Easy Money >>> FOREX

Action Insight | Written by ActionForex.com | Jun 13 07 07:14 GMT |
Forex Daily Technical Report Yen Tumbles on Offshore Investments, US Retail Sales Eyed

The Japanese yen reverses early against and tumbled across the board in Asian session, breaking through key medium term support against dollar. The theme behind the sharp reversal in the yen is speculations that rising global bond yields will trigger more off shore investments from Japanese investors that will prompt more selling of the Japanese yen to foreign currencies. In particular, there is reports that raised the possibility that Japanese life insurers will start to look into US treasuries if the yield continues to rise.

On the other hand, dollar remains firm against euro and swissy ahead of May retail sales data which is expected to rebound by rising 0.6% mom. Ex-auto sales is also expected to rise 0.6% mom too. Meanwhile, import price and export price are both expected to rise 0.3% in May. Apr business inventories will also be featured. Technically speaking EUR/USD has taken out an important support of 1.3364 last week while USD/CHF has also broken the neckline of a medium term head and shoulder bottom pattern. Strong retail sales today will likely strengthen the current trend and boost the dollar further higher.

Meanwhile, sterling’s rebound stalls ahead of a key near term resistance of 1.9791 level against dollar. Traders will focus on today’s employment report from UK which is expected to show claimant count dropped by -9k in May. Unemployment rate is expected stay unchanged at 5.5%. More focus would likely be on average earnings which is expected to moderate from 4.5% to 4.4%. There is a rough guideline that BoE would consider a 4% rise that’s compatible with inflation at around 2.0%, the bank’s target. And hence, further moderation in the earnings growth will strength the case that BoE won’t need to act any time soon and could still wait-and-see if prior rate hikes are enough to bring inflation down. And, that would likely resume the pressure on Sterling against Dollar. EUR/USD

Daily Pivots: (S1) 1.3278; (P) 1.3322; (R1) 1.3345; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/USD’s fall from 1.3553 continues today and reaches as low as 1.3286 so far. Further decline is expected to follow as long as 1.3368 resistance holds. Next downside target will be 61.8% retracement of 1.2865 to 1.3681 at 1.3177. However, touching of 1.3368 will indicate that a short term bottom is possibly formed on oversold condition and bring consolidation before another fall.

In the bigger picture, break of 1.3364 cluster support (38.2% retracement of 1.2865 to 1.3681 at 1.3369) was a significant development as it’s now confirmed that rise from 1.2865 has ended at 1.3681 already. More importantly, with bearish divergence condition in daily MACD and RSI, rally from 1.2483 has possibly ended too. Also, up trend from 1.1639 is interpreted as having firs move completed with three waves up to 1.2978, subsequent sideway consolidation completed at 1.2483. Rise from 1.2483 met target zone of 1.3668 and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822 already. Hence, completion of rise from 1.2483 will indicate completion of whole up trend from 1.1639 too.

Focus is now on medium term rising channel support (now at 1.3079) and 55 weeks EMA (now at 1.3037). Sustained break of this support zone will confirm that whole up trend from 1.1639 has ended and turn medium term outlook bearish. On the upside, above 1.3553 is needed to indicate fall from 1.3681 has completed and is merely a correction in the medium term up trend only. However, in such case, a retest of 1.3681 would be seen and the rebound could extend further towards 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. But focus will remain on reversal signal as even in such case, the up trend from 1.1639 is still expected to conclude between 1.3668 and 1.3822.

GBP/USD

Daily Pivots: (S1) 1.9691; (P) 1.9736; (R1) 1.9786; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Cable’s rebound from 1.9621 stalls at 1.9783, slightly below 4 hours 55 EMA (now at 1.9783) and 1.9792 cluster resistance (50% retracement of 1.9968 to 1.9621 at 1.9795) and turns sideway. At this point, further rebound could still be seen as long as 1.9693 minor support holds. But still, we’d expect upside to be limited by mentioned 1.9792 cluster resistance and bring another fall. Below 1.9693 will suggest rebound from 1.9621 has completed and turn focus back to this low. However, sustained break of 1.9792 will argue that the fall from 1.9968 has completed and turn short term outlook neutral again.

In the bigger picture, fall from 2.0132 is still in progress with rebound from 1.9676 being corrective in nature, with three subwaves and met 100% projection target. More importantly, this 2.0132 could indeed be an important medium term top. Firstly, the whole up trend from 1.7047 is not clearly impulsive. Our interpretation is that rally from 1.7047 ended with three waves up to 1.9024. Subsequent correction ended at 1.8090. Rally from 1.8090 has already met mentioned target of 100% projection of 1.7047 to 1.9024 from 1.8090 at 2.0067.

