Expect Continued Dollar Consolidation Ahead of NFP Report

GFT Daily Forex Market Commentary for May 31, 2007
Forex Market Commentary by Cornelius Luca, Currencies Analyst, GFT
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The dollar treaded water on Wednesday versus the euro, yen and franc, but the pound fell in cross trading. The Fed minutes uncovered the deepening conflict between the weakening US economy and the stubborn inflation, which will freeze the Fed actions this year. Expect more consolidation ahead of the release of the non-farm payrolls on Friday.

Euro/dollar
Euro/dollar recovered most of the losses after nailing a new low for its short-term downtrend. The pair should trade sideways to lower today.

It has strong support at 1.3400. If this level breaks, look for a test of the support at 1.3375. Below this Fibonacci retracement level there is support at 1.3275.

Immediate resistance is at 1.3460. Next resistance lies between 1.3520 and 1.3530. A close above 1.3545 would signal another attack on the upside to 1.3610, but this is unlikely.

Oscillators are declining.

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

Dollar/yen
Dollar/yen traded sideways again on Wednesday and spent another session in an inside range. The medium-term outlook remains bullish, but the short-term outlook is neutral.

Key support level this week is at 121.05 from a 50-point pivot, which targets 120.55 and 121.55. Below 120.00, strong support comes at 119.65 from another 50-point pivot that targets 119.15 and 120.15.

Above 121.89 there still is resistance at 122.18. Next resistance comes at 122.50 from another 50-point pivot.

Oscillators are mixed.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Sterling/dollar
Sterling/dollar fell to a one-week low on Wednesday to give up 61.8% of its temporary recovery made early last week. The pound should struggle lower.

Initial support is now seen at 1.9740. Below 1.9715 there still is good support at 1.9655.

Immediate resistance is at 1.9845. Strong resistance remains at 1.9900 from the top of its declining channel. If this level breaks, then look for a rebound to 1.9960. This is unlikely.

Oscillators are declining.

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

Dollar/Swiss franc
One day after sinking to a 12-day low, dollar/Swiss franc traded sideways in a very tight range on Wednesday. The medium-term outlook remains positive, but in the short-term the pair should consolidate further.

Initial resistance is still seen at 1.2250. Above the resistance at 1.2332 there is good resistance at 1.2370. Next target is 1.2437. Distant resistance looms at 1.2554.

Immediate support remains at 1.2200. Below 1.2170, distant levels are 1.2095 and 1.2065.

Oscillators are mixed.

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

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