Daily Report: EUR/JPY at Record High But Momentum Unconvincing
Action Insight | Written by ActionForex.com | May 21 07 07:37 GMT |
Forex Daily Technical Report EUR/JPY at Record High But Momentum Unconvincing
Japanese yen edges to a new record low of 163.92 and weakens mildly against dollar as the week starts. Markets shrugged off the triple move by PBoC last Friday, with Shanghai stock markets reversing initial loss and rebounds extended higher. Yen sellers jumped in as this risk was cleared. Also, the G8 meeting in Germany was basically a non-event as finance ministers avoided discussing yen’s weakness. Elsewhere, Sterling continues to trade with an undertone after Rightmove house price index showed growth of house prices moderated in May. Without top-tier economic data scheduled today, the majors will likely remain in range. EUR/USD
Daily Pivots: (S1) 1.3474; (P) 1.3497; (R1) 1.3531; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
EUR/USD’s consolidation from 1.3464 continues today but so far, upside is still limited below 4 hours 55 EMA (now at 1.3534). With 4 hours MACD staying above signal line, further recovery could still be seen towards this EMA. But still, upside is expected to be limited below 1.3609 resistance and bring another fall. Below 1.3464 will encourage further decline towards 55 days EMA (now at 1.3438) first. Above 1.3609 is needed to indicate correction from 1.3681 has completed and bring retest of this high.
In the bigger picture, risk of 1.3681 being an important medium term top continues to increase. As discussed before, medium term up trend from 1.1639 is interpreted as having first move completed with three waves up to 1.2978, subsequent sideway consolidation completed at 1.2483. Rise from 1.2483 is treated as resumption of the whole up trend from 1.1639. With such interpretation, we’d expect risk of medium term reversal to increase significantly after EUR/USD met resistance zone between 1.3668 and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. Hence, focus is now on reversal signals.
On the downside, break of the short term rising channel support is already a warning that the rise from 1.2865 has completed. Decisive break of 1.3364 cluster support (38.2% retracement of 1.2865 to 1.3681 at 1.3369) will confirm such case. More importantly, with bearish divergence condition in daily MACD and RSI, this will warn that the whole rally from 1.2483 has also completed, and, so is the whole up trend from 1.1639. Focus will then be back to medium term rising channel support (now at 1.3032).
GBP/USD
Daily Pivots: (S1) 1.9703; (P) 1.9741; (R1) 1.9782; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
Cable’s consolidation in established range of 1.9700 and 1.9778 continues today. With 4 hours MACD staying above signal line, further recovery could still be seen and above 1.9778 will bring test of 4 hours 55 EMA (now at 1.9812). But upside should be limited by 1.9874 resistance and bring another fall. Below 1.9700 will encourage deeper decline towards support zone of medium term rising channel support (now at 1.9551) and 1.9545 cluster support (61.8% retracement of 1.9183 to 2.0132 at 1.9546). On the upside, above 1.9874 is needed to indicate fall from 2.0132 has completed and bring strong rebound.
In the bigger picture, risk of medium term reversal continues to increase. Firstly, the whole up trend from 1.7047 is not clearly impulsive. One interpretation is that rally from 1.7047 ended with three waves up to 1.9024. Subsequent correction ended at 1.8090. Rally from 1.8090 has already met mentioned target of 100% projection of 1.7047 to 1.9024 from 1.8090 at 2.0067. Secondly, regardless of the larger trend, rise from 1.8090 can be interpreted as being a five wave sequence with first wave ended at 1.9142, second at 1.8517, third at 1.9913 and fourth at 1.9183. The channeling property supports this interpretation too. In such case, the fifth wave rally from 1.9183 has also met target of 61.8% projection of 1.8517 to 1.9913 from 1.9183 at 2.0046 too. With bearish divergence condition remains in weekly RSI and Daily MACD and key 2.0106 resistance (92 high) not decisively taken out, 2.0132 could be the important medium term top already.
On the downside, firm break of the medium term rising channel support (now at 1.9551) will indicate that the whole rally from 1.8090 has completed and add much credence to the case that an important medium term top is already formed and put focus to 1.9183 low. However, sustained trading above mentioned 2.0106 resistance will dampen the above interpretation and indicates that underlying bullishness in cable is much stronger then we thought.
USD/CHF
Daily Pivots: (S1) 1.2250; (P) 1.2265; (R1) 1.2286; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
USD/CHF continues to press mentioned 1.2282 cluster resistance (50% retracement of 1.2571 to 1.1993 at 1.2282) today. At this point, intraday bias remains on the upside as long as USD/CHF stays above 1.2242 minor support. Sustained break of 1.2282 will encourage further rally to 61.8% retracement of 1.2571 to 1.1993 at 1.2350 first. On the downside, below 1.2242 will indicate an intraday top is formed and should bring pull back towards 4 hours 55 EMA (now at 1.2203). However, a break below 1.2124 support is needed to indicate rebound from 1.1993 has completed. Otherwise, another rise is still in favor after completing brief consolidation.
In the biggest picture. USD/CHF is now at a juncture. Strength of the current rise from 1.1993, with bullish convergence condition in daily MACD and RSI suggest that the fall from 1.2571 has already completed at 1.1993. Firm break of 1.2282 cluster resistance will confirm this case. More importantly, this will increase the chance that USD/CHF is about to complete a medium term head and shoulder bottom formation (ls: 1.1919, h: 1.1878, rs: 1.1993). Sustained break of 61.8% retracement at 1.2350 and neckline resistance (1.2768 to 1.2571, now at 1.2367) will add more weight to this case. Stronger rally should then be seen to 1.2571 first and then 1.2768.
