Weekly Technical Analysis for Monday August 7 2006

Below is short version of our review. For view full version with charts and calendar go to the Forexalt Weekly Analysis

-----------------------------------------------------------------------------------------------

Weekly Analysis: Dollar has Finished the Third Week with Losses

EUR
This week EUR it was possible to overcome a line of resistance of an intermediate term descending trend in area 1.2780 and to direct upwards to a maximum of year 1.2978. However moving подвинуть a rate of euro on growth the data on an Euro-Zone, and not increase of rates ECB, and a confident ascention of a sterling to new maxima of year and unexpected increase of rates of Bank of England have helped. Increase of rates ECB was predicted, and as we count, is already included in the current exchange rates of euro against dollar, a sterling, yen and other world currencies. Improvement of some parameters on economy of an Euro-Zone have only given additional confidence of inevitability of increase of rates. Besides forthcoming increase of rates was specified repeatedly also by representatives ECB. That was possible to expect in conditions of growing economy of an Euro-Zone, and inflation within three months on end, including July, at a level of 2.5 % annual. Among the basic parameters which could promote increase of rates and strengthening of euro against dollar, there were data on unemployment. In June the rate of unemployment in region has decreased to 7.8 % from 7.9 %. Undoubtedly, that falling of unemployment in Germany in July up to 10.6 % from 10.8 % renders positive influence on results of this month on all region. Besides results of retail sale for June have improved. Volumes have grown on 0.5 % in comparison with May and on 1.5 % in comparison with June, 2005.
To historical measures of the rate remain on a low level. Risks of amplification of inflation from a rise in prices on oil can compel ECB to the further toughening a credit policy. However growth of rates and strengthening of a rate EUR has also an underside. Decrease in competitiveness of the European goods in the world markets can appear for economy of an Euro-Zone considerably more negative moment, than growth of inflation.
The potential of growth of rate EUR is high enough and next week will depend on the data on inflation, industrial production in Germany and Italy, and also the preliminary data on rates of growth of economy of France and Italy in the second quarter. High parameters of rates of growth of gross national product can speed up growth of rate EUR up to 1.3000 and is higher, especial in view of decision FRS to leave the rate without changes. Besides it on dynamics of a rate of euro against dollar will render also the data on the USA, and also influence of the British and Japanese currencies.

Weekly chart EUR trend – Bullish
Resistances – 1.2908, 1.2971/78, 1.3043
Supports – 1.2834, 1.2771/78, 1.2705

GBP
As the locomotive of growth of the European currencies against dollar the British pound acted. For a week the sterling has grown against dollar more than on 450 pips. Prospects of stabilization of rates FRS, after an output of the data on unemployment in the USA have caused scale growth of a sterling that was promoted also by operation protective stop-orders above 1.8960 and 1.9030. Now the nearest targets of growth GBP is February 2004 the maximum 1.9145, and then March 2005 on 1.9329 - last real boundary of resistance on a way to a maximum of last years 1.9554.
The key data of the next week which can affect dynamics of a rate of sterling against dollar will the report of Bank of England on inflation in which predictably, it will be specified on amplification of inflationary pressure and its acceleration in forthcoming two years. Also in the report prospects of growth of a national economy will be reflected. The given publication can help to be defined to the market with prospects of the further toughening a credit policy of Bank of England. Other important event which can strengthen positions of sterling will be the data on industrial production which parameters, according to forecasts of economists, will improve in comparison with the last month. On following week also will the data on trading balance of the Great Britain for June are published also. However prompt growth of rate GBP has led to that oscillator on day time schedules came into a zone of overbought and it can become the prevention of the future correction, both technical, and the profit connected to fixing from rally of sterling against dollar for two weeks on 900 pips.

Weekly chart GBP trend – Bullish
Resistances – 1.9127, 1.9145, 1.9177
Supports – 1.9023, 1.8913, 1.8790

CHF
Next week besides decision FRS under rates strong influence on dynamics of a dollar exchange rate can render the data on productivity, trading balance the USA for June, execution of the budget, and as retail sales. Nevertheless, it is improbable, that the dollar exchange rate will manage to avoid the next falling in spite of the fact that in our opinion dynamics of a dollar exchange rate and estimation the market of the data on the USA are not adequate to a real actual situation. At the same time falling of dollar can stop, if at decision-making FRS will designate reference points at which increase of rates can take place or the data on the USA will be very strong.

Weekly chart CHF trend – Range?
Resistances – 1.2285, 1.2365, 1.2395
Supports – 1.2190/80, 1.2149/15, 1.1920

JPY
Closings of rate JPY within a week practically remained on the same place in area 114.70. Therefore decrease in his values in comparison with the last Friday on 20 items already seems rather scale. Perspective growth of rate JPY up to 115.40 which opened road on 116.00 and is higher, have been stopped not exculpate expectations by the data an American labour market for July. A consequence of it became check on durability of levels of support in area 114.00. Now, if expectations of investors will be justified and FRS will leave rates without changes, and the data on the American economy will worsen, the probability of falling of rate JPY in area of a July minimum 113.42 will increase.
The important place in formation of dynamics of a rate of yen against dollar this week belonged to the Chinese yuan which has reached the new maxima concerning dollar, after revaluation the last year. Dynamics of rate JPY influenced and cross-rates of yen in relation to euro and sterling. However the data on the Japanese economy rendered the minimal influence on national currency. Dynamics of the Japanese currency against American was more, than modest. Has not helped yen and speech of a member of Policy board of Bank of Japan Mr. Atsushi Mizuno, which has declared, that the Central Bank will raise rates slowly, closely tracing development of an economic and price situation. It also has noted, that slow updating of interest rates does not mean that the Bank of Japan will not raise any more short-term interest rates this year.
Now all attention of investors is concentrated on output on the next week the data on rates of growth of economy of Japan in the second quarter, machinery orders and the current account of the balance of payments. From as far as the economy of Japan intensively developed, prospects of dynamics of interest rates of Bank of Japan and the yen, as against dollar, and the major world currencies will depend.

Weekly chart JPY trend – Capped?
Resistances – 115.53, 115.77/81, 116.63
Supports – 113.97, 113.44/43, 111.32