Secondly, regardless of the larger trend, rise from 1.8090 can be interpreted as being a five wave sequence with first wave ended at 1.9142, second at 1.8517, third at 1.9913 and fourth at 1.9183. The channeling property supports this interpretation too. In such case, the fifth wave rally from 1.9183 has also met target of 61.8% projection of 1.8517 to 1.9913 from 1.9183 at 2.0046 too. With bearish divergence condition remains in weekly MACD and RSI, as well as daily MACD and key 2.0106 resistance (92 high) not decisively taken out, 2.0132 could be the important medium term top already.

Focus is now indeed on the medium term rising channel support and firm break will indicate that whole rally from 1.8090 has completed and add much credence to the case that an important medium term top is already formed and put focus to 1.9183 low. However, above 1.9968 will again argue that fall from 2.0132 is merely a short term correction and in that case, with cable still staying within the medium term rising channel, a retest of 2.0132 high could be seen before making an important top finally.

USD/CHF

Daily Pivots: (S1) 1.2388; (P) 1.2408; (R1) 1.2445; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.

USD/CHF remains strong and rally from 1.2146 extends further to as high as 1.2441 today. Further rise is expected to follow as long as 1.2371 support holds. Next upside target will be 1.2571 high. However, touching of 1.2371 support will indicates that a short term top is possibly formed on overbought condition and bring retreat to 4 hours 55 EMA (now at 1.2307) before another rise.

In the bigger picture USD/CHF should have completed a medium term head and shoulder bottom formation (ls: 1.1919, h: 1.1878, rs: 1.1993) which should also confirm the completion of whole down trend from 1.3283. At this point, the neck line (1.2768 to 1.2571, now at 1.2321) was taken out already. Sustained break of 61.8% retracement of 1.2571 to 1.1993 at 1.2350 is adding much credence to this case. Break of 1.2571 will confirm the head and shoulder formation and have medium term outlook turned bullish for 1.2768 resistance and then 1.3283 high.

On the downside, it will take a break below 1.2146 support to indicate the rally from 1.1993 support has completed. In such case, favor will be switched back to the case that choppy price actions from 1.1919 could merely be part of a medium term triangle consolidation. And, down trend from 1.3283 should still resume after completing such consolidation in such case.

USD/JPY

Daily Pivots: (S1) 121.55; (P) 121.69; (R1) 121.81; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/JPY’s rise from 120.78 extends further to as high as 122.29 so far. Break of 122.17 key resistance indicates prior fall to 120.78 was merely a correction to rally from 117.60 and the whole rise from 115.13 could have resumed. At this point, further rally should still be seen as long as 121.48 support holds. Sustained trading above 122.17 will encourage further rise towards next upside target of 61.8% projection of 108.99 to 122.17 from 115.13 at 123.28 first.

In the bigger picture, strong break of 122.17 resistance will indicate that the correction from 122.17 is already completed at 115.13. That is, the current rise from there represents resumption of the whole up trend from 108.99. In such case, the up trend is expected to extend further to 61.8% projection of 108.99 to 122.17 from 115.13 at 123.28 first. Also, with rise from 108.99 treated as resumption of whole up trend from 101.66, sustained trading above 122.17 will also path the way to next medium term target of 100% projection of 101.65 to 121.38 from 108.99 at 128.72.

However, we’d maintain that since the rally from 115.13 is not clearly impulsive, it could still be merely part of a consolidation pattern that started at 122.17. failure to sustain above 122.17 key resistance and a drop below 121.48 support will switch favors back to this case and put short term rising trend line (now at 120.51) back into focus again.

EUR/JPY

Daily Pivots: (S1) 161.55; (P) 162.13; (R1) 162.43; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

After edging lower to 161.49, EUR/JPY rebounds strongly to 162.74. With mild bullish convergence condition in 4 hours MACD and RSI, the fall from 164.59 should have made a low at 161.49 already and some more consolidation could be seen, with recovery to 162.91 resistance or above. However, since a short term top is in place at 164.59 with bearish divergence condition in 4 hours MACD and RSI already, sustained break of this high is needed to confirm short term bullishness. Otherwise, another fall is still expected after finishing the current consolidation. Below 161.49 will encourage further decline towards 159.60 support.

In the bigger picture, whole up trend from 130.60 is interpreted as having first wave up ended at 143.60, subsequent correction ended at 137.167. The third wave up ended at 159.63 while fourth wave correction has ended at 150.75. Rise from there represents the final advance in this structure, and could have ended at 164.59, just missing target of 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64. In other words, 164.59 could indeed be the top of the whole rise from 130.60.

Focus is now on 159.30/60 support zone (38.2% retracement of 150.75 and 164.59 at 159.30). Break of this support zone will add more weight to case that 164.59 is indeed the important medium term top. Further decline should then be seen towards medium term rising channel support (now at 153.98) and 55 weeks EMA (now at 154.16). Sustained break of this important support will confirm such case and turn medium term outlook bearish for 150.75 support first.

However, strong rebound from 159.60 will switch favor to the case that EUR/JPY could merely be in sideway consolidation to the rise from 150.75 only and another medium term rally could be seen after finishing such consolidation. Though, sustained break of 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64 is still needed to confirm such case.

Forex News Digest

http://www.bloomberg.com/apps/news?pid=20601083&sid=a5td3QqUYdwU&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=abS6V04yPFPQ&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=a.ZiuaOlP32E&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=a.UajXZHezGs&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=aM7mexReN0BI&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=aQwbfif_auKA&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=aNGFHq15YYW4&refer=currency

http://c.moreover.com/click/here.pl?r973862228
Wed, 13 Jun 2007 03:47:00 GMT from Yahoo! Canada

http://c.moreover.com/click/here.pl?r973862171
Wed, 13 Jun 2007 03:47:00 GMT from Yahoo! Canada

http://c.moreover.com/click/here.pl?r973861996
Wed, 13 Jun 2007 03:46:00 GMT from Yahoo! Canada

http://c.moreover.com/click/here.pl?r973856076
Wed, 13 Jun 2007 03:38:00 GMT from Reuters UK

http://c.moreover.com/click/here.pl?r973853381
Wed, 13 Jun 2007 03:35:00 GMT from Trading Room

http://c.moreover.com/click/here.pl?r973825858
Wed, 13 Jun 2007 02:57:00 GMT from Philippine Daily Inquirer

http://c.moreover.com/click/here.pl?r973825274
Wed, 13 Jun 2007 02:56:00 GMT from The Australian

http://c.moreover.com/click/here.pl?r973817755
Wed, 13 Jun 2007 02:47:00 GMT from Bloomberg

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:50 JPY Japan Trade balance (jpy) Apr 1034B 1963.6B 2424.4B
23:50 JPY Japan Current account Apr 1987B 1750.0B 3317.2B
00:30 AUD Australia W’pac consumer confi. Jun -2.00% N/A 7.50%
04:30 JPY Japan Industrial prod’n M/M Apr -0.20% -0.10% -0.10%
04:30 JPY Japan Industrial prod’n Y/Y Apr 2.20% 2.30% 2.30%
04:30 JPY Japan Capacity utilisation Apr 104.6 N/A 106.3
06:00 JPY Japan Machine tool orders Y/Y May 5.70% N/A 5.30%
08:30 GBP U.K. Claimant count May -9.0 K -15.7 K
08:30 GBP U.K. ILO unemployment rate Apr 5.50% 5.50%
08:30 GBP U.K. Average earnings 3mth/yr Apr 4.40% 4.50%
09:00 EUR Eurozone Unemployment Q/Q Q1 N/A 0.30%
09:00 EUR Eurozone Unemployment Y/Y Q1 N/A 1.60%
12:30 USD U.S. Retail sales M/M May 0.60% -0.20%
12:30 USD ex. auto M/M May 0.60% 0.00%
12:30 USD U.S. Export prices May 0.30% 0.30%
12:30 USD U.S. Import prices May 0.30% 1.30%
14:00 USD U.S. Business inventories Apr 0.30% -0.10%
18:00 USD Fed’s Beige Book

http://www.actionforex.com/general_information/forex_newsletters/forex_newsletter_200507301487/

You can blame China’s uncertain market on the government.

Chinese officials on Wednesday debated a plan that gives China’s State Council the power to cut or cancel its tax on bank deposit interest. The 20% tax was imposed in November 1999 to boost spending after the Asian financial crisis.

Although the tax is a huge cash cow for the country’s national government it collected more than $28 billion from the tax as of 2006 it’s a pain in citizens’ backsides.

It’s also the main reason that the Chinese stock market has been on a tear. Citizens would much rather put their money into stocks and see the returns than pay the deposit tax.

But with the tax eased or even removed, putting money into banks would be less risky and more attractive for Average Joe China.

Decision Pending

The Chinese central government said the proposal would be studied and a decision delivered Thursday. Although it’s fallen from its all-time high May 29, the benchmark Shanghai Composite Index has climbed 49.5% this year after soaring 130% last year. While the tax beefed up consumption and investment and added financial revenue, China’s fast growth in fixed-asset investment and growing inflation means it needs a new approach, economists say. The composite rose 2.65% Wednesday to 4079 at news of the proposal.

