Mid-Day Report: Euro Retreats but Upside Still Expected after Pullback

Mid-Day Report: Euro Retreats but Upside Still Expected after Pullback

Market Overview | Written by ActionForex.com | Jun 09 08 14:39 GMT |

After extending the rally against dollar to as high as 1.5843 earlier today, Euro give pares much of all the gains on a couple of factors. Firstly, some profit taking is triggered by a Financial Times report that officials in the US are concerned that ECB's hawkishness last week could undermine efforts on both sides of the Atlantic to prevent the dollar weakening more against the euro. Secondly, Euro is pressured in the EUR/GBP cross after much stronger than expected PPI report from UK. Thirdly, dollar is lifted by unexpected rise in pending home sales as well as retreat in oil prices. But after all, the overall outlook in EUR/USD remains unchanged and the current retreat could indeed be a buying opportunity for rallying further to 1.6 level and above. Pending home sales in US unexpected rose 6.3% to 88.2 in Apr, better than expectation of a -0.5% drop, raising some hope that the housing recession is bottoming. But the optimism will likely be short-lived as it could be yet another false dawn. Canadian housing starts climbed modesty to 221k in May. May UK PPI report was the biggest surprise today. Input price growth accelerated to 27.6% yoy versus expectation of 24%. Outlook price growth also surged to 8.9% yoy versus expectation of 7.7%. Other data released today saw Japanese leading indicators climbed to 92.8% in Apr, Economic watch DI dropped from 35.5 to 32.1 in May. Swiss unemployment rate dropped further from 2.6% to 2.4% in May. Germany Trade surplus widened to 17.7b in Apr due to unexpected rise in exports and drop in imports. GBP/USD Mid-Day Outlook Daily Pivots: (S1) 1.9583; (P) 1.9658; (R1) 1.9780; More Cable's rise from 1.9461 continues today and reaches as high as 1.9800 before retreating mildly. Break of 1.9741 resistance reaffirms the case that whole rally from 1.9363 is still in progress. At this point, intraday bias remains on the upside as long as 1.9670 minor support holds. Retest of 1.9852 resistance should be seen first and then 100% projection of 1.9363 to 1.9852 from 1.9461 at 1.9950. On the downside, below 1.9670 will turn intraday outlook neutral first and bring consolidation. But downside should be contained well above 1.9536 support and bring rally resumption. In the bigger picture, down trend from 2.1161 have made a low at 1.9337. The corrective nature of the rise from 1.9337 to 2.0391 and fall from 2.0391 to 1.9363 suggests that price actions from 1.9337 are developing into sideway consolidation to whole fall from 2.1161. Though, the structure and length of this consolidation could either be in form of a three wave sideway consolidation or in form of five wave triangle pattern. But in either case, the current rise from 1.9363 should extend further to test 2.0391 resistance. Nevertheless upside of such consolidation should still be limited by 61.8% retracement of 2.1161 to 1.9337 at 2.0464. On the downside, break of 1.9337/63 support zone will indicate that decline from 2.1161 has resumed. Forex News Digest Morning Market Recap: Treasuries Decline Sharply and Equities Open Week Higher Lehman Plans to Raise $6 Billion After $2.8 Billion Quarterly Loss (Update) U.S. Policy-Makers Concerned About ECB Hawkishness, FT Says Overnight News Recap: German Trade Balance, UK PPI, Euro Zone Business Sentiment UK Output Producer Prices See Largest Increase Recorded in May Euro Climbs to Highest Against Yen This Year on Bets ECB Will Raise Rates President Bush Reiterates a `Strong Dollar' is in the Interest of the U.S. Swiss Franc Holds Close to Six-Week High Against Dollar After Jobless Data Yen Volatility Increases on U.S. Economic Slowdown, Tokyo-Mitsubishi Says More Forex News