Forex Market Commentary for August 27, 2007 by Cornelius LucaGFT Daily Market Commentary
The European and the commodity currencies surged on Friday, while the yen consolidated on a soft note. This bodes well for the carry trades. Both dollar/yen and euro/yen look ready to rally aggressively, particularly after the dollar/yen formed a bullish engulfing pattern on the weekly chart.
Euro/dollar
Euro/dollar surged on Friday, but initially edged lower after central bank sources said that the European Central Bank is not committed to raising interest rates in September.
It’s overbought in the short term, according to some oscillators, so a break above 1.3700 is needed to continue the strength today. Elliott Wave analysis suggests a possible final rally to the 1.4100 area but let’s not get too far ahead of ourselves.
Initial resistance is at 1.3711. This is followed by 1.3775. Above the weak trendline at 1.3820, resistance looms at 1.3853 from a pivotal high.
Below 1.3610, euro/dollar has support comes at 1.3555. A break below the latter level would signal the resumption of the downmove, but this is unlikely. Next level is at 1.3480.
Oscillators are rising.
NEAR-TERM: Mixed with upside bias
MEDIUM-TERM: Bearish
LONG-TERM: Mixed
Dollar/yen
Dollar/yen traded sideways in an inside range on Friday. But it the most important issue is that it formed a bullish reversal signal on the weekly chart and a trip up to 119.65 would not surprise me in the least.
Immediate resistance is at 116.85 from a 50-point pivot that targets 116.35 and 117.35. Above 117.68 there is good resistance at 118.25 from another 50-point pivot, which targets 117.75 and 118.75. Distant resistance looms at 119.65 from a 50-point pivot that targets 119.15 and 120.15.
Initial support is at 115.50 from another 50-point pivot, which targets 115.00 and 116.00.
Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Mixed