Daily Forex Market Commentary
Tuesday, July 24, 2007 8:00 GMT
Daily Forex Market Commentary
By: Cornelius Luca, Currencies Analyst, GFT
Visit GFT to learn more
The dollar recovered some of the losses made in Asia versus the pound and the yen on Monday and even closed up against the euro and the Swiss franc. Expect further choppy and divergent trading amid still strong US equities. Focus on the yen crosses, also generally similar to the carry trades. The existing homes report should be weak and inconsequential.
Euro/dollar
The euro/dollar climbed further up early Monday to a new high for the uptrend, but then reversed gains. The close was low enough to grant hopes for a further decline. Prepare to reduce long positions. It’s overbought in both the short and medium terms, but sell it only on a confirmed decline. If that happens, the slide should be quite aggressive. Support comes first at 1.3770. Next level is at 1.3740 and only a break below 1.3705 would signal a more sustained decline toward 1.3625 Resistance comes at 1.3825. If the euro/dollar manages to break above 1.3846, then look for a test of the resistance at 1.3900 and even the 1.4000 area, even though profit taking and barrier defense should not allow it.
Oscillators are mixed.
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen collapsed to a 2 ½-month low and there is ongoing threat of liquidating yen crosses. It formed a head-and-shoulders pattern, and the close below the neckline at 121.16 adds confidence. Mild selling pressure should continue early this week. Key level remains at 121.05, a 50-point pivot, which targets 120.55 and 121.55. Initial support is at 120.40. A break below this area would encourage a test of 119.65. Further support is at 119.15. The target of the bearish reversal pattern would be at around 118.00. Resistance is first seen at 121.15. The next level is 121.55. Only a break above 122.15 would signal a more aggressive recovery to 122.50, which is a 50-point pivot, which targets 122.00 and 123.00 Oscillators are falling.
NEAR-TERM: Bearish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Sterling/dollar
Sterling/dollar surged to a new 26 ½ year high on Monday. It reached the channel line of an uptrend rising since March and is heavily overbought. Hold long positions and sell it only a stop-loss order basis.Resistance emerges at 2.0645. The next level looms at 2.0765. Distant resistance is at 2.0845.Initial decline is at 2.0605. Next level follows at 2.0500. A break below 2.0460 would signal a slide to 2.0400.
Oscillators are rising.
NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/Swiss franc
Dollar/Swiss franc rallied to a near-two-week high on Monday to recover 23.6% of the downtrend between Jun 14 and July 18. However, it’s trading one day up and one day down, and today should be the down day. For this silly quasi-pattern to work, the 23.6% Fibonacci retracement level at 1.2083 must hold If it doesn’t, then look for a test of the next resistance at 1.2140. It would take a break above this level to increase the odds that a significant low is in place and the pair would shoot for 1.2215. Immediate support is at 1.2031. Strong support is at 1.1962. If this pivotal low gives way, then the downtrend is rejuvenated and dollar/Swiss should challenge 1.1835.
Oscillators are rising.
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish
DISCLAIMER: This forum and the information provided here should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this column for your general information. The views of the author are not necessarily those of Global Forex Trading, its owners, officers, agents or employees. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading and Cornelius Luca will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading and Cornelius Luca do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.