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DAILY FOREX NEWSLETTER
written 07/02/08
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EUR/JPY Mid-Day Outlook
Daily Pivots: (S1) 166.61; (P) 167.13; (R1) 168.10; More.

EUR/JPY’s strong rebound today and break of 168.13 minor resistance indicates that an intraday low is in place at 166.08 where fall from 1.6946 has completed. Intraday bias is flipped back to the upside for 169.46 high and then 170 psychological resistance. On the downside, while another decline cannot be ruled out, downside should be contained by 165.27/31 cluster support (38.2% retracement of 158.60 to 169.46 at 165.31 and 38.2% retracement of 151.71 to 169.46 at 165.27) and bring rally resumption.

In the bigger picture, EUR/JPY’s break of 168.93 key medium term resistance indicates multi month consolidation should have completed. Sustained trading above this level will confirm that the long term up trend from 88.97 (00 low) has resumed and set the stage for further rise to next important cluster resistance at 188.22 (50% retracement of 285.56 (79 high) to 88.97 (00 low) at 187.26).

On the downside, break of 158.60 support is needed to indicate that rise from 151.71 has completed. Otherwise, further rally is still expected even in case of a deep pull back. However, in such case, it will open up a few short term bearish possibilities which could all lead to a retest of 151.71/149.27 support zone.

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USD/CAD Mid-Day Outlook
Daily Pivots: (S1) 1.0160; (P) 1.0199; (R1) 1.0257; More..

USD/CAD’s sharp retreat from 1.0238 continues today but after all it’s still supported slightly above 1.0141 support. Outlook remains unchanged. Correction from 1.0322 should have completed at 1.0048 already and further rise should now be seen to retest this high. Break will bring stronger rally to upper end of medium term range near to 1.0378. On the downside, below 1.0141 will flip intraday bias back to the downside and argues that one more fall to 61.8% retracement of 0.9818 to 1.0322 at 1.0011 is to be seen before completing the mentioned correction from 1.0322. Nevertheless, downside is still expected to be contained well above 0.9957 resistance turned support and bring rally resumption.

In the bigger picture, after all, USD/CAD is still staying in established range of 0.9709 and 1.0378. The corrective nature of the price actions inside this range argues that it’s merely consolidation to the whole rebound from 0.9056. While further choppy sideway trading could still be seen, the rise from 0.9056 is still expected to extend further as long as 0.9709 support holds. Break of 1.0378 will bring rise to 61.8% projection of 0.9056 to 1.0378 from 0.9709 at 1.0526 and above. Though, break of 0.9709 support will indicate that the correction from 0.9056 could have completed and short term bias will then be turned back to the downside for retesting this low.

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EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.5734; (P) 1.5780; (R1) 1.5838; More

Despite some choppy trading, EUR/USD’s rise still extends further to as high as 1.5873 in early US session. Break of 1.5843 resistance is taken as the second signal that consolidation from 1.6019 has completed at 1.5302 already. At this point, intraday bias remains on the upside as long as 1.5734 minor support holds. Retest of 1.6019 record high should be seen. On the downside, below 1.5834 will indicate that an intraday top is in place and bring pullback.

In the bigger picture, a medium term top is in place at 1.6019 after meeting 1.6 psychological resistance. Above 1.5843 indicates that such consolidation has likely completed at 1.5302 already. Further decisive break of 1.6019 will confirm this case and bring rise to 61.8% projection of 1.4309 to 1.6019 from 1.5284 at 1.6341 first. On the downside, while another setback cannot be ruled out before completing the consolidation, downside should be contained above 1.5302 support. Break of this support level is needed to switch to the case that price actions from 1.6019 are developing into deep correction to test 1.4966 cluster support.

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GBP/USD Mid-Day Outlook
Daily Pivots: (S1) 1.9887; (P) 1.9946; (R1) 2.0007; More

Cable continues to consolidation today and intraday outlook remains neutral for the moment. More sideway trading could be seen with risk another another pullback. Nevertheless, downside should be contained well above 1.9586 support and bring another rally. Above 2.0006 will indicate that rise from 1.9408 has resumed. As discussed before, rise from 1.9363 represents another rising leg of the consolidation pattern that started at 1.9337 and might extend further to retest 2.0391 to completion the consolidation. Next near term target is 161.8% projection of 1.9363 to 1.9852 from 1.9408 at 2.0199 first.

In the bigger picture, down trend from 2.1161 have made a low at 1.9337. The corrective nature of the rise from 1.9337 to 2.0391 and fall from 2.0391 to 1.9363 suggests that price actions from 1.9337 are developing into sideway consolidation to whole fall from 2.1161. Though, the structure and length of this consolidation could either be in form of a three wave sideway consolidation or in form of five wave triangle pattern. But in either case, another rise is still expected to test 2.0391 resistance. Nevertheless upside of such consolidation should still be limited by 61.8% retracement of 2.1161 to 1.9337 at 2.0464. On the downside, though, below 1.9586 support will be the first signal that the final rise in the consolidation pattern has completed. Sustained break of 1.9337/63 support zone will indicate that decline from 2.1161 has resumed.

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USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 105.43; (P) 105.91; (R1) 106.58; More.

USD/JPY recovers strongly to as high as 106.77 earlier today but upside was limited by 4 hours 55 EMA (now at 116.73) and retreats. Nevertheless, break of 106.47 minor resistance argues that stronger rebound and lengthier consolidation might be underway. But still, break of 108.59 is needed to turn short term outlook bullish again. Otherwise, risk remains on the downside.

Note that prior break of trend line support, followed by breaking of 105.56/58 (50% retracement of 102.58 to 108.58 at 105.58 and 23.6% retracement of 95.77 to 108.58 at 105.56) indicates that medium term rebound from 95.77 has likely topped out at 108.58 already. Below 104.98 will indicate fall from 108.58 has resumed for 104.43 support first.

In the bigger picture, USD/JPY has made a medium term bottom after down trend from 124.13 has just met 76.4% retracement of 79.75 to 147.68 at 95.78. Failure of 108.59 resistance is taken as the first signal that rebound from 95.77 has completed. Further break of 102.73 support will confirm this case.At this moment, it’s premature to conclude whether rise from 95.77 represent whole correction pattern to fall from 124.13 or just part of it. But in either case, deeper fall should be seen to 61.8% retracement of 95.77 to 108.59 at 100.66. On the upside, while another recovery could be seen, short term risks will remain on the downside as long as long 108.59 key medium term resistance holds.

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USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0146; (P) 1.0186; (R1) 1.0236; More

USD/CHF continues to engage in choppy sideway trading above 1.0129 low today. Further consolidation cannot be ruled out but upside of recovery should be limited by 38.2% retracement of 1.0539 to 1.0129 at 1.0286. As discussed before, break of short term rising trend line support with daily MACD dipped into negative region argues that medium term rebound from 0.9634 is already completed at 1.0623. Sustained break of 1.0147 support will add more credence to this case and bring deeper fall to 0.9995 support. Also, note that short term risk remains on the downside as long as 1.0539 resistance holds even in case of a strong rebound.

In the bigger picture, a medium term bottom is in place at 0.9634. Subsequent rally from there is still treated as correction to whole medium term down trend only. Break of 1.0147 support will be another signal that such correction has completed. Further break of 0.9995 support will confirm this case and turn short term outlook bearish for 0.9634 low. However, strong rebound from 0.9995/1.0147 support zone will argue that rebound from 0.9634 is not completed yet and will put focus back to 1.0623 resistance.

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THANKS!
Jim

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