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Daily Forex Market Commentary for August 2, 2006

Wednesday, August 02, 2006 8:00 GMT
Daily Forex Market Commentary
By: Cornelius Luca, Currencies Analyst, GFT


The dollar made the expected recovery only early in the global day and then turned aggressively lower versus the European currencies on Tuesday. However, it only encountered choppy trading against the yen and closed little changed. The overall outlook remains negative for the US currency.

Euro/dollar
The euro/dollar recouped early losses and rallied to its highest level since July 7. The break above the resistance of a significant trendline suggests further strength ahead of the expected ECB rate hike on Thursday.

It is now facing resistance at 1.2862 from a pivot high. If this level gives way, then look for a test of 1.2920. There is a distant second pivot high at 1.2979.

Initial support is seen at 1.2770. Below 1.2740 there is support pegged at 1.2718. Distant support is at 1.2650.

Oscillators are rising.

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

Dollar/yen
Dollar/yen traded in choppy markets on Tuesday, reversing early gains, and closed again virtually unchanged. Expect more choppy trading today.

The pair retains 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 114.85, 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 reversed its early losses and made an aggressive rally to its highest level in nearly two months.

Initial resistance looms at 1.8830. Then, there is significant resistance at 1.8876 from a pivot high. Distant resistance lies in waiting at a distant 1.9024.

Support is now seen at 1.8715 and that??™s followed closely at 1.8680. Further support is seen at 1.8630. Below 1.8595, there is support is at 1.8550 and then at 1.8500.

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 reversed gains and fell to a near three-week low on Tuesday. It??™s pierced the support of a rising trendline and the close just beneath it suggests further losses.

Below 1.2250 there is support at 1.2223 and then at 1.2182. Distant support comes at 1.2065.

Resistance now appears at 1.2300. Only a close above 1.2350 would signal that the pair had bottomed and will make a more substantial recovery. There is further resistance at 1.2405 and then at 1.2465.

Oscillators are declining.

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

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