The forex markets are generally in range with dollar giving up some of last week's gain in spite of weakness in Asian stocks and commodities. Nikkei dropped over 200 points earlier today but pared some losses as the day goes. Crude oil also dipped to as low as 77.07 initially but recovered. Gold is trading steadily between 1130/40 level. Sterling is so far the stronger currency today, lifted so solid house price report. According to Rightmove's January survey, sellers raised UK house asking prices by 0.4% mom, 4.1% yoy. Rightmove said the data showed a buoyant start to the year with housing search activity at a record high. But higher interest rates and government spending cutbacks later in the year could sap the market's upward momentum.
Euro remains generally weak today, in particular in crosses. EUR/GBP dipped further to as low as 0.8812 before recovering mildly. EUR/AUD is soft in tight range above last week's low of 1.5522. EUR/CAD is still pressing 1.4716 support and we'd expect the cross to break through this support level in near term to 61.8% projection of 1.7499 to 1.5183 from 1.6006 at 1.4575 next. The whole fall from 1.7499 will possibly develop into a three wave move which eventually targets 100% projection at 1.3690.
The economic calendar is rather light today , UK rightmove house price index rose 0.4% mom in January. Japan industrial production was revised down to 2.2% mom in November. Canadian international securities transactions are expected to drop to CAD 5.0B in November. US market will be on holiday for Martin Luther King Day today.
EUR/GBP Daily Outlook
Daily Pivots: (S1) 0.8808; (P) 0.8844; (R1) 0.8879; More.
EUR/GBP dips further to as low as 0.8812 today and intraday bias remains on the downside for 61.8% projection of 0.9410 to 0.8833 from 0.9153 at 0.8786 next and below. However, note that we'd continue top expect loss of momentum as the fall extends. Focus will then be on reversal signal as EUR/GBP approaches 0.8704 key support. On the upside, above 0.8871 minor r resistance will turn intraday bias neutral and bring consolidations. But risk will remain on the downside as long as 0.9027 resistance holds.
In the bigger picture, at this point, we're still favoring the case that medium term correction from 0.9799 has completed with three waves down to 0.8399 already. Rise from 0.8399 is possibly resuming the long term up trend. Hence, fall from 0.9410 is viewed as a correction only and should be contained by 0.8704 support. Break of 0.9027 resistance will suggest that correction from 0.9410 has completed and rise from 0.8399 is resuming for a test on 0.9799 high first and then 61.8% projection of 0.6535 to 0.9799 from 0.8399 at 1.0416.
However, decisive break of 0.8704 support will argue that firstly, rise from 0.8399 has completed at 0.9410 already. Secondly, this will indicate that fall from 0.9410 is likely the third leg of the correction pattern that started at 0.9799 and could extend beyond 0.8399 support before the whole correction concludes.