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Daily Market Commentary

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The dollar slumped on the first trading day of 2008 on news

Wed, Jan 2 2008, 07:04 GMT
by Cornelius Luca

GFT

The dollar slumped on the first trading day of 2008 on news that the manufacturing ISM contracted to 47.7 in December from 50.8 in November. The exception to the rule was the pound, which remained under selling pressure on concerns over a rate cut. The dollar should attempt to recover while the market is looking for direction, but take your cues from the ADP data, the oil prices and the carry trades.

Euro/dollar

Euro/dollar rallied on Wednesday to fully recover its Monday’s losses and matched that day’s high. Today should see some attempt of a pull back, but the risk is on the upside because of cross trading. Immediate support is now seen at 1.4640. This is followed by 1.4570 and 1.4520. A break below 1.4470 would infer a test of the distant support at 1.4390. Initial resistance is seen at 1.4750. The next level is 1.4800. Distant resistance follows at 1.4885.

Oscillators are mixed.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Dollar/yen

With the carry trades on the ropes, dollar/yen fell further on Wednesday to reach its lowest levels seen since November 28. It should trade sideways today. Initial support remains at 111.60 from a 50-point pivot that targets 112.10 and 111.10. Immediate resistance is at 112.55. Strong resistance follows at 112.90 from a 50-point pivot, which targets 113.40 and 112.40 in place at 113.85.

Oscillators are falling.

NEAR-TERM: Mixed to slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Sterling/dollar

Sterling/dollar fell further on Wednesday, a day when the other European currencies rallied, following a soft manufacturing PMI report. Cable should now consolidate. Initial resistance is at 1.9900 and then at 1.9945. Above 2.0000, the next level to deal with is at 2.0055. Distant resistance follows at 2.0260. Immediate support comes at 1.9745. Further support is pegged at 1.9698 from a pivot low.

Oscillators are mixed.

NEAR-TERM: Mixed to slightly bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bullish

Dollar/Swiss franc

As I suspected, dollar/Swiss’ recovery on Monday was too misguided but Wednesday’s slide surpassed expectations. The pair sank to its lowest level since November 29 and this pressure may continue, albeit at a reduced pace. A high-risk medium-term trade may be buying GBP/CHF because the cross is grossly oversold. Below 1.1150, support is seen at 1.1060. A distant support is pegged at 1.0890 from a pivot low. Initial resistance comes at 1.1250. Above 1.1330, distant resistance comes at 1.1415 and 1.1525.

Oscillators are declining.

NEAR-TERM: Mixed to slightly lower
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Published on  Thu, Jan 3 2008, 07:04 GMT