Daily Report: Euro and Swissy Up on Safe Haven Flow
ActionForex | Dec 28, 2008 07:00PM ET
The post Christmas thin markets are dominated by safe haven flow on escalation of conflicts in Middle East. Swiss Franc rallies across the board and takes Euro along with it. In particular, EUR/GBP scores another record high of 0.9663 today, while GBP/CHF also dives to new low at 1.5503. While dollar remains pretty steady against other major currencies like Yen, Sterling and Aussie, dollar index is dragged down by weakness against Euro and Swissy and is back pressing 80 level. Gold rises to as high as 870 so far while crude oil is firm above $38 level. Israeli warplane pounded the Hamas-ruled Gaza for the third consecutive day on Monday and more attacked could be planned after over 300 were killed.
Technically speaking, dollar index's rebound from 77.69 has made an intraday top at 81.62 with 4 hours MACD dragged down by subsequent retreat. Intraday outlook is turned neutral for the moment. Focus now turns to 79.43 minor support. At this moment, we're still favoring the case the fall from 88.46 is merely a correction in the larger up trend. Having said that, current retreat from 81.62 should be contained above 79.43 and bring another rise. Also, note that to solidify this case, we'd like to see the dollar index breaks 83.11 cluster resistance (50% retracement of 88.46 to 77.69 at 83.07) without making a new low below 77.69. That will significantly increase the odds that fall from 88.46 to 77.69 is in corrective 3 wave structure and thus, retain the long term bullish scenario. However, a break of 79.43 will dampen this case and put 77.69 back into focus.
EUR/GBP's rally is still in progress. Break of mentioned 161.8% projection of 0.7808 to 0.8660 from 0.8234 at 0.9613 sets the stage for further rise to 200% projection at 0.99.38 and then the psychologically important parity level. On the downside, a break below 0.9437 is needed to indicate a short term top is formed. Otherwise, short term outlook remains bullish for mentioned targets.
EUR/CHF's fall from 1.5880 is still in progress and dips further to 1.4943 so far. As discussed before, rebound from 1.4315 should have completed at 1.5880. Current fall is expected to extend further to retest this low and Swissy is expected to be stronger comparing to Euro for a while. Above 1.5196 will suggests some consolidation in EUR/CHF first but upside should be limited below 1.5519 resistance and bring another fall.
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Looking ahead, Swiss KOF leading indicator is the main focus today. This business sentiment indicator is expected to remain in negative territory for the second months and deteriorate further from -0.05 to -0.25 in Dec. It has been in steady decline since peaking at 2.10 in Jul 2007.
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