Forex Market Commentary for October 2, 2008 by Cornelius LucaGFT Daily Market Commentary
The dollar marched higher versus The European currencies on Wednesday amid increased demand for funding in the dollar, as the money markets remain frozen on both sides of the Atlantic. The Senate passed the revised TARP late Wednesday, while the House is expected, but not remotely sure, to do the same on Friday, so the market should remain illiquid. The US manufacturing PMI was weak enough to revive warranted fears of recession. There is a risk the ECB will cut rates today, and this would send more weakness in the direction of the euro. But be prepared for more choppy trading during this leg of the downtrend.
Euro/dollar
The euro/dollar sank further on Wednesday and my model remains short. I like holding short positions but am uneasy opening fresh ones at these levels. The medium-term outlook remains negative.
Immediate support is at 1.3935. A pivotal low is at 1.3883. Below the strong level at 1.3855 there is support in the 1.3800 area.
Above 1.4065, resistance is now seen at 1.4100 and 1.4175. The next level is 1.4275. Distant resistance now follows at 1.4335.
Oscillators are declining.
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bearish
Dollar/yen
Dollar/yen slipped on Wednesday, but lacked much direction. My model remains long. The short-term outlook is mixed.
Good resistance remains at 106.75 from another 50-point pivot, which targets 106.25 and 107.25. The next level is 107.95 from a 50-point pivot, which targets 107.45 and 108.45.
Immediate support is now at 105.60 from a 50-point pivot that targets 105.10 and 106.10. Further support is 104.50 by a 50-point pivot, which targets 104.00 and 105.00.
Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Mixed
Sterling/dollar
Sterling/dollar drilled for a third consecutive day on Wednesday and my model remains short. The downside remains only mildly and early favored, as the pair is heavily oversold.
Initial support is at 1.7635. This is followed by 1.7540. A distant pivot low is at 1.7448.
Initial resistance is at 1.7760. Good resistance follows at 1.7875. Above 1.7915, distant resistance is at 1.8085.
Oscillators are falling.
NEAR-TERM: Mixed to slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish
Dollar/Swiss franc
Dollar/Swiss franc reversed early losses to climb to the highest levels seen since September 8. My model remains long. The initial bias is bullish, but the pair remains overbought and the risk is lower.
Initial resistance now comes at 1.1290. A key pivot high lies at 1.1417. Distant resistance is perched at 1.1490.
Immediate support is seen at 1.1190. Below 1.1090, support is now pegged at 1.0920. Only a break below 1.0845 would turn the medium-term outlook negative, but this is unlikely.
Oscillators are rising.
NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish