Thursday January 25, 2007 - 19:02:41 GMT
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Daily Forex Market Commentary - 1/25/07
GFT Daily Forex Market Commentary for January 25, 2007
Forex Market Commentary by Cornelius Luca, Currencies Analyst, GFT
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The pound led the European currencies down on Wednesday, but the dollar fell against the yen. The mini earthquake in the carry trades owes to overdone concern that the Bank of England is done tightening rates. The European currencies should remain under pressure versus the dollar and the yen, as there is some talk of pressure on Japan to strengthen its weak currency.
The euro/dollar sank on Wednesday after reaching the top of its rising consolidation. The pair gave up all of the gains made a day earlier and got stuck in an inside range. There is limited room lower, so the risk is now on the upside.
Initial resistance is at 1.3000 and then at 1.3030. Above Tuesdayâ€™s high of 1.3044 resistance comes at 1.3060 and 1.3090. Next level is 1.3130. Distant resistance is at 1.3240.
Key support is at 1.2940 from the bottom of the rising consolidation. Below 1.2925, the pair has support at 1.2880 and retains strong support at 1.2820. A close below this level would signal a further significant decline to 1.2760.
Oscillators are mixed.
NEAR-TERM: Slightly bullish
The overbought dollar/yen posted the first significant decline in 13 sessions and finally displayed some signs of a correction. Its slide created a little havoc among the Europe/yen crosses. The correction was accelerated by G7 talk of criticizing the weakness of the yen. Well, Toyotaâ€™s profits were not inflated only by the exchange rate! So, I donâ€™t expect an accentuated downmove here.
Initial support is at 120.55. Further support is seen at 120.15. Strong support follows at 119.65 from a 50-pip pivot, which targets 120.15 and 119.15.
Immediate resistance is at 121.05 from a 50-pip pivot that targets 120.55 and 121.55. Above 122.10, dollar/yen retains resistance at 122.50 from a 50-point pivot, which targets 122.00 and 123.00.
Oscillators are rising.
One day after coining a 14 Â˝-year high of 1.9914, sterling/dollar succumbed to fears that the BoE will not tighten anymore. OK, but it will not ease either, so there is little reason to dump the pound, except to take profit on the sterling crosses and to keep it sway from the 2.0000 barrier. The pair is less overbought, but remains square.
There is strong support right between 1.9660 and 1.9643. If this area crumbles, then look for a test at 1.9585. Distant support is now seen at 1.9510.
Above 1.9745, resistance comes at 1.9775 and then at 1.9810. Distant resistance follows at 1.9910.
Oscillators are falling.
Dollar/Swiss francâ€™s breakout from a sideways phase on Tuesday was very short lived; the pair recovered all of its losses and is back to square one. Expect sideways trading today.
Immediate support is now seen at 1.2430. Below 1.2374 there is another peg at 1.2325. Distant support is seen at 1.2275.
Initial resistance is at 1.2546. Above it, resistance remains at 1.2660 from the target of a bull flag.
Oscillators are mixed.
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