NEWS / Monetary Policy

Daily Forex Market Commentary for October 12, 2006

Forex Market Commentary for October 12, 2006
GFT Daily Forex Market Commentary by Cornelius Luca


The dollar traded sideways on Wednesday, as the market took a siesta after its aggressive gains on Tuesday and Friday. The Fed minutes were unexpectedly hawkish, and concerns about the stubbornly high core inflation raises the specter of another rate hike this year. The accidental crash of a small plane into a residential high-rise in New York briefly pressured the dollar. After an early decline the US currency should attempt mounting another attack higher through the end of the week.

Euro/dollar
Euro/dollar made a marginally new 2 1/2-month low on Tuesday and broke again below a medium-term Fibonacci retracement level at 1.2523. The odds are rising that the pair will see more medium-term weakness.

Below this level, a pivotal support remains at 1.2460. Next level to watch is 1.2415. Distant support comes at 1.2310

Good resistance is seen at 1.2555. Above it, the euro/dollar would encounter resistance between 1.2610 and1.2630 ??“ but I doubt it can get anywhere close to this level. Distant resistance is at 1.2715.

Oscillators are declining.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bullish

Dollar/yen
Dollar/yen was all over the place on Wednesday, reaching a marginally new 10-month high but closing unchanged. All eyes remain on the psychological level at 120, where the market expects that knockout options lie; I??™d doubt that this is true and what I still expect to see is an attack of this level to trip buy-stops. The rally should not exceed, say, 35 pips, and then the dollar/yen should pull back. The key level remains 119.65 from a 50-point pivot that targets 119.15 and 120.15.

Initial resistance comes at 120.15. That??™s followed by 121.10 and by a pivotal high at 121.40. Distant resistance is at 122.50.

Initial support is at 119.15. That??™s followed by 118.45. Next level is at 118.25 from another 50-point pivot that targets 117.75 and 118.75.

Oscillators are rising.

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

Sterling/dollar
Sterling/dollar slipped to a marginally new 2 1/2-month low on Wednesday but made little progress. It perforated again the support at 1.8544 of the 61.8% Fibonacci retracement level of the July ??“ August uptrend so the odds are increasing for further losses.

Immediate support remains at 1.8495. That??™s followed nearby by 1.8476 and then 1.8460. The 1.8390 area houses a Fibonacci retracement level.

Strong resistance looms at 1.8615 and that??™s followed by 1.8665. Distant resistance is pegged at 1.8740.

Oscillators are declining.

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

Dollar/Swiss franc
Dollar/Swiss climbed further on Wednesday to nail a new 5 ??-month high.

Initial resistance now comes at 1.2775. The next big levels are 1.2830 and 12865. Distant resistance is at 1.2950.

Immediate support is at 1.2665. Below 1.2622 there is support at 1.2575. Distant support is at 1.2495.

Oscillators are rising.

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

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