No Inspiration from US Economic Data
Euro’s rebound on Ifo was short lived as market halted before US data. However, after release of worse than expected new home sales and mixed durable goods orders, markets are not inspired for further move. Jul new home sales dropped by 4.7% to $1.072M annualized rate, worse than expectation of 2.7% fall to 1.108M. Headline durable orders dropped 2.4% in Aug, much worse than expectation of 0.5% fall. However, ex-transport orders came in much stronger than expected, rising 0.5% versus expectation of 0.3% rise. Also, both figures were revised upward in June. In general, capital spending remains solid.
With no important economic data from US and eurozone tomorrow, the markets may continue to trade without much direction till next week. And risk of further choppy actions remains high, at least, until breaking of mentioned key support/resistance levels in majors.
Focus in the coming Asia session will be on Japan CPI which is expected to drop 0.1% mom and rise 0.6% yoy in Jul.
Daily Pivots: (S1) 1.8864; (P) 1.8929; (R1) 1.8997;
Cable remains bounded in established range between 1.8853 and 1.8995, without much sense of direction. On the upside, firm break above 1.9024 will indicate the retreat from 1.9142 high has completed and and a retest of 1.9199 fibo resistance (61.8% projection of 1.7230 to 1.9024 from 1.8090) should follow.
Below 1.8853 will suggest further decline is underway to retest 1.8774 cluster support (38.2% retracement of 1.8174 to 1.9142 at 1.8772). However, break of 1.8774 cluster support is needed to signal corrective fall from 1.9024 has resumed. Otherwise further choppy trading might still follow.
In the bigger picture, cable’s rally from 1.8090 made a short term top at 1.9142, slightly below 1.9199 projection target. with bearish divergence condition displayed in daily MACD and RSI, as well as possibly in weekly RSI too, an important medium term top is around the corner, if not formed yet. So a decisive break of 1.9199 (with a weekly close above) is needed to confirm the whole up trend has resumed for 1.9554 (2004 high). Otherwise, there is substantial risk of larger scale correction/consolidation. A break below 1.8538 cluster support will add much credence to the case that a medium term top is formed. In such case, further pull back towards 1.8090 low (50% retracement of 1.7047 top 1.9142 at 1.8095) should be seen.
Shing-Ip Tsui is the founder and CEO of
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