Dollar Sellers Back After New Home Sales, EUR/USD Eyes 04 High
Despite rebounding mildly in early US session after stronger
than expected durable goods report, the dollar is pressured again by another piece of disappointing housing data. New Home Sales rose less than expected by 2.6% to 0.858m, missing expectation of 0.89m. Meanwhile, prior data was revised down from 0.848m to 0.836m. March’s durable good orders from US grew impressively by 3.4%, beating expectation of 2.5%. Ex-transport orders and ex-defense orders both came in higher than consensus at 1.5% and 4.5% respectively. Prior month’s data were also revised higher. Dollar is supported by the impressive Mar data but upside is rather limited as overall, it’s too early to draw a conclusion on the rebound of manufacturing activities yet. The 3-month annualized rate from Jan to Mar is still negative.
Released in European session, Germany’s Ifo Business Climate Index rose more than expected to 108.6 in Apr on the back of a 107.7 reading in Mar. More importantly, it’s just 0.1 shy of Dec’s record of 108.7. Consistently strong Ifo readings suggest that business conditions and expectations continued to improve in Apr and added further upward momentum to continue prevailing economic expansion. The impact of VAT hike was much weaker than expected and is continue to fade away as the year goes. Preliminary GDP data from UK saw the British economy grew 0.7% qoq, 2.8% yoy in Q1. The pace of expansion slowed slightly but nevertheless, momentum of 06 is seen preserved in early 07. BoE’s earlier rate hike has yet to show significant impact to the economic activities.
Fed’s Beige book will be released later today. Also, in the coming Asian session, RBNZ will make its Apr monetary policy announcement and is widely expected to keep rates unchanged at 7.5%.
EUR/USD
Daily Pivots: (S1) 1.3576; (P) 1.3609; (R1) 1.3670;
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EUR/USD edges further higher to 1.3658, just 10 pips shy of 04 high of 1.3668. At this point, further is still expected to follow as long as EUR/USD stays above 1.3613 minor support. However, as discussed before, EUR/USD will be meeting short term channel resistance (now at 1.3670) too and risk of a short term reversal will be increasing as EUR/USD meets 1.3668. Below 1.3613 will suggest that an intraday top is formed and bring retreat.
Still, note that even in case of retreat, the rally from 1.2865 should still be in good shape as long as short term channel support (now at 1.3465) and 1.3406/10 support holds. Sustained trading above 1.3668 will path the way to next medium term target of 1.3822.
In the bigger picture, 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 and is set to retest 1.3668. With such interpretation we’d expect risk of medium term reversal to increase significantly as EUR/USD enter into resistance zone between 1.3668 and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. Hence, focus will then be on reversal signal.
On the downside break of 1.3406/10 support will indicate that the rise from 1.2865 has completed and deeper decline should then be seen to 55 days EMA (now at 1.3322). More importantly, this will be the first warning that the rise rally from 1.2483 has completed, and thus, so is the whole up trend from 1.1639. Focus will then be back to medium term rising channel support (now at 1.2953).
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY, EUR/JPY) here.
Shing-Ip Tsui is the founder and CEO of www.ActionForex.com. ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.