistance. On the downside, sustained break of 1.9177 cluster support will turn medium term outlook neutral and argue that the whole rise from 1.7047 has possibly completed. Break of 1.8834 will add further weight to this case and turn focus back to 1.8517 support.

USD/CHF

Daily Pivots: (S1) 1.2415; (P) 1.2446; (R1) 1.2493; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.

USD/CHF’s rise from 1.2111 extends further to 1.2478 but upside momentum is seen diminishing as USD/CHF approaches 100% projection of 1.1878 to 1.2268 from 1.2111 at 1.2501. A this point, further rise is still expected to follow as long as 1.2399 support holds. On the upside, break of 1.2501 projection level will likely bring further strong rally towards 1.2768 resistance.

However, With bearish divergence conditions remaining in hourly MACD and RSI as background, steep sell off from 1.2501 could at least market the completion of rise from 1.2111. Break of 1.2399 support will indicate a short term top is formed and should bring further pullback to 1.2770 support or lower.

In the bigger picture, break of 1.2343 resistance has opened up a few possibilities. Sustained break of 1.2501 projection level will argue that the rise from 1.1878 could be of impulsive nature. In other words, the whole down trend from 1.3283 could have completed and the current rise from 1.1878 could be resumption of the medium term rebound from 1.1288 to 1.3283. But still, a strong break of 1.2768 cluster resistance is needed to confirm such case. Otherwise, USD/CHF will just be bounded in choppy range trading between 1.1878 and 1.2768. On the downside, a break below 1.2110 support is needed to shift focus back to the downside. Otherwise, further rally is still in favor.

USD/JPY

Daily Pivots: (S1) 119.25; (P) 119.51; (R1) 119.87; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/JPY’s rally extends further to 119.82 today and is now pressing 119.86 support. At this point, intraday bias remains on the upside as long as USD/JPY stays above 119.49 support. Sustained break of 119.86 resistance will confirm that recent rally from 114.41 has resumed and should encourage further rise towards 121.38 resistance (04 high).

On the downside, below 119.49 support will indicate an intraday top is formed and should bring pull back towards 119.13 support. But further rise is still in favor as long as consolidation is contained by 119.13 support. However, break of 119.13 will argue that USD/JPY is still bounded in consolidation that started from 119.68 and should bring further fall to retest 117.96 low and then 38.2% retracement of 114.41 to 119.68 at 117.67

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 long as USD/JPY stays above 113.14/39 cluster support (61.87% retracement of 108.99 to 119.86 at 113.14). And above 119.86 will bring further rise to 121.38 (04 high) again. Also, note that the current rally has pushed USD/JPY above multi-year falling trend line (147.68 to 135.20, now at 117.65) again. Sustained break of 121.38 resistance will confirm that whole up trend from 101.65 has resumed.

Forex News Digest

http://c.moreover.com/click/here.pl?r764850582
Thu, 11 Jan 2007 02:59:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r764834628
Thu, 11 Jan 2007 02:31:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r764820105
Thu, 11 Jan 2007 02:15:00 GMT from CHINAdaily

http://c.moreover.com/click/here.pl?r764814878
Thu, 11 Jan 2007 02:10:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r764787580
Thu, 11 Jan 2007 01:43:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r764766200
Thu, 11 Jan 2007 01:20:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r764746258
Thu, 11 Jan 2007 01:00:00 GMT from Bloomberg

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
00:30 AUD Australia Employment change Dec 44.6K 15.0 K 36.2 K 43.0K
00:30 AUD Australia Unemployment rate Dec 4.60% 4.70% 4.60%
05:00 JPY Japan Leading indicator Nov 20 20 54.5
06:00 JPY Japan Machine tool orders Y/Y Dec -2.4% N/A 4.90%
08:00 EUR Germany GDP (annual growth) 1 Jan 2.50% 0.90%
09:30 GBP U.K. Industrial prod’n M/M Nov 0.30% -0.80%
09:30 GBP U.K. Industrial prod’n Y/Y Nov 2.30% 2.50%
09:30 GBP U.K. Manufacturing prod’n M/M Nov 0.30% -0.40%
09:30 GBP U.K. Manufacturing prod’n Y/Y Nov 2.30% 2.50%
10:00 EUR Eurozone GDP rev. Q/Q Q3 0.50% 0.50%
10:00 EUR Eurozone GDP rev. Y/Y Q3 2.70% 2.70%
12:00 GBP BOE rate decision Jan 5.00% 5.00%
12:45 EUR ECB rate decision Jan 3.50% 3.50%
13:30 USD U.S. Jobless claims 324 K 329 K
15:30 GBP U.K. Leading indicator M/M Nov N/A -0.10%
19:00 USD Fed budget Dec 20.0 B 10.97 B

http://www.actionforex.com/general_information/forex_newsletters/forex_newsletter_200507301487/

LONDON (Thomson Financial) - The upcoming UK smoking ban will dent spending on alcohol and tobacco, weighing heavily on the hospitality sector, according to think-tank, Centre for Economics and Business Research (CEBR).

