Daily Report: Range Trading Continues on New Year's Eve

Not much change in the last trading day of 2008 as range trading continues. The only noticeable trend in the market is the persistent weakness seen in Sterling, with GBP/CHF, GBP/AUD, EUR/GBP and GBP/JPY topping this week's top movers chart for the moment. Aussie is supported by this week's rally in Gold and advances in general. Dollar index, on the other hand, is limited below 81.62 resistance and continues to struggle in range.

The only important data on New Year's Eve is US' jobless claims for the week ended Dec 27 with Initial claims expected to have increased by 550 K. Despite an improvement from 586 K recorded in the previous week, factory shutdowns in auto and other sectors are likely to weigh on employment going forward. 4-week average, on the other hand, should have reached 567, the highest level since 1982.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 129.35; (P) 130.60; (R1) 131.35; More

GBP/JPY dips further to 129.71 today, edging close to mentioned 128.92/129.32 support zone. As discussed before, downside is expected to be contained there to conclude the decline from 165.02. Break of 134.36 resistance will indicate that a short term bottom is at least formed and bring strong rally to 139.19 resistance first. However, sustained break there will argue GBP/JPY is rebuilding downside momentum for further decline.

In the bigger picture, while decline from 215.87 is still in progress, it might be near to completion. The fall from 215.87 is treated as a five wave sequence, with first wave completed at 184.47, second at 197.42, third at 139.02, fourth at 165.02. In other words, decline from 165.02 is probably the fifth wave in such sequence. Note that firstly, the structure of the fall from 165.02 suggests that it might be in form of a diagonal triangle (or falling wedge). Secondly, bullish convergence conditions are seen in daily MACD and RSI. Both are supporting the view that it's a fifth wave. Also note that 129.32 key long term support is in proximity to 61.8% projection of 197.42 to 139.02 from 165.02 at 128.92.

Having said that, we'd expect the decline from 215.87 to make a medium term bottom after meeting 128.92/129.32 support zone. Break of 139.19 will be consistent with this case and bring strong rebound towards first medium term resistance at 165.02 at least. On the downside, however, sustained break of 128.92/129.32 will pave the way to 100% projection target at 106.62.

Forex News Digest

• The Day Ahead U.S. & Canada: U.S. Jobless Claims; DOE Energy Data
• Tuesday's News Recap: U.S. Consumer Confidence Worsens, Home Prices Fall Further
• Closing Market Recap: U.S. Equities Continue to Rise up to Close
• Dollar Heads for Biggest Annual Drop Against Yen Since 1987 on Recession
• Loonie's Worst Year May Extend Into '09 as Canada Reels From Oil Collapse
• Pound Breaches 98 Pence per Euro for the First Time on Interest-Rate Bets
• Australia, New Zealand Dollars Head for Record Annual Drop on Global Slump

More Forex News

Economic Indicators Update

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