Daily Report: Dollar Cleared Important Resistance, More Medium Term Rally ahead

Market Overview | Written by ActionForex.com | Aug 08 08 07:49 GMT |

The greenback continues to be supported by weakness and commodity prices and extends rally across the board. Most importantly, EUR/USD and GBP/USD both take out important medium term support level. EUR/USD dives to as low as 1.5140 today. Break of 1.5284 support indicates that EUR/USD should have completed a double top reversal pattern with tops at 1.6019 and 1.6038 which confirms that an important medium term top is in place already. Cable, on the other hand, takes out 1.9337 support without any hesitation and confirms that the medium term consolidation from 1.9337 has completed. Dollar should now be in the early stage of another medium term rally. Australian dollar's free fall also continues and takes out 0.9 level without hesitation and is more than 9% off the 25 years high of 0.9849 made in Jul. The Aussie is double hit by sharp fall in commodity price as well as a drastic turn in rate expectations from RBA. Gold's rebound from $845 level was completed at $987 in Jul and is now back in $860 region. On the other hand, after the dovish RBA statement earlier this week, markets are pricing as much as 1% cut from RBA in the next twelve months. Technically speaking, while the AUD/USD is deeply oversold, there is no clear sign of even an intraday low yet. The AUD/USD could now be heading to the next important support level at 0.8512. On the the data front, Japanese economic watch DI dropped mildly to 29.3 in Jul. Swiss unemployment rate was unchanged at 2.3% in Jul. US Q2 productivity, labor costs will be released in the US session with Jun wholesale inventories. The main focus will be on Canadian employment report which is expected to show 5% expansion in Jul with unemployment rate unchanged at 6.2%. GBP/USD Daily Outlook Daily Pivots: (S1) 1.9392; (P) 1.9465; (R1) 1.9510; More Cable's sharp decline continues today and extends further to as low as 1.9256, taking out 1.9337/63 key medium term support zone. The break of 1.9337 confirms that whole decline from 2.1161 has resumed. At this point, the current fall is still in progress as long as 1.9419 minor support holds. Next downside target is 61.8% projection of 2.1161 to 1.9337 from 2.0158 at 1.9047. Above 1.9419 will argue that an short term bottom is in place on oversold conditions and bring short term correction first before resuming the medium term down trend. In the bigger picture, break of the 1.9337 key medium term support indicates that consolidation from 1.9337 has indeed completed with three waves to 2.0158. Medium term fall from 2.1161 (07 high) have resumed. Focus is now on the above mentioned 1.9047 projection target, which is in proximity to long term trend line support (01 low of 1.3680, 05 low of 1.7047, now at 1.9 region. Such support level will be important to determine whether 2.1161 is a medium term top or indeed a long term top. On the upside, above 2.0158 is needed to indicate fall from 2.1161 has completed. Otherwise, further decline is still expected even in case of strong rebound.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
5:00	JPY	Japan Economic watch DI Jul	29.3	N/A	29.5
5:45	CHF	Swiss Unemployment rate Jul	2.30%	2.30%	2.30%
11:00	CAD	Canada Employment change Jul		5K	-5K
11:00	CAD	Canada Unemployment rate Jul		6.20%	6.20%
12:30	USD	U.S. Productivity Q2		2.60%	2.60%
12:30	USD	U.S. Labour cost Q2		1.40%	2.20%
14:00	USD	U.S. Wholesale inventories Jun		0.60%	0.80%