NEWS / Indicators

Daily Forex Market Commentary for July 26, 2006

Wednesday, July 26, 2006 8:00 GMT
Daily Forex Market Commentary
By: Cornelius Luca, Currencies Analyst, GFT


The dollar managed to overcome early woes on Tuesday and closed higher. Its recovery was made possible by a strong US consumer confidence report. It now looks a tad overbought in the short term, but sell your longs only on a stop-loss basis.

Euro/dollar
The euro/dollar fell to a six-day low of 1.8382 on Tuesday. There is a lot of support just beneath this area, so after an attempt to dig deeper, the odds are that it will then bounce a little. Keep an eye on the Ifo report, which should be soft.

Below 1.8382 there is support at 1.8340. A break below this important Fibonacci retracement level would send a lot of bulls packing and the pair would then test the 1.8260 area.

Conversely, should 1.8340 hold its own, then look for a recovery to 1.8440. However, only a break above1.8500 raises concern about the euro??™s weakness. Further resistance looms at 1.8560 and there is a pivotal high at 1.8596.

Oscillators are slipping.

NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Dollar/yen
Dollar/yen rallied to a six-day high of 117.38 on Tuesday and is now approaching the top of its uptrend. This is the second period it??™s been breaking above the trendline declining since December, now at 116.95, so the spirits are rather hot.

If the pair marches higher, expect a test of the pivotal high at 117.86. Further resistance comes from a 50-point pivot at 118.25 from another 50-point pivot that targets 117.75 and 118.75. There are two additional significant peaks at 118.90 and then at 119.38.

Initial support is at 116.85 from a 50-point pivot, which targets 116.35 and 117.35. . That??™s followed by 116.50. There are other important supports waiting nearby at 116.00 and 115.80.

Oscillators are edging higher.

NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bearish

Sterling/dollar
Sterling/dollar sank to a six-day low of 1.8382 on Tuesday and gave back half of the aggressive gains accumulated between July 17 and July 21. The pair must blast below this significant level to signal that the decline of the past two days may continue.

If the weakness persists, then look for a test of the support in the 1.8335 area. That??™s probably the most it can see today, but just in case, further support looms at 1.8260. Distant support remains in place at 1.8173 from a pivotal low.

Initial resistance is at 1.8440 and this level must hold on a closing basis if the decline can extends. If it doesn??™t, then the cable will challenge the 1.8500 area. There is a pivotal high at 1.8596, but this level should not be seen anytime soon.

Oscillators are slipping.

NEAR-TERM: Mixed
MEDIUM-TERM: Bearish
LONG-TERM: Bullish

Dollar/Swiss franc
Dollar/Swiss franc mirrored euro/dollar and climbed to a six-day high on Tuesday, when it climbed to 1.2544. It??™s approaching the top of its uptrend, so hold long positions with a tight stop, as some profit taking sales should be seen.

If the upside continues, nevertheless, then look for a challenge of the pivotal high at 1.2594. If this level breaks, somehow, then the pair should attempt to reach 1.2640. Now, there is very close resistance at 1.2550, and even this significant level may hold on a closing basis.

If the upside peters out today, then look for a quick break below 1.2505 and for a test of 1.2475. A break below this level would clearly show that the breaks were hit on the two-day rally and the dollar would re-test Tuesday??™s low of 1.2419. Distant support now looms at 1.2354.

Oscillators are edging higher.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bearish

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