CEBR said in a report it sees the July ban resulting in a 3 pct drop in spending in the third quarter of the year compared with the same period a year ago before worsening to a near 3.5 decline pct in the fourth quarter.

It argued that the decline will come on top of what has already been a difficult period for the sector.

Jaspreet Sehmi, one of the report’s authors said he expect belts to tighten across the board over the next 18 months as high interest rates, low house price inflation and a weak global economy take effect.

“However, while tobacco and alcohol sales have traditionally been relatively immune to these cyclical effects, we expect the smoking ban to change that on this occasion, and sales to drop,” he added.

Jonathan Said, senior economist at CEBR said some companies in the sector are still not fully prepared.

“Virtually all parts of the hospitality sector are going to be affected to a greater or lesser extent by the forthcoming smoking ban. However, while some companies have made concerted efforts to understand the likely impact and plan around it, others are likely to face a shock come July 1st,” he said.

sivakumar.sithraputhran@thomson.com

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The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.

BEIJING (XFN-ASIA) - Premier Wen Jiabao said that credit growth is too fast and the nation needs tighter controls on investment.

The premier made the remarks at a meeting of the State Council, or cabinet, called today to review the economy’s first quarter performance.

Wen also said that China needs to maintain price stability in the months ahead as well as curtail the expansion of the nation’s trade surplus, according to a statement on the government’s main web site.

“So far this year, economic development has been good. The growth of the economy has maintained fast and stable momentum,” the statement said.

He noted that among the problems in the economy’s current performance is fast-growing monetary credit, pressure from a rebound in fixed-asset investment and continuing growth in the trade surplus.

The meeting called for maintaining coherent and stable macro-economy policies. The central government should take “timely” economic and administrative measures and enhance economic controls to prevent overheating, it said.

The State Council pledged to strengthen liquidity management and “window guidance” to curb the fast growth of money and credit. “Window guidance” refers to direct government interventions into commercial bank lending activities.

It reiterated that the government will continue to enhance fixed-asset investment controls and apply tighter requirements in energy-saving and environmental protection.

To curb the fast trade surplus growth, Wen said that the nation should “eliminate unreasonable preferential policies for exports, improve supervision over processing trade and actively expand imports of high-tech equipment and key parts.”

China also should strengthen supervision of the property sector to curb the fast growth in housing prices, as one of the measures taken to maintain overall stability of prices.

The National Bureau of Statistics said earlier today that the country’s GDP growth accelerated to 11.1 pct year-on-year in the first quarter, stoking concerns that the government will take new steps — possibly including an interest rate hike — to tame the economy’s rapid expansion.

derek.jiang@xfn.com

WIESBADEN, Germany (Thomson Financial) - German retail sales were up 0.5 pct in real terms in March compared with March 2007 and down 0.7 pct from February this year, according to preliminary figures from the Federal Statistics Office.

Analysts polled by AFX News had forecast a 0.9 pct rise in retail sales month-on-month.

The Statistics Office also revised upward retail sales in February, saying they rose 1.0 pct month-on-month. Its preliminary estimate released last month had an increase of 0.9 pct.

marilyn.gerlach@thomson.com

mog/vs

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Copyright AFX News Limited 2007. All rights reserved.

The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.

SEOUL (XFN-ASIA) - Service sector output expanded 4.8 pct year-on-year in March, easing from February’s 6.7 pct rise, with the real estate, education services, transportation and wholesale and retail sectors seeing a slowdown, the National Statistical Office said.

The growth rate was at its lowest level since a gain of 3.4 pct last October.

Seasonally adjusted, service sector output declined 1.2 pct month-on-month in March, reversing February’s 1.0 pct rebound, the NSO said.

Output growth in the real estate industry eased to 2.5 pct in March from 7.1 pct in February, reflecting a cooling-off in the property market after the government introduced a series of stricter measures to dampen prices.

Growth rates in the education and transportation service sectors more than halved to 3.8 pct and 4.2 pct, respectively.

Wholesale and retail sector output growth also dropped to 3 pct from 6.9 pct in February.

Financial and insurance sector output, however, accelerated to 10.6 pct from 8.3 pct.

Output by hotels and restaurants rebounded to 1.8 pct from a 1.2 pct contraction in February.

In the first quarter of 2007, service sector output grew 5.5 pct year-on-year, retreating from a 6.2 pct rise a year earlier.

eunkyung.seo@xinhuafinance.com