More Dollar Consolidation After GDP Revision
Dollar rebounds briefly after a larger than expected upward revision in Q3 GDP. Real GDP growth for the Q3 was revised to 2.2% annualized from 1.6% in the advance estimate, above expectation of 1.8%. Lower imports, higher inventories and greater consumer spending on services were the main contributor to the revision. However, the overall economy is still slowing from Q2’s 2.6%. Price index was unchanged at 1.8%, much slower than prior 3.3% in Q2. Core PCE was revised lower to 2.2% from 2.3%, again much slower than 2.7% in Q2. Also, just released, new home sales dropped more than expected in Oct, by 3.4% to 1.004m annualized rate,.
Technically speaking dollar still lack the decisive momentum to break through key support levels against Euro and Sterling and further recovery is till likely to follow.
Earlier today, the Swiss KOF Leading dropped more than expected to 1.73 in Nov, from a downward revised 1.95 in Oct. The was the fifth consecutive monthly decline since making a high of 2.44 in June. Since the KOF is a strong indicator of economic growth six months ahead, the continuous fall from June’s high suggest that even though the Swiss economy will remain strong for the rest of this year, it will likely slow starting in early 07.
Later today, Nov Fed Beige Book will be released, providing snapshot on regional growth. Focus will be on the continued downturn in housing markets and the recent weakness in manufacturing.
EUR/USD
Daily Pivots: (S1) 1.3142; (P) 1.3175; (R1) 1.3232;
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EUR/USD’s retreat from 1.3217 continues today. Mild bearish divergence condition is also seen in 4 hours MACD and RSI, suggesting that a short term top is formed at 1.3217 already, below mentioned 1.3234 fibo resistance. Below 1.3316 will confirm such case and bring further pull back towards 38.2% retracement of 1.2760 to 1.3127 at 1.3042 or lower. But downside should be contained above 1.2938 clusters support (61.8% retracement 1.2760 to 1.3127 at 1.2935, 38.2% retracement of 1.2483 to 1.3217 at 1.2937) and bring another rally.
On the upside, a decisive break above 78.6% retracement of 1.3668 (04 high) to 1.1639 (05 low) at 1.3234 is needed to confirm recent rise has resumed. Otherwise, risk for lengthier consolidation remains.
In the bigger picture, current rally from 1.2483 represents resumption of whole medium term rise from 1.1639. Hence, break of 61.8% projection of 1.1639 to 1.2978 from 1.2483 at 1.3311 will encourage further rally towards 1.3668 key resistance (04 high). On the downside, sustained trading below 1.2938 support will be the first warning that whole rise from 1.2483 has completed but break of 1.2760 cluster support (61.8% retracement of 1.2483 to 1.3217 at 1.2763) or medium term reversal pattern is needed to confirm.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
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