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Monday February 20, 2006 - 14:25:47 GMT

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Weekly Forex Market Commentary - 2/20/2006

Weekly Forex Market Commentary
Monday, February 20, 2006 8:00 GMT
By Cornelius Luca, Currencies Analyst, GFT
Learn more about Global Forex Trading (GFT)

It was a potentially interesting week, but when the dust settled, it made little progress. It slipped versus the European currencies but held on to some of the gains against the yen. The market will be quiet on Monday, due to the US holiday, and then the market will look hard for new cues. The charts argue for some weakness for US currency.

This Week's Data and Events
United States
The US economic calendar will begin on Tuesday with the release of the leading indicators report for January. This should show a marked improvement from December’s puny 0.1 percent increase.

Wednesday will see the CPI report for January and the FOMC minutes for the 31 January FOMC Meeting.

Friday will see the release of the durable goods orders report for January

The Eurozone
The Eurozone economic calendar will start on Monday with the release of the

German producer prices report for January and of the Italian industrial orders report for December.

The French preliminary fourth quarter GDP and the French CPI report for January are due on Tuesday.

Wednesday will be a busy day.

It features the preliminary fourth quarter German GDP, the French indicators report for February and the French consumer spending report for January, along with the final Italian consumer confidence report for February, the final Italian CPI report for January and the regional industrial orders report for December.

On Thursday, all eyes will be on the German Ifo indices report for February and the Italian retail sales for December.

The week will end with the release of the Italian business confidence and the preliminary German inflation reports for February.

The Japanese economic calendar is very light this week and is focused on releases on Wednesday.

The day will feature the merchandise trade balance report for January and the tertiary industry index report for December.

The UK
The UK economic calendar is light this week.

Wednesday will see the CBI industrial trends report for February.

The second estimate of the UK fourth quarter GDP is due on Friday.

The Canadian economic calendar will open on Monday with the release of the leading indicators report for January.

Tuesday will see the retail sales report for December.

The CPI report for January is due on Wednesday.

Technical Overview
Last week's range: 1.1848 – 1.1954 (Up)
Previous range: 1.1894 – 1.2045 (Down)

Euro/dollar slumped to a 1 ½-month low of 1.1848 on Thursday and then managed to recover and reverse its losses to end the week higher. This rally amounts to a bullish reversal signal on the weekly chart, so expect at least some recovery early this week.

Immediate resistance is between 1.1980 and 1.2000. Next resistances are stacked at 1.2060 and 1.2105. Resistance then remains at 1.2205 and at 1.2225 from the 61.8% the Fibonacci retracement level of the September to November downtrend. Distant pivotal high remains at 1.2322.

Below 1.1900, support is pegged to the 1.1850 area. Below this level further support is seen at 1.1805. Next level is 1.1725. Distant support is at 1.1640.

NEAR-TERM:Slightly bullish
LONG-TERM: Bearish

Last week's range: 116.73 – 118.84 (Mixed)
Previous range: 116.87 – 119.15 (Down)

Dollar/yen made little progress last week, closing virtually unchanged and remaining stuck in an inside range. Expect more choppy trading this week.

Immediate resistance is at 118.25 from a 50-point pivot, which targets 117.75 and 118.75.

Above 119.38, the pair retains strong resistance at 119.65 from a 50-point pivot, which targets 119.15 and 120.15.

Dollar/yen has immediate support 117.40. Strong support is at 116.85 from another 50-point pivot, which targets 116.35 and 117.35.Next floor is seen at 115.50 from another 50-point pivot that targets 115.00 and 116.00. Distant support comes at 114.20 from a 50-point pivot, which targets 113.70 and 114.70.

LONG-TERM: Bullish

Last week's range: 1.7279 – 1.7487 (Mixed)
Previous range: 1.7373 – 1.7639 (Down)

Sterling/dollar made the expected decline early last week. The pair sank to a 1 1/2-month low of 1.7279 last Tuesday before recovering to close the week little changed. The recovery followed the inability to break below the bottom of the rising medium-term channel. The weekly candlestick chart suggests a recovery this week, but don’t get long before more confirmation is seen.

Initial resistance is pegged at 1.7530. Above 1.7590, the pound has strong resistance at 1.7655. Distant resistance is stacked at 1.7720.

Initial support is seen at 1.7400. Below 1.7373 the pair has support at 1.7320. Next support is at 1.7243. Distant support is at 1.7130.

NEAR-TERM:Slightly bullish
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bearish

Dollar/Swiss franc
Last week's range: 1.3026 – 1.3172 (Up)
Previous range: 1.2911 – 1.3068 (Up)

Dollar/Swiss franc rallied to a seven-week high of 1.3172 on Friday before trimming gains.

The rallied to a seven-week high of 1.3172 on Friday before trimming gains. The pair will hard pressed to extend its rally this week without pausing first.

Immediate support is at 1.3026. Below 1.2990 there is support at 1.2900. Only a close below 1.2840 would signal an acceleration of the decline and the pair would challenge the support at 1.2735. Distant support is at 1.2570.

Initial resistance is at 1.3135. Next resistance is at 1.3172. Distant resistance is seen at 1.3280.

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

Last week's range: 1.1493 – 1.1612 (Down)
Previous range: 1.1414 – 1.1562 (Up)

Dollar/Canada reached a four-week high of 1.1612 on Tuesday but failed to surpass the 50 percent fan line and then made an aggressive decline on Friday to end the week in the negative column. Keep your eyes on natural gas prices to see the next move in dollar/Canada. The long-term outlook remains bearish.

The pair has initial support at 1.1480. That’s followed by 1.1440. Below the pivotal 1.1373 level, next supports are at 1.1308 and 1.1300. Distant support is still seen at around 1.1200.

Initial resistance is at 1.1530. Good resistance remains at 1.1600. Above 1.1640, strong resistance is then seen at 1.1700. Distant resistance is at 1.1796.

LONG-TERM: Bearish

Last week's range: 139.36 –141.31 (Up)
Previous range: 139.98 – 143.07 (Down)

Euro/yen made the expected decline through Tuesday, when it hit a four-week low of 139.36. The cross then recovered to close the week higher. It recouped approximately half of the losses encountered in the past two weeks and must now break above this level if the recovery is to continue.

Immediate resistance is at 141.35 from a Gann retracement level. The next barrier remains at 141.90. Above 143.00, distant resistance is now seen at 144.40.

Initial support is at 140.40. Below 139.98 support is pegged at 139.35. Below 138.95 there is support at 137.90. Strong support follows at 137.50.

LONG-TERM: Bullish

Last week's range: 0.6817 – 0.6870 (Up)
Previous range: 0.6816 – 0.6884 (Mixed)

Euro/sterling ended the week higher, but this was not an aggressive upmove and the cross got stuck in an inside range. Trading should remain choppy as the market is approaching the tip of a triangle.

Initial support is at 0.6825. Below 0.6795, further support is at 0.6784 and then at 0.6775 and then at 0.6745. There is a pivotal low at 0.6704 and a break below it would signal another sharp decline toward 0.6633 but this is very unlikely.

Immediate resistance is still seen at 0.6860. Next levels are stacked at 0.6875 and 0.6884. A close above the pivotal high at 0.6907 would call for a further rally to the 0.6965 area. Distant resistance remains pegged at 0.7000.


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.


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