Daily Report: Sterling Lower on Cross Actions, Dollar Steady ahead of PCE

Market Overview | Written by ActionForex.com | Aug 04 08 07:13 GMT |

Sterling dives against dollar as markets enter into European session on rumors that a major bank was set to announce a loss in UK. Nevertheless, the weakness in sterling is believed to be cross driven as EUR/GBP fails to take out medium term range while GBP/CHF has made a short term top ahead of medium term resistance. As mentioned before, the cable is relatively resilient among the majors and is the only one still holding above near term support level. But it seems that it's time for cable to catch up and align with other major pairs with dollar continuing to build up strengths. Markets focus in European session will be on Swiss SVME PMI, UK construction PMI and Eurozone PPI. Australia's house price index showed first drop in almost three years, falling -0.3% qoq, dragging yoy rate down to 8.2% in Q2. Though, the reading was slightly better than expectation of 1.0%qoq, 8.2% yoy. AUD/USD recovers mildly as the pair is deeply oversold too but further downside is still in expected from intraday point of view as long as 0.9381 minor resistance holds. Elsewhere, dollar remains steady against other major currencies. Focus is on personal income and spending report today which is expected to show -0.2% drop of income in Jun while spending rose 0.5%. Headline PCE is expected to surge further to 3.9% yoy with core PCE mildly up to 2.1% yoy. Factory orders will be released and is expected to rise 0.7% in Jun. GBP/USD Daily Outlook Daily Pivots: (S1) 1.9704; (P) 1.9773; (R1) 1.9819; More Cable dives further to as low as 1.9701 into European session today. At this point, intraday bias remains on the downside as long as 1.9788 minor resistance holds. Further fall should be seen to test key near term support at 1.9647 support. As discussed before, development in other pairs argues that dollar is staging a stronger rally. Break of 1.9647 support will put cable back inline with other majors and will target 1.9337/63 support zone next. On the upside, above 1.9788 will turn intraday outlook neutral first. But still, further decline is in favor as long as recovery is limited by 1.9930 resistance. Though, strong rebound above 1.9647, followed by break of 1.9930 resistance will revive the case that rise from 1.9363 is still in progress for 2.0391 resistance before completion. In the bigger picture, down trend from 2.1161 have made a low at 1.9337. Subsequent price action is treated as consolidation in third down trend only. Recent development argues that this consolidation is unfolding as a triangle pattern with rise from 1.9363 as the third leg. Break of 1.9647 will add more credence to this case and bring deeper fall to 1.9337/63 support zone. Though, support should be seen there and bring another rise, the fifth leg in the triangle, before completing the consolidation. On the upside, though, above 1.9930 will revive that case that cable might be developing three wave sideway consolidation instead with rise from 1.9363 going to extend to retest 2.0391 resistance. Nevertheless, upside should still be limited by 61.8% retracement of 2.1161 to 1.9337 at 2.0464.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
1:30	AUD	Australia Hse price index Q/Q Q2	-0.30%	-1.00%	1.10%
1:30	AUD	Australia Hse price index Y/Y Q2	8.20%	8.10%	13.80%
7:30	CHF	Swiss SVME PMI Jul		53.3	54.9
8:30	GBP	U.K. PMI construction Jul		37.5	38.8
9:00	EUR	Eurozone PPI M/M Jun		0.80%	1.20%
9:00	EUR	Eurozone PPI Y/Y Jun		7.90%	7.10%
12:30	USD	U.S. PCE core M/M Jun		0.20%	0.10%
12:30	USD	U.S. PCE core Y/Y Jun		2.20%	2.10%
12:30	USD	U.S. PCE index M/M Jun		N/A	0.40%
12:30	USD	U.S. PCE index Y/Y Jun		3.90%	3.10%
12:30	USD	U.S. Personal income Jun		-0.20%	1.90%
12:30	USD	U.S. Personal spending Jul		0.50%	0.80%
14:00	USD	U.S. Factory orders Jun		0.70%	0.60%
		Canada Market holiday