On the other hand, bouncing off from 1.2282 cluster resistance will still keep USD/CHF below 55 weeks EMA (now at 1.2647), thus keeping medium term outlook mildly bearish. In such case, recent choppy price actions could merely be part of a medium term triangle consolidation. And, down trend from 1.3283 should still resume after completing such consolidation. Hence, below 1.2124 will indicate that rebound from 1.1993 has completed and further weakness should then be seen to retest 1.1193 low and then 1.1878. .
USD/JPY
Daily Pivots: (S1) 120.73; (P) 121.06; (R1) 121.44; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
USD/JPY continues to trade in established range of 120.67 and 121.39 today. As discussed before, touching of 120.67 minor support indicates an intraday top is in place at 121.39, with 4 hours MACD staying below signal line. Further consolidation is in favor with risk of another fall to 4 hours 55 EMA (now at 120.53) or lower. However, note that rise from 117.60 should still be in force as long as 119.43 cluster support (50% retracement from 117.60 to 121.39 at 119.50) holds and another rise is still expected to follow. Above 121.39 again will indicate recent rally has resumed for 122.17 high.
In the bigger picture, previous break of medium term rising channel support (108.99, 114.41, 117.87) indicates the whole medium term rally from 108.99 has completed at 122.17. However, current strong rally from 115.13 suggest that price actions from 122.17 is just developing into sideway consolidation to rise from 108.99 only, instead of a sharp reversal. Hence, a retest of 122.17 high is expected be seen. But still, firm break above this resistance is needed to confirm medium term rally from 108.99 has resumed. Otherwise, medium term outlook will be neutral at best and there should still be another fall to retest 115.13 low before completing such consolidation.
On the downside, below 119.43 cluster support will indicate that the rise from 117.60 has finished and thus warn that the whole rebound from 115.13 has completed too. Focus will then be on 117.60 support and firm break will confirm such case. Deeper fall should then be seen to retest this low and probably further towards 114.02/41 support zone (61.8% retracement of 108.99 to 122.17 at 114.02).
EUR/JPY
Daily Pivots: (S1) 162.84; (P) 163.35; (R1) 164.12; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/
EUR/JPY edges to new record high of 163.93 today but upside momentum remains unconvincing. Nevertheless, further rise is still mildly in favor as long as EUR/JPY stays above 162.64 minor support and EUR/JPY could continue to crawl towards 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64. Below 162.64 will suggest a short term top is formed and bring deeper correction towards short term rising trend line (now at 161.69).
Also, we’d like to maintain that risk of short term reversal remains high after previous break of the short term rising channel, with bearish divergence condition staying in 4 hours MACD and RSI and with daily MACD remains below signal line. Also, it’s possible that EUR/JPY is now in formation of a diagonal triangle to conclude the rally from 150.75. Hence, upside could be limited by 164.64 on loss of momentum and bring reversal. Break of 161.05 support will add much weight that rise from 150.75 has ended and deeper decline should then follow to 159.60 support first.
In the bigger picture, EUR/JPY’s previous break above medium term rising channel resistance suggests that strength of the rally from 150.75 is stronger than we originally thought. But still, interpretation of rally from 130.60 remains unchanged. First wave up ended at 143.60, subsequent correction ended at 137.167. The third wave up ended at 159.63 while fourth wave correction has ended at 150.75. Rise from there represents the final advance in this structure, targeting 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64 and could terminate there.
On the downside, rise from 150.75 could still resume as long as 159.60 support holds. However, sustained trading below 159.60 will warn that prior break of medium term rising channel resistance was merely a throw-over. Also, this will give a serious warning signal that the whole rise rise from 130.60 has ended. EUR/JPY should set to test the medium channel support (now at 153.51) in such case.
Forex News Digest
http://c.moreover.com/click/here.pl?r942252463
Mon, 21 May 2007 04:49:00 GMT from Xinhua News Agency
http://c.moreover.com/click/here.pl?r942239407
Mon, 21 May 2007 04:32:00 GMT from Nine MSN
http://c.moreover.com/click/here.pl?r942233963
Mon, 21 May 2007 04:25:00 GMT from Bloomberg
http://c.moreover.com/click/here.pl?r942228345
Mon, 21 May 2007 04:15:00 GMT from Reuters
http://c.moreover.com/click/here.pl?r942218070
Mon, 21 May 2007 04:03:00 GMT from Bloomberg
http://c.moreover.com/click/here.pl?r942216443
Mon, 21 May 2007 04:00:00 GMT from The Australian
http://c.moreover.com/click/here.pl?r942196753
Mon, 21 May 2007 03:26:00 GMT from Bloomberg
http://c.moreover.com/click/here.pl?r942192911
Mon, 21 May 2007 03:20:00 GMT from Bloomberg
http://c.moreover.com/click/here.pl?r942107419
Mon, 21 May 2007 01:05:00 GMT from AP via MSN Money
http://c.moreover.com/click/here.pl?r942099448
Mon, 21 May 2007 00:52:00 GMT from Reuters
http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:01 GBP U.K. Rightmove hse prices M/M May 0.40% N/A 3.60%
23:01 GBP U.K. Rightmove hse prices Y/Y May 13.10% N/A 15.00%
8:30 GBP U.K. PSNCR Apr -1.25 B 17.19 B
8:30 GBP U.K M4 Money Supply M/M Apr 1.00% 1.00%
12:30 USD U.S. Chicago Fed survey Apr N/A 0.01
EUR Germany Import price index M/M Apr 0.50% 0.60%
EUR Germany Import price index Y/Y Apr 0.00% 0.90%
CAD Canada Market holiday
http://www.actionforex.com/general_information/forex_newsletters/forex_newsletter_200507301487/
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