Wednesday’s forex market commentary

The dollar rallied further on Tuesday against all the majors except for the pound, but all eyes will now be on Wednesday’s CPI report and Fed Chairman Bernanke’s semi-annual testimony before Congress in hope for clues about the end of the tightening cycle.

The euro/dollar sank further to its lowest level since April 27 but trimmed some of its losses. The strength of the dollar combined with a very weak ZEW report.

Initial support is now from a new pivotal low at 1.2472. If this level gives way, the pair would test a Fibonacci retracement level at 1.2435. Distant support is still pegged at 1.2335.

Immediate resistance is at 1.2535 and that’s followed by 1.2575. Next level is 1.2605 from a Gann level. A close above the Fibonacci retracement level at 1.2645 would signal an aggressive recovery.

Oscillators are declining.

NEAR-TERM: Slightly bearish
LONG-TERM: Bullish

Dollar/yen surged to a three-month high of 117.56 on Tuesday, thus reaching the upside target of 117.35 from the 116.85 50-point pivot. This level, which also targets 116.35 on the downside, remains the key technical level today.

Above 117.35, strong resistance follows at 118.25 from another 50-point pivot that targets 117.75 and 118.75.

Initial support is at 117.00. Next one is 116.65. Below 116.35, the pair has support at 115.70. Strong support remains at 115.50, from a 50-pip pivot, which targets 116.00 and 115.00.

Oscillators are rising.

LONG-TERM: Bearish

Sterling/dollar was the exception to the rule and recovered about half of its Monday’s losses. Its recovery was triggered by a strong increase in the UK PPI. Its recovery was capped by the 60-day moving average and only a break above this line would signal another attempt to wipe out the Monday’s losses.

Initial support is at 1.8200. Below 1.8140, the pound would face the pivotal support at 1.8088. Just in case the pair sinks further, look for a test of the 1.8015 area.

Resistance remains at 1.8235 from the 60-day moving average and that is followed by from a Fibonacci retracement level at 1.8285. Only a break above this level would suggest an accelerated recovery to 1.8360.

Oscillators are falling.

LONG-TERM: Bullish

Dollar/Swiss franc
Dollar/Swiss franc rallied further on Tuesday to 1.2554, the highest level since April 28.

Above this level, resistance is now seen at 1.2580. A break above this level would suggest a further rally to 1.2640. Distant resistance now looms at 1.2705 and 1.2750.

Support is pegged at 1.2480. Next level remains at 1.2435. That’s followed by 1.2385 and 1.2340.

Oscillators are rising.

NEAR-TERM: Slightly bullish
LONG-TERM: Bearish

Wednesday, July 19, 2006 8:00 GMT
Daily Forex Market Commentary
By: Cornelius Luca, Currencies Analyst, GFT

Cornelius Luca is the Currencies Analyst for GFT – Visit GFT to Learn More

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