Forex Market Commentary for February 1, 2007 by Cornelius Luca
GFT Daily Forex Market Commentary
Aggressive trading on Wednesday obliterated the quiet market of Tuesday. The dollar bounced briefly early on Wednesday on news that the US GDP expanded at an annual rate of 3.5% in the last quarter of 2006 from 2.0% in the third quarter. But the dollar then fell sharply following soft data, concern that the yen will come to the forefront of the G7 financial ministers’ meeting next week, and fears that the Fed will not hike rates again (!) The weakness should alleviate ahead of the release of the US non-farm payrolls report on Friday. But keep your eyes on the carry trades, as the long positions are starting to get pummeled.
Euro/dollar reversed early losses to close at an eight-day high on Wednesday. It’s running in a double Fibonacci level and below the neckline of a potential double bottom formation and only a break above them would warrant further strength.
The double Fibonacci level comes at 1.3030. Above the neckline at 1.3060, the pair has resistance at 1.3085. The next level is 1.3135.
Initial support is at 1.3000. The next levels are at 1.2960 and 1.2925. Below 1.2868, euro/dollar has strong support at 1.2820.
Dollar/yen fell sharply on Wednesday, as expected, following a bearish reversal formation a day earlier. The risk remains on the downside, given the carry trades exposure and concern that the G7 meeting will finger the yen as being oversold. The slide probed the downside target of the 121.05 pivot at 120.55.
Below 120.55, the key support level is seen at 120.15. Dollar/yen retains good support at 119.65 from a 50-pip pivot, which targets 120.15 and 119.15.
Immediate resistance now comes at 121.05 from a 50-pip pivot that targets 120.55 and 121.55. Above 121.90, strong resistance remains at 122.50 from a 50-point pivot, which targets 122.00 and 123.00.
Oscillators are falling.
Sterling/dollar was not for faint-hearted on Wednesday, when it sank to a 19-day low of 1.9479 in early trading just to recoup all of the losses and close marginally higher. Thus, the pair still needs more information before a new direction ensues.
Initial resistance remains at 1.9694. Above 1.9735, resistance comes at 1.9775 and then at 1.9810.
Immediate support is at 1.9585 and 1.9547 follows that. Below the area between 1.9510 and 1.9500, strong support follows from a rising trendline at 1.9460. Further support lies at 1.9400.
Oscillators are mixed.
Dollar/Swiss franc shook its way out of an inside range in a very aggressive manner; it first climbed to a near three-month high of 1.2570 before plummeting to challenge a long-term the Fibonacci retracement level at 1.2425. If this level gives way, then the pair will sink further ahead of the non-farm payrolls report on Friday.
Significant support then comes at 1.2410 from a rising trendline. Below 1.2375 there is support at 1.2325.
Above 1.2465, dollar/Swiss franc has resistance at 1.2495. Next levels are 1.2520 and 1.2570.