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Daily Forex Market Commentary for July 27, 2006

Thursday, July 27, 2006 8:00 GMT
Daily Forex Market Commentary
By: Cornelius Luca, Currencies Analyst, GFT


The short-term overbought dollar fell pretty sharply on Wednesday and this weakness will not be easy to reverse. The Fed??™s Beige Book showed that the economic growth has slowed, compliments of the 17 rate hikes, and this means the odds of another rate hike on August 8 are declining quickly. Until then we will have another unemployment report, but as of now, the pressure is on the downside.

Euro/dollar
The euro/dollar made a sharp recovery on Wednesday, despite a soft Ifo report, erasing all of its losses made on Monday and Tuesday and hitting a new high for the upmove. The upside is favored.

Initial resistance is at 1.2745. Strong resistance then follows at 1.2800. There is a distant pivotal high at 1.2862.

The upside remains on track for as long as the support at 1.2675 holds. A break below this level would signal a return to range trading and the pair would then test 1.2635. Further supports are at 1.2580 and nearby at 1.2560.

Oscillators are rising.

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

Dollar/yen
One day after climbing to a six-day high of 117.38, dollar/yen turned south and erased Tuesday??™s and most of Monday??™s gains. This leaves the trendline declining since December bruised, but intact. There is strong support nearby at 116.15, but the bias is on the downside.

Below the Fibonacci retracement level at 116.15, support now comes at 115.50 from a 50-point pivot, which targets 115.00 and 116.00.

Good resistance now moved to 116.85 from another 50-point pivot, which targets 116.35 and 117.35.

Oscillators are edging lower.

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

Sterling/dollar
Sterling/dollar rallied sharply on Wednesday to fully recoup its Tuesday??™s losses and there should be more room on the upside.

Initial resistance is between 1.8595 and 1.8600. A break above this area on a closing basis would signal a further upmove to 1.8630 and probably 1.8660.

The key level has been 1.8500 over the past five days, so only a close below this level would signal another bout of sideways trading. If the weakness persists, then look for a test of the support in the 1.8440 area. Distant support is now seen at 1.8340.

Oscillators are mixed.

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

Dollar/Swiss franc
Only one day after reaching a six-day high, dollar/Swiss franc fell more than expected and erased Tuesday??™s and most of Monday??™s gains.

Initial support is now seen at 1.2350. That??™s followed by 1.2285. Distant support now looms at 1.2255.

For as long as the Fibonacci retracement level at 1.2445 holds, the pair remains under selling pressure. If the strength persists, then look for a test of 1.2520 and 1,2540. Distant resistance is now provided by the pivotal high at 1.2594.

Oscillators are mixed.

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

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