GFT Daily Market Commentary
The dollar fell sharply versus the European currencies but rallied against the yen on Tuesday following the slightly less expected move by the Federal Reserve. The Fed succumbed to market pressures and cut its rate by 50 bps to 4.75 percent to slow down the decline of the economy into a recession started by fallout the housing-market collapse. This was the first cut in four years and the somewhat surprisingly wide cut propelled the US equities. Does it mean Fed Chairman Bernanke slowly learned how to emulate Greenspan? As I have been saying for the past few days, carefully hold long crosses against the yen. The euro/sterling is overbought and there is a good chance it will fall sharply here.
Euro/dollar
The euro/dollar surged to a new all-time high on Tuesday in the wake of the Fed move. The overbought pair reached a significant Gann level and some pullback on profit taking is likely. However, sell only on a stop loss basis.
Above 1.4000, resistance comes at 1.4085. Distant resistance is seen at 1.4135. Further resistance is pegged at 1.4278.
Below 1.3927, euro/dollar now has support at 1.3870. This is followed by 1.3830. Only a break below 1.3745 would signal the start of a downmove.
Oscillators are rising.
NEAR-TERM: Mixed with downside bias
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen rallied to a two-week high on a move led by euro/yen and carry trades. The close above 115.80 signals further strength.
Strong resistance is still seen at 117.10. Above 117.85 there is distant resistance at 118.80.
Strong support is at 115.50 from a 50-point pivot, which targets 115.00 and 116.00. Distant support follows at 114.20 from another 50-point pivot that targets 113.70 and 114.70.
Oscillators are rising.
NEAR-TERM: Mixed to slightly higher
MEDIUM-TERM: Mixed
LONG-TERM: Mixed
Sterling/dollar
The Fed mammoth rate cut forced the sterling/dollar to reverse from its lowest level since August 22 and close sharply higher on Tuesday. The rally vaulted cable from below 2.0000 to above 2.0100. The rally should decelerate and the pair should consolidate.
Above 2.0150, strong resistance follows at 2.0220. Next level is 2.0270. Distant pivotal resistance is at 2.0366.
Immediate support is now seen at 2.0050. A break below 2.0015 would signal a further slide to 1.9945. Below 1.9880 there is distant support at 1.9775.
Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish
Dollar/Swiss franc
The oversold dollar/Swiss fell further on Tuesday. As expected for a few days, following a brief bounce the sell-off should continue . Another pattern like this should be seen here.
Immediate support is now at 1.1797. Below it, support is seen at 1.1788 and then at 1.1740 from a pivotal low. Distant support is at 1.1715
Initial resistance is at 1.1845. Next level remains at 1.1924. Above it, resistance is at 1.1970. Distant resistance comes at 1.2025.
Oscillators are edging lower.
NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bearish
By: Cornelius Luca, Currencies Analyst, GFT
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