Forex Market Commentary for September 17, 2008 by Cornelius LucaGFT Daily Market Commentary
So, what to expect in FX after in the biggest financial industry shake-up since the Great Depression? Further long liquidation of carry trades, such as AUD/JPY and NZD/JPY, and this means a weaker still dollar/yen. With the stock markets, and oil and gold prices imploding, the trading risk will remain high and the spreads wide. The easy story is to sell dollars wholesale, but the European currencies may see some consolidation. Lots of data today: Germany’s ZEW Survey, the UK CPI for August, the US CPI, the net long-term TIC flows for July, and the FOMC rate decision. I don’t see why the Fed would cut rates at this point, but it may be possible under the circumstances. It’s a crisis out there, and all eyes will be on the fortunes of Wa Mu.
Euro/dollar
Euro/dollar closed actually lower after surging earlier on Monday, and my model remains long. A more sustained recovery may still be under way, but be cognizant of wide spreads and exceptional spreads – the range on Monday was about 400 pips!
Immediate support is at 1.4145. Below 1.4088, the low on Monday, support is now seen at 1.4004. A pivot low is at 1.3883.
Initial resistance is at 1.4330. Above 1.4482, the high on Monday, resistance is still seen at 1.4545. Above 1.4625, resistance is at 1.4810.
Oscillators are rising.
NEAR-TERM: Mixed
MEDIUM-TERM: Bearish
LONG-TERM: Bearish
Dollar/yen
Dollar/yen, which had been alternating up and down days for five days, made an exceptionally aggressive decline on Monday on sales of yen crosses, and my model remains short. The downside remains favored, but at a much slower pace. The key level today is the 104.50 by a 50-point pivot, which targets 104.00 and 105.00.
Initial support is at 103.78 from a pivot low. This followed by 103.40 from another 50-point pivot, which targets 102.90 and 103.90.
Immediate resistance is at 105.00. The next level is 105.60 from a 50-point pivot that targets 105.10 and 106.10. Distant resistance remains at 106.75 from a 50-point pivot, which targets 106.25 and 107.25.
Oscillators are falling.
NEAR-TERM: Bearish
MEDIUM-TERM: Mixed
LONG-TERM: Mixed
Sterling/dollar
Despite extreme choppy trading, sterling/dollar retained Friday’s gains on Monday and my model remains long. The short term is bearish though, but observe extreme care.
Below the strong level at 1.7780, support is at 1.7708. This is followed by 1.7672. Below 1.7595, distant support is at 1.7450.
Good resistance is at 1.8035. The next level to keep in mind is 1.8120. Above the strong level at 1.8190, further resistance remains at 1.8280.
Oscillators are mixed.
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish
Dollar/Swiss franc
Dollar/Swiss franc trimmed some of the losses after falling sharply on Monday and my model remains short. The initial bias is mixed to slightly higher.
Initial resistance remains at 1.1200. This is followed by 1.1360.
Immediate support is still seen at 1.1060. Below 1.1010, support is pegged at 1.0885. This is followed by 1.0844.
Oscillators are mixed.
NEAR-TERM: Mixed to slightly higher
MEDIUM-TERM: Bullish
LONG-TERM: Bullish