Sunday August 29, 2004 - 01:50:48 GMT
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Forex: General Market Conditions 30th August 2004
The Dollar had a stronger day than expected against the Euro & Swissie and this persistent strength, while consistent with our long term view into the end of the year, conflicts somewhat with our view for the next two weeks. Indeed, looking at the near term daily cycles the evidence does seem to suggest Dollar weakness for around 2 weeks with a cycle low in the Euro expected right now. On the one hand we have this cyclic indication but need to match it together with what price is demonstrating to make sure that we are not trying to step in the way of a steam train.
In the Euro we see that price has once again penetrated below that weekly uptrend line for a second time. This look a little concerning but we also need to have price break below the 1.1952-67 lows. Against the Swissie we see the Dollar approaching a declining weekly channl high which comes in right around the 1.2857 peak. These two areas - around 1.1952-67 Euro and 1.2857-85 Swissie appear to be the crucial break points. Until these break, with the daily cycles looking to find a Dollar peak for 2 weeks and failure for the British Pound and Japanese Yen to match the general Dollar strength, we will cautiously hold to the expectation of Dollar weakness for the next two weeks.
This will mean that while we see a possibility of testing the 1.1952-67 and 1.2857-85 areas we feel today should start a pullback today. Any clean break of these points and we'll start looking at the Dollar in light of the long term bullish view given in the monthly reports.
The 1.8030 resistance held well in the British Pound and this does appear to point to further weakness. However, we do note that the decline from 1.8035 does appear to have developed in five waves and we are cautious about seeing any further losses here. Given the persistance of the Dollar strength against the Europeans in general we have to be cautious and would recommend looking for breaks with 1.7925 and 1.7950-80 looking to provide resistance here.
Finally as with the picture against the Europeans the longer picture suggests Dollar strength and we are seeing an intermediate downward cycle that should cause the Dollar strength to be put on hold for the next 2 weeks or so. Indeed, the Dollar performed as expected on Friday against the Japanese Yen and this gives us some confidence that today should see further weakness with price ideally holding below 109.70-90 to take price down to the 108.50-55 level. However, any break of 109.90 and more importantly 110.50 would begin to turn our thoughts towards the long term bullish expectations.
Have a profitable week.
(c) FX-Strategy Inc
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