Daily Forex Technical Report

ActionForex.com
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Wed, 25 Oct 2006 14:44:33 GMT
by ActionForex.com Team

Forex Mid-Day Technical Report

Dollar Softer, FOMC Awaited

Dollar continues to trade with an undertone today as traders awaits FOMC rate announcement. Euro was boosted slightly earlier today after stronger than expected German Ifo business sentiment which rose to 105.3 to Oct. Disappointing Existing home sales, which dropped more than expected by 1.9% to 6.18m annualized rate is adding some weights to the greenback too. Both impact on the market is limited as traders are still cautious ahead of the FOMC statement.

As mentioned before, expectation has been built up for hawkish fed statement despite keeping range unchanged at 5.25%. However, the major question remains on market's reaction and it's doubtful on how hawkish the Fed is needed to sound to keep dollar buyers jumping in. An hawkish statement that stress the persistently high core inflation will likely spike higher the greenback. But, if no sustained buying, we could see an equally sharp reversal as selling-on-news comes into dominance. Beware of the volatility.

RBNZ is expected to keep overnight cash rate unchanged at 7.25% in the coming Asian session.

Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.

USD/JPY

Daily Pivots: (S1) 119.07; (P) 119.35; (R1) 119.62; More

USD/JPY's retreat from 119.64 reaches 118.98 but is still supported by 4 hours 55 EMA (now at 118.98). As discussed before, short term risk remains on the upside as long as USD/JPY stays above 118.54 support. Firm break above 119.86 will indicate recent rally has resumed for 121.38 high.

However, below 118.54 support will indicate rebound from 118.04 has completed and bring retest of 118.04 low. Break will indicate corrective fall from 119.86 has resumed and should bring testing of 117.37 cluster support (23.6% retracement of 108.99 to 119.86 at 117.29, 55 days EMA at 117.51, short term rising channel at 117.49).

In the bigger picture, with multi-year trend line resistance (147.68 to 135.20 then to 121.38) broken, the strong medium term rise from 108.99 could either be resumption of the year long up trend from 101.65 to 121.38, in other words, the correction from 121.38 has totally finished at 108.99 already. Or it could just be part of the consolidation that started at 121.38. But in either case, a retest of 121.38 high should be seen.

However, firm break below 117.37 cluster support will be the first signal that whole medium term rally from 108.99 has completed and deeper decline should be seen towards outer channel line (now at 115.43) first.