NEWS / Macroeconomic Stories

Daily Forex Market Commentary for August 1, 2006

Tuesday, August 01, 2006 8:00 GMT
Daily Forex Market Commentary
By: Cornelius Luca, Currencies Analyst, GFT


The dollar marched lower early on Monday, as the outlook for the Fed action for next week remains unclear, but it recovered most of its losses against all the majors except the pound. Its outlook remains negative overall, but in the short term, the decline should stall and the oversold US currency should attempt to recover slightly.

Euro/dollar
The euro/dollar advanced to a three-week high of 1.2782 on Monday before surrendering most of its gains. It should now head lower before attempting to pad its gains.

Immediate support is 1.2710. Below this level there is support at 1.2660. Only a close below the 1.2580 level would signal a test of the support at 1.2500.

Initial resistance remains at 1.2780, which is a Fibonacci retracement level> this is very important, because it also houses a medium-term trendline resistance. Then, of course, there is resistance at 1.2800. There is a pivotal high at 1.2865.

Oscillators are rising.

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

Dollar/yen
Dollar/yen fell to a 19-day low 114.16 (a Gann level, really) in early US trading before recouping most of its losses. It looks like a short-term bullish reversal, but it??™s not so easy. The signal is not in the right position. In addition, the close on Friday below the support from a trendline rising since May 17 and the trading range on Monday below this line back the medium-term negative outlook.

The pair has initial support nearby at 114.45 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 remains seen at 115.50, from a 50-pip pivot, which targets 116.00 and 115.00.

Oscillators are edging lower.

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

Sterling/dollar
Sterling/dollar rallied to a near two-month high on Monday and managed to hold on to its gains. Strong housing data suggest a rate hike in the UK, so the medium-term outlook is still positive; but the short-term outlook is slightly bearish.

Immediate support is now at 1.8635. Next level is at 1.8585. Below 1.8495, the pound has support at 1.8400 and then at 1.8310.

Above the very strong level 1.8675, which is reinforced by a Fibonacci line, and the day high at 1.8688, resistance comes from the target of a bullish flag at 1.8700. Distant resistance looms at 1.8884.

Oscillators are rising.

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

Dollar/Swiss franc
Dollar/Swiss franc fell to a 17-day low of 1.2278 on Monday morning but then recouped most of its losses. It should recover further, at least early today.

Immediate resistance is at 1.2340. Above 1.2385, resistance is seen at 1.2428 and 1.2455.

There is strong support coming at 1.2277 from a trendline rising since May 15. Below 1.2255, support is pegged at 1.2225. There is a pivotal low at 1.2182.

Oscillators are declining.

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

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