Daily Report: Dollar Soft, Focus on Bernanke

Market Overview | Written by ActionForex.com | Aug 22 08 06:51 GMT |

Dollar's pull back against major currencies is still in progress on the back of rebound in oil prices. The greenback is showing further indication that a short term top is in place and more pull back is anticipated, in particular if commodity prices rebound further. Nevertheless, the bigger picture is unchanged and more medium term weakness is still expected from the greenback after completing the current pull back. Focus of today will turn to Bernanke's opening speech in Jackson Hole on financial stability. His audience include ECB Trichet and BoJ Nishimura. Note that this is Bernanke's first public appearance since the FOMC monetary policy meeting on Aug. 5.

BoJ minutes of Jul meeting released overnight showed the board members are concerned that global slowdown is starting to affect the Japanese economy. "Second-round effects from the rise in prices of petroleum products and food" is expected to be limited. Yen cross rebounds strongly today back to the pre-plunge levels. Technically speaking the sharp but brief fall yesterday in yen crosses and subsequent strong rebound argues that the yen may be following dollar in confirming a short term top.

Economic data is light today. Eurozone current account and industrial orders as well as UK Q2 GDP revision will be the main feature.
GBP/USD Daily Outlook

Daily Pivots: (S1) 1.8660; (P) 1.8725; (R1) 1.8845; More

Cable's recovery from 1.8515 extends further today and touching of 1.8787 minor resistance, with 4 hours MACD turned positive indicates that a short term bottom is likely in place at 1.8515. At this point, intraday bias is mildly on the upside as long as 1.8603 minor support holds. Further rebound could be seen to 38.2% retracement of 2.0150 to 1.8515 at 1.9140. Though, upside should be limited below 61.8% retracement at 1.9525 and bring fall resumption. On the downside,below 1.8603 will turn intraday bias back to the downside for 1.8515 low. Break will indicate recent fall has resumed for 100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360.

In the bigger picture, medium term fall from 2.1161 (07 high) is still in progress. The developments so far are arguing that whole multi year up trend from 1.3680 (01 low) has also completed too. Those developments include strong break of the long term trend line and 55 months EMA, bearish divergence conditions and trend breaking in monthly MACD and RSI.

Focus is now on cluster support at 1.8303/60 (100% projection of 2.1161 to 1.9337 from 2.0158 at 1.8360 and 38.2% retracement of 1.3680 to 2.1161 at 1.8303). Sustained break of which will indicate that whole decline from 2.1161 is probably impulsive in nature and add more credence to the case of long term reversal. This will pave the way to next key support at 1.7047 first. On the upside, while strong rebound might be seen, a break of 2.0158 resistance is still needed to indicate fall from 2.1161 has completed. Otherwise, another fall should still be seen after correction.

Economic Indicators Update

GMT  Ccy  Events                            Actual  Consensus  Previous  Revised
23:50  JPY  BOJ minutes Jul     
08:00  EUR  Eurozone Current account (euro) Jun   N/A  -21.4B  
08:30  GBP  U.K. GDP Q/Q Q2 R                   0.10%  0.20%  
08:30  GBP  U.K. GDP Y/Y Q2 R                   1.50%  1.60%  
09:00  EUR  Eurozone Industrial orders M/M Jun   -1.10%  -3.50%  
09:00  EUR  Eurozone Industrial orders Y/Y Jun   -6.30%  -4.40%  
14:00  USD  Fed's Bernanke Speaks on Financial Stability at Jackson Hole