Near term, staying below 1.4181 keeps the trend pointed down and the alternate (in which wave ii is complete at 1.4340) intact. A rally through there would negate the bearish bias and signal that price is most likely headed above 1.4340 and probably 1.4723 in order to complete an ending diagonal as wave C from 1.2454. Given the GBPUSD pattern, the bullish scenario is probable. There is short term support down to 1.3820.
Wednesday, June 17, 2009
DAILY FORECAST FOR GBP-USD 17th June 2009
Price: 1.6362
Bias: Slightly mixed - waiting for breaks but the underlying move remains bearish
Daily Bullish:
Yesterday's strength was a little stronger than expected but doesn't destroy the underlying bearish view. I do feel we saw the corrective high yesterday at 1.6507 and I see only a small chance we may just see a blip higher to 1.6524. Thus wait for that break before getting too bullish. Before that to generate any potential rally we'll need a break back above the 1.6400 area and if seen should mean that there is chance of extension to 1.6443-67. I feel this should probably be the highest we see today. Thus only above 1.6467 opens the risk of a return to the 1.6507-24 area and only a breach here opens up stronger gains towards the 1.6621-62 highs.
MT Bullish:
17th June: The decline is developing well and only a move back above 1.6467 and 1.6543 would put us back on a more bullish track.
Daily Bearish:
While yesterday's high was higher than I thought it would be it doesn't alter the bearish view. However, we should be aware of the risk that we could see a small sideways consolidation. If we see the first move today as higher to 1.6467 I feel this would provide a good selling area for losses but within a range and probably limited to around 1.6237-51. If we don't see the rally to 1.6467 first and instead see loss of 1.6341 there is more chance we'll see losses extend through 1.6320 and down to the 1.6237-51 area. Take care there as it could cause a correction. Next support is at 1.6208 followed by 1.6114-40 and 1.6075-94.
MT Bearish:
15th June: We should have seen the high now and we should be seeing a larger decline back to the 1.5801 low and lower. However, the broad 1.5801 area should provide a pullback before the additional losses.
For a full description of how to use the analysis please see the Analysis page of my website. The prior day's set ups for potential trading levels highlighted in the report are now available on the Daily Forecast page of my web site.
I shall be presenting a seminar in Hong Kong on Saturday 27th June at the Excelsior Hotel in Causeway Bay. Please see http://www.earlthorn.com/ for details.
EUR/JPY Daily Outlook
Daily Pivots: (S1) 132.27; (P) 133.81; (R1) 134.89;
EUR/JPY edges lower to 132.55 earlier today before recovering. Break of 132.72 minor low suggests that fall from 139.21 is resuming and at this point, intraday bias remains mildly on the downside as long as 135.36 minor resistance holds. Further decline should be seen to medium term trend line support (now at 130.60) next. On the upside, above 135.36 will bring more consolidation first but risk remains on the downside as long as 138.27 resistance holds.
In the bigger picture, recent price actions are treated as consolidation in the down trend from 08 high of 169.96 only. Considering bearish divergence condition in daily MACD and RSI, the rise from 112.21 might have completed at 139.21 already. Break of trend line support (now at 130.60) will add much credence to this case and turn focus to 124.35 support for confirmation. But before that, rise from 112.21 might still extend further to 141.03/147.85 resistance zone (50% and 61.8% retracement of 169.96 to 112.10) before completion.
Daily Report: Markets Consolidate, UK Jobs, BoE Minutes, US CPI Watched
The forex markets are generally staying in consolidation as traders prepare for a busy day ahead. Japanese yen weakens mildly after following rebound in Asia stocks but the depth of the retreat is so far shallow. Yen crosses are still broadly lower from weekly point of view with AUD/JPY and NZD/JPY dropping more than 3% so far. Similarly, dollar is also bounded in tight range against major currencies in general. The developments suggest that some more sideway trading will likely be seen in near term.
Events in UK will be the main focus in the European session today. The number of UK claimants is expected to have risen 55K in May, a figure lower than 57.1K in April, 65.5K in March and 136.6K in February. Recent decline in the increase in claimant counts signaled the job market in the UK may have improved. However, unemployment rates remained on the rise with claimants count rate probably risen to 4.8% in May from 4.7% a month ago while ILO unemployment rate might have risen to 7.3% in April from 7.1% in the prior month. BoE minutes will be released today but is unlikely to reveal much new information. Though focus will be on any discussion and possibility to expand the current quantitative easing programs. Other data include Swiss ZEW and Eurozone trade balance.
US CPI is expected to have risen +0.3% mom (-0.9% yoy) in May as driven by rally in retail gasoline price. Gasoline price has surged 10.6% in May and after seasonal adjustment, the gasoline component of CPI should have risen 4%. Other components remained soft but the pace of decline probably slowed down. Core CPI is anticipated to have eased to +0.1% mom (+1.8% yoy) from +0.3% mom(+1.9%) in April as spike in the tobacco component which was boosted by federal excise tax disappeared.
After much speculations, the BRIC summit delivered little surprise to the markets. The statement called for a "stable, predictable and more diversified currency system," and emerging economies to have “greater voice and representation in international financial institutions". However, there is no mentioning of the possibility of lessening of dollar's influence, nor anything about investing BRIC's reserve in each other's bond.
Looking at the dollar index, consolidation from 81.36 is still in progress and at this point, some more pull back cannot be ruled out. But downside is expected to be contained by 79.19 support and bring rally resumption. We're still favoring the case that whole decline from 89.62 has completed at 78.33 already. Above 81.36 will bring rise resumption to key near term resistance of 82.63 (38.2% retracement of 89.62 to 78.93 at 82.64) to confirm this case.
Financial Markets Monthly - June 2009
Highlights
- Risk appetite whetted by less negative economic news.
- Stocks, commodities and currencies (except the U.S. dollar) have rallied.
- Longer-dated government bond yields rose.
- The sharp contraction in key world in the first quarter may represent the worst for this recession...
- ...with forecasters calling for economies to get back into the black later this year
- Central banks keep policy accommodative, but are largely tapped out on rate cuts.
- Canada's first-quarter contraction was less than expected.
- The economy likely remained in recession in the second quarter, but moderate growth is expected in the second half of the year.
- The Canadian dollar benefitted from the recent pick-up in risk appetite ...
- ...presenting downside risk to the outlook for exporters.
- The Bank of Canada left the policy rate at 0.25% and reiterated its conditional committment to maintaining this level until the middle of next year.
- Eurozone real GDP plunged in the first quarter.
- Recent Eurozone survey data have reported steadily more positive readings on the economic growth front .
- In its quarterly inflation report, the Bank of England revised its growth forecast down.
- S&P revised down its mediumterm outlook for the United Kingdom to "negative," while the outlook for New Zealand was revised up to "stable."
- Australian GDP confounded expectations for a 0.2% fall, rising
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