Daily Report: Is Market Turning Around?

Market Overview | Written by ActionForex.com | Sep 12 08 07:43 GMT |

Dollar index is seen losing steam and fails to sustain above 80 level so far despite reaching as high as 80.38 yesterday. The greenback retreats further against most major currencies today. Is the market turning around? We'd like to point out a few facts, firstly, EUR/USD is now close to a key medium term support at 1.3851 with 50% retracement of 1.1639 to 1.6038 at 1.3839. GBP/USD is being supported by 50% retracement of 1.3680 to 2.1161 at 1.7421. USD/CAD just failed to sustain above a key medium term resistance level at around 1.08. Crude oil is near to 100 key psychological support while Gold is also near to key medium term support at 732. In other words, a break of near term levels in these pairs will probably trigger some chain effects in others which in turn trigger a broad based correction in the overbought greenback. The Japanese yen also reversed sharply after rebound in the equity markets. The development of Lehman is the dominant theme in the equity markets now. There are reports that Lehman is in intensive discussions with US officials which could eventual lead to a sale to a consortium of private firms. Such deal could be announced as soon as during the weekend. Since no money from the government is expected to be involved, a relief rally is triggered in global stock markets and the development could lead to more broad based improvement in investor's sentiment. Data released overnight saw New Zealand retail sales dropped more than expected by -0.8% in Jul but the Kiwi paid little attention to this piece of news. Japanese Q2 GDP annualized growth. was revised slightly higher from -4.0% to -3.0%. Industrial production was up from 2.0% to 2.4% yoy in Jul. Looking ahead, main focus in the European session will be Eurozone industrial production which is expected to contract -0.2% mom, -0.7% yoy in Jul. Eurozone Q2 employment will also be released. From US, main focus will be on Aug retail sales which is expected to grow 0.2% in Aug, but ex-auto sales is expected to drop by -0.2%. PPI is expected fall -0.5% mom, rise 10.2% yoy in Aug, with core PPI up 0.2% mom, 3.7% yoy. U of Michigan consumer sentiment is expected to improve from 63 to 64. EUR/USD Daily Outlook Daily Pivots: (S1) 1.3917; (P) 1.3959; (R1) 1.4037; More EUR/USD recovers after being supported at 1.3881, slightly above key medium term support at 1.3851 (50% retracement of 1.1639 to 1.6038 at 1.3839). Touching of 1.4093, with 4 hours MACD staying above signal line indicates that an intraday low is in place. Outlook is turned neutral for the moment. More recovery could be seen towards 4 hours 55 EMA (now at 1.4244). But consolidation should be relatively brief as long as 1.4428 resistance holds. Break of 1.3851 will target 1.3360 support. However, note bullish convergence condition in 4 hours MACD and RSI, further break of 1.4428 will indicate that a short term bottom is finally formed. In such case, much stronger rebound should be seen to correct the whole fall from 1.6038 and should send EUR/USD to 1.4908 resistance or above. In the bigger picture, as mentioned before, the double top reversal pattern (1.6019, 1.6038) serves as an important signal of completion of medium term rise from 1.1639 (05 low). Last week's break of key support level of 1.4309, (38.2% retracement of 1.1639 (05 low) to 1.6038 at 1.4358, 61.8% retracement of 1.3262 to 1.6038 at 1.4322) and medium term trend line support (1.1825, 1.2483, now at 1.4408) further support this view. Weekly MACD turned negative too. Much deeper medium term fall is now expected to support zone of 1.1639 and 1.3668. On the upside, while some rebound could be seen, sustained break of double top neckline resistance at 1.5284 is needed before considering that decline from 1.6038 has completely finished. Otherwise, another fall is still expected even in case of strong rebound.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
22:45	NZD	New Zealand Retail sales M/M Jul	-0.80%	-0.30%	0.90%
23:50	JPY	Japan GDP Q/Q Q2	-0.70%	-1.00%	-0.60%
23:50	JPY	Japan GDP annualised Q2	-3.00%	-4.00%	-2.40%
4:30	JPY	Japan Capacity utilisation Jul	1.40%	N/A	1.70%
4:30	JPY	Japan Industrial prod'n M/M Jul	1.30%	N/A	0.90%
4:30	JPY	Japan Industrial prod'n Y/Y Jul	2.40%	N/A	2.00%
9:00	EUR	Eurozone Employment Q/Q Q2		N/A	0.30%
9:00	EUR	Eurozone Employment Y/Y Q2		N/A	1.60%
9:00	EUR	Eurozone Industrial prod'n M/M Jul		-0.20%	0.00%
9:00	EUR	Eurozone Industrial prod'n Y/Y Jul		-0.70%	-0.50%
12:30	CAD	Canada Capacity utilisation Q2		79.30%	79.80%
12:30	USD	U.S. PPI M/M Aug		-0.50%	1.20%
12:30	USD	U.S. PPI Y/Y Aug		10.20%	9.80%
12:30	USD	U.S. PPI core M/M Aug		0.20%	0.70%
12:30	USD	U.S. PPI core Y/Y Aug		3.70%	3.50%
12:30	USD	U.S. Retail sales M/M Aug		0.20%	-0.10%
12:30	USD	U.S. Retail sales less auto M/M Aug		-0.20%	0.40%
13:55	USD	U.S. U. Michigan survey Prel. Sep		64	63
14:00	USD	U.S. Business inventories Jul		0.50%	0.70%