Daily Forex Market Commentary

GFT Daily Forex Market Commentary for January 12, 2007
Forex Market Commentary by Cornelius Luca, Currencies Analyst, GFT

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The pound surged across the board on Thursday after the BoE’s MPC unexpectedly raised its benchmark interest rate by 25 bps to 5.25%.
The repo rate now matches the Fed Funds rate. The euro and the franc made the expected rally only in early trading and then fell sharply. Dollar/yen smashed above the psychological 120 level with no problem, which means the barriers were not massive at all. The market should be very choppy today, with sterling/yen leading the way. The dollar looks good over all, but not yet against the pound.

The euro/dollar made the expected bounce only in early trading and fell to the lowest level since November 22. The double top formation looks good and the medium term target is the 1.2665 area. Following a temporary recovery, it should plow lower.

Initial support is seen at 1.2860. A break below this level would signal a further significant decline to 1.2820 and eventually to 1.2763. Strong support follows at 1.2720.

Immediate resistance comes at 1.2920. Strong resistance follows at 1.2985. The next level is 1.3030. Above 1.3065, euro/dollar has resistance at 1.3105. The next level is 1.3135.

Oscillators are falling.

NEAR-TERM: Slightly bearish
LONG-TERM: Bullish

Dollar/yen surged again on Thursday and smashed above the psychological 120 mark on its way to a 13-month high. Once again, look at the European currencies/yen crosses for additional cues.

The pair now has strong resistance at 121.05 from another 50-pip pivot, which targets 121.55 and 120.55.

Initial support is at 120.20. Strong support follows at 119.65 from a 50-pip pivot, which targets 120.15 and 119.15. Distant resistance is seen at 118.80.

Oscillators are rising.

NEAR-TERM: Slightly bullish

Sterling/dollar rallied sharply on Thursday after the BoE surprised the market with a rate hike, but closed well off its highs, suggesting some decline or mixed trading today.

Immediate resistance is at 1.9535. Further resistance remains at 1.9570. Distant resistance is at 1.9730.

Below 1.9390 the pair has strong support at 1.9330 and 1.9295. Pivotal support is at 1.9250 and then at 1.9223 from a Fibonacci retracement level. The next big level is 1.9180.

Oscillators are mixed.

MEDIUM-TERM: Mixed with downside bias

Dollar/Swiss franc

Dollar/Swiss franc reversed expected losses made early on Thursday and then closed up for the seventh consecutive day to reach the highest level since November 17. The pair should edge lower briefly before resuming its uptrend.

Immediate support now comes at 1.2460. That’s followed by 1.2415. The next level is 1.2355. Below 1.2290, 1.2260 and 1.2180 follow.

Initial resistance is at 1.2530. A Gann retracement level follows at 1.2550. Further resistance is at 1.2580 and a distant cap is at 1.2660

Oscillators are rising.

NEAR-TERM: Slightly bullish

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