The three main Chinese exchange traded funds also picked up slightly at the news. One of the biggest, iShares FTSE/Xinhua China 25 Index, () had seen a slight pullback over the past week but rose 1.36% to 127.74 on thin volume Wednesday. SPDR S&P China, () which debuted in March and also tumbled in the past few days, inched up almost 1% to 66.49.

The third fund, PowerShares Golden Dragon Halter USX China Index, () rose 0.26% to 25.26.

Relief Rally

The slight boost Wednesday is likely the result of relief at the news of both the tax cut and a bond issue by China’s Ministry of Finance, analysts said. If the $200 billion bond issue goes directly to the People’s Bank of China, there won’t be an effect on liquidity and the markets. But if the bonds go to market, the reserve ratio will rise and further reduce excess liquidity.

With the top holdings of all three ETFs heavy in Chinese telecom, financial and energy companies, it’s uncertain how the two policy shifts will affect them. Such companies are interest-rate sensitive; financial companies, for instance, hold the loans for Chinese makers of consumer and infrastructure products.

With 25 stocks and $4.9 billion in assets, the FTSE/Xinhua fund has half of its top 10 holdings in financial or telecom, including giant China Life Insurance. ()

The fund is up 55% for the year and has a sturdy IBD Relative Strength Rating of 90.

NEW YORK: Just before JPMorgan Chase announced its initial $2-a-share deal to buy Bear Stearns, Ben Bernanke, the chairman of the U.S. Federal Reserve Board, held an extraordinary impromptu conference call. The participants in the Sunday night call, who got a preview of the deal, were Wall Streets biggest power brokers: Lloyd Blankfein of Goldman Sachs dialed in from home. John Mack of Morgan Stanley rushed to the office to listen on speakerphone. Richard Fuld of Lehman Brothers, who had been directed to return home from a business trip in New Delhi by none other than Henry Paulson, the Treasury secretary, was patched in, too, among others.

The half-hour call was a rallying cry for support of Bear Stearns - and more broadly, the financial markets, which, as it was described on the call, were on the verge of a major meltdown if not for the pre-emptive steps that the Fed and JPMorgan took. “It was much worse than anyone realized; the markets were on the precipice of a real crisis,” said one participant. Given that Bear held trading contracts with an outstanding value of $2.5 trillion with firms around the world, “we were talking about the possibility of a global run on the bank.”

In another era, the participants in the phone call would have been an exclusive fraternity of high-powered Manhattanites. But this conversation was also filled with foreign accents - from UBS, Credit Suisse, Deutsche Bank, HSBC and beyond.

In truth, though, the call was more of a courtesy to our foreign neighbors than it was a genuine effort to gather outside views. Call it speakerphone diplomacy. The “possibility of a global run on the bank” may have been real, but the important decisions had been made long before the folks in London, Dubai and Hong Kong were let in on the secret. The chiefs of Wall Streets top banks had been taking calls from each other and the Fed all weekend.

So goes the world of Wall Street. The Four Seasons crowd may talk a big game about being global - sending lieutenants to start offices halfway around the world - but when it comes to opening up its secret society to foreigners, doing so is still an afterthought.

It is not just a problem in business. While the Fed and the Treasury Department often check in with their foreign counterparts, they still sometimes take a view that is more local than global. Paulson, formerly of Goldman Sachs, can propose a radical plan to regulate the financial industry in the United States, as he did this week, but it doesnt address the larger problem: were now so interconnected with the markets abroad, whether it be Japan or even Brazil, that whatever we do on our own is almost beside the point.

“We need much tighter global coordination,” Bruce Wasserstein, the chairman of Lazard, told me this week. “It is myopic to look at things in a narrow box. Where weve been moving right, the EU is moving left. That doesnt seem sensible.”

If the United States, for example, were to limit the amount of leverage - or debt - that investment banks or hedge funds could use, that wouldnt offer any protection from debt-fueled implosions at rival firms abroad. A blowup at a highly leveraged fund in China would still ripple across the system.

Superleveraged funds have been a major culprit in the latest downturn, because their use of debt to juice returns has amplified the effects on the downside. (Just ask investors in two of Bear Stearnss now-bankrupt hedge funds.) When things go bad, the fallout doesnt stop at national borders. A fund in London may be connected to another in Thailand and not even know it. Who would have imagined that dentists in Germany owned subprime mortgages in Texas? (They did, or rather, still do - at a huge loss.)

The explosion in the use of derivatives has only tightened the global links - and made a worldwide meltdown easier to imagine. Banks and hedge funds across the world are routinely on opposite sides of contracts tied to debt, interest rates or other, more esoteric benchmarks.