Unwinding of carry trades dragged the commodity currencies and the pound down and propelled the yen into stratosphere on Thursday. The US indices are suffering a minor (for now) meltdown and the housing sector is naturally suffering. Expect more of the same today, and the US GDP and the U of Mich report should not have much impact.
Euro/dollar
The overbought euro/dollar reduced some of its significant losses made on Wednesday, but by and large didn’t do all that much. Sell again on a bounce. Initial support comes at 1.3693. Next level is at 1.3625. Distant support is at 1.3560. Resistance now comes at 1.3770. If the euro/dollar manages to break above the pivot high at 1.3853, then look for a test of the resistance at 1.3900 and the uptrend is back in the game. This is unlikely.
Oscillators are mixed.
NEAR-TERM: Mixed with downside bias
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen collapsed to a three-month low amid liquidation of standard yen crosses and carry trades. It formed a head-and-shoulders pattern, and is close to the target at around 118.00. Selling pressure should continue, but not before dollar/yen makes a corrective bounce. Initial resistance looms at 119.20. Strong resistance now comes at 119.65 from another 50-point pivot that targets 119.15 and 120.15. Strong support is at 118.25 and targets 117.75 and 118.75. The target of the bearish reversal pattern is at around 118.00. Below this, strong support is at 117.75. Next support at is at 117.12. Very distant support is at 115.50.
Oscillators are falling.
NEAR-TERM: Mixed
MEDIUM-TERM: Bearish
LONG-TERM: Bullish
Sterling/dollar
The overbought sterling/dollar fell on Thursday as well but it reduced some of the losses into the close. Sell it again only on a bounce. Initial support is at 2.0420. A break below 2.0390 would signal a slide toward 2.0250. Immediate resistance is at 2.0560. Resistance then remains at 2.0630 and at 2.0654. The next level looms at 2.0765. Distant resistance is at 2.0845.
Oscillators are mixed.
NEAR-TERM: Bearish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/Swiss franc
Dollar/Swiss franc fell in an inside range to give up its gains made only a day earlier. Some residual pullback may be seen before the next move up. Immediate support is at 1.2005. Strong support follows at 1.1962. If this pivotal low gives way, then the downtrend is rejuvenated and dollar/Swiss should challenge 1.1835. Resistance is at 1.2085. It would take a break above 1.2165 to increase the odds that a significant low is in place and the pair would shoot for 1.2215. Distant resistance is at 1.2275.
Oscillators are mixed.
NEAR-TERM: Mixed with upside bias
MEDIUM-TERM: Bearish
LONG-TERM: Bearish
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