Dollar Steady After ISM Services Report
Dollar extends rally today but turns sideway before US session. The green back continues to stay in tight range after ISM Services data which came in at dropped mildly to 57.1 in Dec, basically inline with expectation. The Employment Index continues to oscillate in the low 50s, rising 1.7 points to 53.3. Meanwhile, the Prices Paid Index accelerated 3.5 points in December to 59.1.
Earlier today, Sterling staged a rebound against Euro in EUR/GBP cross after better than expected Services PMI data which to 60.6 in December, its highest level since June 1997 and up 0.8 of a point on November’s metric. On the other hand, the eurozone Services PMI eased slightly in December, dropping to 57.2 from 57.6 in the previous month. However, Consumer confidence in the U.K. softened in December, contrary to consensus expectations. The headline sentiment measure fell to -8 from -7, whereas the median consensus forecast was for a gain to -6.
Canadian dollar remains under pressure against dollar and weakens further after disappointing PPI inflation data. The industrial product price index was unchanged (m/m) in November following an unchanged reading in October. The IPPI was up 1.9% over the year.
EUR/USD
Daily Pivots: (S1) 1.3113; (P) 1.3202; (R1) 1.3258;
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EUR/USD’s decline from 1.3296 extends further to as low as 1.3080 today. At this point, further decline is still in favor as long as EUR/USD stays below 1.3180 resistance. As discussed before, the current fall from 1.3296 should represent the last leg of consolidation that started at 1.3362, further weakness should be seen towards 1.3051 support and probably further towards 100% projection of 1.3362 to 1.3051 from 1.3296 at 1.2985. However, since we’re treating this as consolidation to rise from 1.2483 only, downside is expected to be contained by 1.2922/23 cluster support (50% retracement of 1.2483 to 1.3362 at 1.2923) and bring rally resumption.
On the upside, above 1.3180 resistance will be the first warning that whole fall from 1.3296 has completed. Break of 1.3296 will encourage a retest of 1.3364 high. But still, firm break above 1.3364 is needed to confirm rise from 1.2483 has resumed for 1.3668 resistance (04 high). Otherwise, consolidation might still extend further.
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 and then 1.3822. 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 possibly completed.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui is the founder and CEO of
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