Euro was sold off after much worse then expected German ZEW. The investor confidence index dropped for the fourth consecutive months in January, and deeper than expected to 47.2 versus 50.4 in December. Eurozone ZEW economic sentiment also unexpectedly dropped to 46.4. The data suggests that German economy is still struggling to maintain momentum for recovery . ZEW president Franz said that "the way out of the recession is burdensome and long." Dollar is helped by weakness in Euro and concern of more tightening measures from China, and much stronger TIC capital flow, and rebounds strongly against most major currencies
Bank of Canada left rates unchanged at 0.25% as widely expected and reiterated conditional commitment to hold current policy rate until the end of the second quarter of 2010. Also, the Bank will continue to conduct term Purchase and Resale Agreements based on existing terms and conditions.
Japanese yen was lifted early today on news that China, once again, guided its one-year bill higher to curb lending growth. PBoC sold the 1 year bill at 1.9264% in open market operations, up +0.08% from last week. This is the second time in a month the PBoC guided the 1-year bill yield higher after raising yield on 3 month bills and raising reserve requirements earlier.
Dollar index's rise from 76.60 resumes after brief retreat and reaches as high as 77.63 so far today. The development is in line with the view that correction from 78.45 has already completed with three waves down to 76.60. Intraday bias remains on the upside for the moment. Break of 78.19 resistance will indicate that whole rally from 74.19 is resuming for 38.2% retracement of 89.62 to 74.19 at 80.08.
GBP/JPY Daily Outlook
Daily Pivots: (S1) 147.60; (P) 148.24; (R1) 148.98; More
Intraday bias in GBP/JPY remains neutral for the moment and some more sideway trading could be seen. Note that another rise cannot be ruled out with 146.64 minor support intact. Above 149.98 will bring rally to 150.68 or above. However, there is no change in the view that recent price actions from 139.96 are merely consolidations to fall from 163.05 only, with rise from 139.26 as the third leg. Hence, even in case of another rise, upside should be limited by 153.21 resistance and bring reversal. On the downside, below 146.64 minor support will suggest that rise from 139.26 has completed at 150.68 already and fall from there is resuming. Intraday bias will then be flipped back to the downside for 141.99 support for confirmation. And break there will target a retest on 139.26 low.
In the bigger picture, medium term rebound from 118.18, which is a correction to the long term down trend from 07 high of 251.90, has completed at 163.05 already. Fall from 163.05 is expected to resume after sideway consolidation from 139.69 completes and should target a new low below 118.81. However, note that sustained break of 61.8% retracement of 163.05 to 139.26 at 153.96 will argue that fall from 163.05 has finished already and will in turn indicate that rise from 118.81 is still in progress to another high above 163.05 before conclusion.
EUR/GBP Daily Outlook
Daily Pivots: (S1) 0.8777; (P) 0.8805; (R1) 0.8828; More.
EIR/GBP broke mentioned target of 61.8% projection of 0.9410 to 0.8833 from 0.9153 at 0.8786 and reaches as low as 0.8765 so far. At this point, intraday bias remains on the downside as long as 0.8833 minor resistance holds and current decline might extend further towards 0.8704 key support. However, we'd expect loss of momentum as the fall extends and focus will be on reversal signal as EUR/GBP approaches 0.8704 key support. On the upside, above 0.8833 minor r resistance will turn intraday bias neutral and bring recovery.
In the bigger picture, at this point, we're still favoring the case that medium term correction from 0.9799 has completed with three waves down to 0.8399 already. Rise from 0.8399 is possibly resuming the long term up trend. Hence, fall from 0.9410 is viewed as a correction only and should be contained by 0.8704 support. Break of 0.9027 resistance will suggest that correction from 0.9410 has completed and rise from 0.8399 is resuming for a test on 0.9799 high first and then 61.8% projection of 0.6535 to 0.9799 from 0.8399 at 1.0416.
However, decisive break of 0.8704 support will argue that firstly, rise from 0.8399 has completed at 0.9410 already. Secondly, this will indicate that fall from 0.9410 is likely the third leg of the correction pattern that started at 0.9799 and could extend beyond 0.8399 support before the whole correction concludes.
EUR/CHF Daily Outlook
Daily Pivots: (S1) 1.4726; (P) 1.4750; (R1) 1.4766; More
No change in EUR/CHF's outlook. Intraday bias remains neutral for the moment as consolidations from 1.4722 continues. Note that another fall is still expected in near term as long as 1.4827 resistance holds. Break of 1.4722 will target 1.4577 key support next. On the upside, break of 1.4827 resistance will indicate that a short term bottom is formed with bullish convergence condition in 4 hours MACD. In such case, stronger rebound should be seen to 1.4894/4988 resistance zone. But after all, that break of 1.4988 resistance is needed to indicate that EUR/CHF has bottomed. Otherwise, outlook will remain bearish and another fall should be seen after consolidations.
In the bigger picture, with EUR/CHF still staying well below 55 weeks EMA, fall from 1.5880 is likely still in progress. Current decline should have a test on 1.4577 support first and break will target 2008 low of 1.4315. On the upside, break of 1.5007 support turned resistance is needed be the first signal to indicate that fall from 1.5446 has finished and revive the case that 1.4577 is still in progress. Otherwise, medium term outlook will remain bearish.
EUR/JPY Daily Outlook
Daily Pivots: (S1) 130.12; (P) 130.52; (R1) 130.98; More.
EUR/JPY dips further to 129.97 today so far and at this point, intraday bias remains on the downside for further decline. As discussed before, rise from 127.50 has completed at 134.36, ahead of 134.54 resistance on a small head and shoulder top pattern. Deeper fall should now be seen to 126.88/127.50 support zone. Also, note that recent development suggests that price actions from 126.88 are merely consolidation to fall from 138.47 and should have completed too. On the upside, above 130.94 minor resistance will turn intraday bias neutral and bring consolidations. But recovery is expected to be limited well below 133.62 resistance and bring fall resumption.
In the bigger picture, EUR/JPY is still bounded in medium term range between 126.88 and 139.21 and outlook remains neutral for the moment. On the downside, a break of 126.88 support will revive that case that medium term rebound from 112.10 has completed at 139.21 already and down trend from 169.96 is resuming. In such case, we'd expect deeper fall to 112.10 and beyond to resume the long term down trend. On the upside, however, break of 134.54 resistance will revive that case that recent price actions are merely consolidations to medium term rise from 112.10 already and another high above 139.21 should be seen before EUR/JPY tops.
DISCLAIMER
These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsible for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.
