Lookout for Durable Goods & New Home Sales
The Beige Book released yesterday was considered dovish and has pushed dollar sharply lower. The report showed even though the economy is still growing overall, there is continued weakness in retail sales and cooling down of activity in the housing market in general, which is confirming Fed’s worry that the downside risks to growth could outweigh the upside risks to inflation.
U.S. senators Charles Schumer and Lindsey Graham yesterday told Treasury Secretary Henry Paulson to sent a deadline for yuan appreciation by Sept 30. Otherwise they will press their their legislation to impose a 27.5% duty on Chinese goods. They accuse China of holding the value of the yuan artificially low to keep Chinese products cheap. The Japanese yen could be benefited against dollar by speculation of earlier revaluation of the Yuan.
Released earlier today, Germany Gfk consumer confidence rose sharply to 8.6, reaching the highest level since Nov 2001. EUR/USD remains firm against dollar after rising from yesterday’s low of 1.2559.
RBNZ has kept overnight cash rate unchanged at 7.25% as widely expected. Governor Bollard said that there will be no more rate hike in the current cycle. even though RBNZ would not cut rate for some time.
Later today, focus will be on durable goods order and new home sales from US. June durable goods orders are expected to increase 1.8% with ex-transport orders increases 0.7%. New home sales is expected to drop back from May’s 1.234m to 1.19m annualized rate.
Daily Pivots: (S1) 1.2360; (P) 1.2450; (R1) 1.2495;
USD/CHF’s sharp decline from 1.2545 has pushed it below mentioned 1.2420 support, indicating that the fall from 1.2594 has resumed. At this point, further weakness is expected to follow as long as USD/CHF stays below 1.2416 minor resistance. Break of 1.2330 cluster support (61.8% retracement of 1.2182 to 1.2594 at 1.2339) will encourage testing of short term rising trend line (now at 1.22754). As discussed before, sustained trading below the trend line will strongly suggest that whole rebound from 1.1919 has completed already and bring further weakness to 1.2181 cluster support (61.8% retracement of 1.1919 to 1.2594 at 1.2177). Meanwhile, above 1.2416 will turn intraday outlook consolidative first.
In a bigger picture, weekly MACD’s turn above signal line is suggesting that price action from 1.1919 could be developing into a larger consolidation to the whole fall from 1.3283. Hence firstly failure to break below mentioned trend line will staying will indicate the rebound from 1.919 is still underway. Secondly, firm break below 1.2181 is needed to confirm weakness and bring further decline to 1.1919 low. Otherwise, USD/CHF is still bounded is sideway trading and risk of another rise remains before completing the consolidation.
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.