Daily Forex Market Commentary
The pound led the European currencies higher against the dollar on Monday. Dollar/yen fell as well, but the main point was that there was no over reaction (or any reaction) to news that the Shanghai Index continued to slide to the tune of nearly 16% since May 29. So, that means just a pullback of the dollar after the rally on Friday. The carry trades remain the flavor of the month as the appetite for risk remains high. Be careful of possible double bottoms in euro and franc, but they shouldn’t pan out.
Euro/dollar
The euro/dollar rallied on Monday after marking a seven-week low of 1.3390 on Friday and is now threatening to form a double bottom. It’s not that likely yet.
Initial resistance remains at 1.3530. A break above the important 1.3575 level would signal a more aggressive upmove and another attack on the upside to 1.3610. Distant resistance is at 1.3683.
Immediate support is at 1.3450. If this level breaks, expect a test of the support at 1.3375. Below this the Fibonacci retracement level there is support at 1.3275.
Oscillators are declining.
NEAR-TERM: Mixed
MEDIUM-TERM: Bearish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen fell on Monday after coining a four-month high of 122.14 on Friday. It managed to avoid a bearish reversal and the uptrend persisted unabated. The outlook is cautiously bullish.
Initial support is 121.35. Key support level remains at 121.05 from a 50-point pivot, which targets 120.55 and 121.55.
Above 122.18 the next resistance remains at 122.50 from another 50-point pivot, which targets 122.00 and 123.00.
Oscillators are rising.
NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Sterling/dollar
Sterling/dollar broke from an inside range as it surged to above 1.9900 on Monday. It briefly pierced the resistance of its declining channel but closed on the line. Again, the pound should consolidate further today, but the upside is favored. One may even argue for an inversed head-and-shoulders, but it would be in a wrong position.
If the resistance at 1.9925 breaks, then look for a further rebound to 1.9960. Distant resistance is at 2.0035.
Initial support is at 1.9860. Below 1.9727 there still is good support at 1.9655.
Oscillators are edging up.
NEAR-TERM: Mixed with upside bias
MEDIUM-TERM: Mixed
LONG-TERM: Bullish
Dollar/Swiss franc
Dollar/Swiss franc fell on Monday and briefly penetrated the support of its rising trendline. The medium-term outlook remains cautiously positive, but there is a risk of a double top.
Immediate support is at 1.2210. Below 1.2170, the next levels are 1.2095 and 1.2065.
Initial resistance looms at 1.2250. Above the resistance at 1.2332 there is good resistance is at 1.2370. Next resistance is still seen at 1.2425.
Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Slightly bearish
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