Dollar Consolidation Still in Progress, Focus Turns to Services Data

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Dollar Consolidation Still in Progress, Focus Turns to Services Data

Author: admin | Total views: 48 | Word Count: 467 | Category: Forex trading signals | Date: Apr 8th 2008

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Dollar turned sideway after a rather balanced FOMC minutes and continues to trade in tight range today as focus turns to services data. The FOMC minutes reveals that members' biggest concern is still on inflation as "all members agreed that the risk that inflation would fail to moderate as desired remained the predominant concern." However, several members also judged that "the subdued tone of some incoming indicators meant that the downside risks to economic growth in the near term had increased a little and become a bit more broadly based than previously thought". With the current inflation outlook, it's likely for the Fed to leave rate unchanged than cut rates if upcoming economic data points to a steady economy.

Services data will be the major focus today. Dec Services PMI from Eurozne and UK are expected to stay at similar level as prior month at 57.7 and 59.5 respectively. ISM non-manufacturing index fall slightly from 58.9 to 57 in Dec. Swiss CPI, UK Gfk consumer confidence and US factory orders will also be released today.

Technically speaking, dollar's rebound against European majors yesterday suggest that consolidation that started in Dec is still in progress. But upside on the greenback should be limited as the consolidation goes. Also, with a weak ADP employment report yesterday in mind, risk is more on the downside for tomorrow's NFP which, in case of a much lower than expected number, will spark another reversal in dollar and resume the prior down trend.

USD/JPY turns sideway after reaching as high as 119.68, getting very close to mentioned 119.86 resistance. Two developments should be noted. Firstly, bearish divergence condition remains in 4 hours MACD and RSI, suggesting the rise from 114.41 is losing momentum Secondly, the thrust to 119.68 after a triangle pattern could be terminal. Both are suggesting a top could be around the corner. But still, a break below 118.64 support is needed to confirm a short term top is formed. Otherwise further rally is still in favor.

On the downside, break of 118.64 will indicate correction has started and should bring decline to 117.42 support or lower. But downside should be contained by 116.63 support and bring further rally.

In the bigger picture, medium term rise from 108.99 is still in force after correction from 119.86 was contained at 114.41 above 113.14/39 cluster support (61.87% retracement of 108.99 to 119.86 at 113.14). Sustained break of 119.86 will bring retest of 121.38 resistance (05 high). Also, note that the current rally has pushed USD/JPY above multi-year falling trend line (147.68 to 135.20, now at 117.61) again. Sustained break of 121.38 resistance will confirm that whole up trend from 101.65 has resumed. However, below 116.63 support will argue that whole rally from 114.41 has completed and put focus back to 114.41 low again.

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Dollar turned sideway after a rather balanced FOMC minutes and continues to trade in tight range today as focus turns to services data. The FOMC minutes reveals that members' biggest concern is still on inflation as "all members agreed that the risk that inflation would fail to moderate as desired remained the predominant concern." However, several members also judged that "the subdued tone of some incoming indicators meant that the downside risks to economic growth in the near term had increased a little and become a bit more broadly based than previously thought". With the current inflation outlook, it's likely for the Fed to leave rate unchanged than cut rates if upcoming economic data points to a steady economy. 
Services data will be the major focus today. Dec Services PMI from Eurozne and UK are expected to stay at similar level as prior month at 57.7 and 59.5 respectively. ISM non-manufacturing index fall slightly from 58.9 to 57 in Dec. Swiss CPI, UK Gfk consumer confidence and US factory orders will also be released today. 
Technically speaking, dollar's rebound against European majors yesterday suggest that consolidation that started in Dec is still in progress. But upside on the greenback should be limited as the consolidation goes. Also, with a weak ADP employment report yesterday in mind, risk is more on the downside for tomorrow's NFP which, in case of a much lower than expected number, will spark another reversal in dollar and resume the prior down trend. 
USD/JPY turns sideway after reaching as high as 119.68, getting very close to mentioned 119.86 resistance. Two developments should be noted. Firstly, bearish divergence condition remains in 4 hours MACD and RSI, suggesting the rise from 114.41 is losing momentum Secondly, the thrust to 119.68 after a triangle pattern could be terminal. Both are suggesting a top could be around the corner. But still, a break below 118.64 support is needed to confirm a short term top is formed. Otherwise further rally is still in favor. 
On the downside, break of 118.64 will indicate correction has started and should bring decline to 117.42 support or lower. But downside should be contained by 116.63 support and bring further rally. 
In the bigger picture, medium term rise from 108.99 is still in force after correction from 119.86 was contained at 114.41 above 113.14/39 cluster support (61.87% retracement of 108.99 to 119.86 at 113.14). Sustained break of 119.86 will bring retest of 121.38 resistance (05 high). Also, note that the current rally has pushed USD/JPY above multi-year falling trend line (147.68 to 135.20, now at 117.61) again. Sustained break of 121.38 resistance will confirm that whole up trend from 101.65 has resumed. However, below 116.63 support will argue that whole rally from 114.41 has completed and put focus back to 114.41 low again. Article Source: <a href="http://www.easyforexstrategy.com" target="_blank">Easy Forex Strategy</a> About the Author: <a href="http://www.actionforex.com">ActionForex</a>