Daily Forex Market Commentary

The dollar tumbled sharply versus the European currencies on Tuesday, and even dollar/yen fell. The prime reason is the subprime crisis, as two leading rating agencies downgraded bonds backed by the risky mortgages. There is increasing risk to the yen crosses, but only a break below 121.90 in dollar/yen would amplify this risk.

Euro/dollar surged to a new lifetime high (or about a 12-year high in legacy terms) on Tuesday. The medium term view is bullish.

Immediate resistance is now seen at 1.3785. A break above it would signal a further aggressive rally to 1.3887.

Initial support is at 1.3685. Below the strong support at 1.3610, the next level is 1.3570.

Oscillators are rising.

NEAR-TERM: Bullish
LONG-TERM: Bullish

Dollar/yen fell to its lowest level since June 13 and tested the support of its rising trendline and from a Fibonacci retracement level at around 121.90. The line held so far, but a lot rides on it (such as enormous long cross positions against the yen) and the pressure may last today as well.

Initial support is now at 121.50. Strong supports follow at 120.89 and 120.65. Distant support is then seen at 120.10.

Above 122.00, key resistance is in place at 122.50 from another 50-point pivot, which targets 122.00 and 123.00. Distant resistance is at 123.65.

Oscillators are mixed.

NEAR-TERM: Mixed to slightly lower
LONG-TERM: Bullish

Sterling/dollar surged to a new 26 1/4-year high on Tuesday, so clearly the overbought pair moved safely away from the edge of the abyss…Hold long positions with a trailing stop.

Above 2.0272 there is resistance is at 2.0325. Above it, resistance is now seen at 2.0370. Distant resistance looms at 2.0430.

Immediate support is now seen at 2.0200. Only a break below 2.0150 on a closing basis would signal a more sustained decline, but this is unlikely. Distant support is at 1.9990.

Oscillators are rising.

NEAR-TERM: Bullish
LONG-TERM: Bearish

Dollar/Swiss franc
Dollar/Swiss franc sank to a 2 ½-month low on Tuesday and the medium-term outlook turned negative.

It briefly pierced the support of a trendline rising since late 2004 and the pressure should continue. Initial support is now seen at 1.1995 from a pivot low. Distant support follows at 1.1883.

Above 1.2070 resistance is now seen at 1.2100. Next level comes at 1.2175. Distant resistance is at 1.2235.

Oscillators are falling.

NEAR-TERM: Bearish

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