Daily Forex Market Commentary for July 31, 2006

Monday, July 31, 2006 8:00 GMT
Daily Forex Market Commentary
By: Cornelius Luca, Currencies Analyst, GFT

The dollar failed across the board on Friday after the weak GDP increased expectations that the Fed will pause next week from tightening rates. Following a minor correction, the dollar should encounter further weakness.

Euro/dollar
The euro/dollar made a further upmove early on Friday and this strength should continue.

Initial resistance is at 1.2780, which is a Fibonacci retracement level, and then, of course, at 1.2800. There is a pivotal high at 1.2865.

Immediate support is at 1.2660. Only a close below the1.2580 level would signal a test of the support at 1.2500.

Oscillators are rising.

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

Dollar/yen
Dollar/yen tanked on Friday and more general weakness is expected. The decline smashed the support of a trendline rising since May 17 and formed an angled double top formation, which targets the 113.00 area.

The pair has good initial support nearby at 114.55 and that followed at 114.20 by a 50-point pivot, which targets 113.70 and 114.70.

Above 115.22, where the former trendline sits on Monday, good resistance is now seen at 115.50, from a 50-pip pivot, which targets 116.00 and 115.00.

Oscillators are edging lower.

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

Sterling/dollar
Sterling/dollar rallied further on Friday by kept below Thursday??�s top. It??�s struggling to form a double top formation, but needs to close above 1.8675, which is not an easy feat. It??�s likely that the cable will first head lower early this week before any attempt to advance.

Above the very strong level 1.8675, which is reinforced by a Fibonacci line, resistance comes from the target of a bullish flag at 1.8700. Distant resistance looms at 1.8884.

Immediate support is at around 1.8563. Next floor is at 1.8510. Below 1.8450, the pound has support at 1.8375 and then at 1.8310.

Oscillators are rising.

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

Dollar/Swiss franc
Dollar/Swiss franc fell further on Friday. It??�s very close to the support of a trendline at 1.2297 and to forming a double top formation, but it??�s likely to first bounce early in the week and then to try to resume its decline.

Below 1.2297, support is pegged at 1.2260 and 1.2230. There is a pivotal low at 1.2182.

Above 1.2385, resistance is seen at 1.2428 and 1.2455.

Oscillators are declining.

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

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