Dollar still indecisive, Yen weakens against Euro
While still trapped in established range, dollar turned mildly weaker into European session as traders await trade balance data from US. Economists expect US trade deficit to wide to $64.5b in June from $63.8b. With slowing growth in US and strengthening economy in Asia and Europe, even though not much improvement is expected in the trade deficit for the rest of the year, it’s neither expected get worse and should stay below last Oct’s record high of $66.6b.
Technically speaking, even though dollar turned mildly weaker, resumption of recent decline can only be confirmed by breaking of respective near term resistance against majors, otherwise, the current fall could still be part of a prolonged consolidation while traders are stills searching for an underlying theme for the market. And as pointed out before, the Japanese yen continues to be the weakest one among the majors, as also demonstrated in EUR/JPY’s making of new record high of 148.58 today. Cross activities could continue to limit USD/JPY’s fall even in case of further dollar weakness.
From Asia, released earlier today, Japanese GCPI, an index of prices that companies pay for energy and raw materials, rose 0.7% mom and 3.4% yoy in Jul, fastest in 25 years. June trade surplus narrowed slightly to 857b yen. China had a record trade surplus for the third straight month in July, widened from $14.5b to $14.6b. up from $10.6b in the same month last year. South Korea’s central bank unexpectedly raised its benchmark interest rate by 25bp to 4.5%, a five-year high and Bank of Korea Governor Lee Seong Tae said, “price pressures will strengthen.”
GBP/USD
Daily Pivots: (S1) 1.8972; (P) 1.9040; (R1) 1.9111;
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Cable remain bounded in established range today. A discussed before, with 4 hours MACD remains below signal line and RSI retreated from overbought region, a short term top is possibly formed already and risk turned to the downside for further consolidation and pullback Hence, as long as cable stays below 61.8% projection of 1.7230 to 1.9024 from 1.8090 at 1.9199, we’d expect further consolidation to follow. Break below 1.8926 cluster support (23.6% retracement of 1.8174 to 1.9142 at 1.8914) will confirm such case and bring further retreat towards 4 hours 55 EMA (now at 1.8882) or further towards 38.2% retracement at 1.8772).
In a bigger picture, rally from 1.8090 has now pushed cable above 1.9024 cluster resistance (78.6% retracement of 1.9554 to 1.7047 at 1.9018), confirming the case that such rally should be the fifth wave advance in the medium term five wave rally from 1.7230 (or from 1.7047). Firm break above 1.9199 projection target will now encourage further rise to 1.9554 (2004 high).
On the downside, as long as any correction/consolidation is contained above 1.8538 cluster support (61.8% retracement of 1.8174 to 1.9142 at 1.8544), the rise from 1.8090 is still in progress and medium term outlook will remain bullish. Below 1.8538 will suggest that the whole rise from 1.7047 has possibly completed and cable has turned into wide range consolidation before another medium term rally.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui (Shing) 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.