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Daily Market Commentary

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The appetite for risk imploded on Monday

Tue, Sep 30 2008, 06:06 GMT
by Cornelius Luca

GFT

The appetite for risk imploded on Monday after the House of Representatives unexpectedly rejected the $700 billion TARP and the S&P's 500 Index tumbled the most since the 1987 crash. The price of oil collapsed amid expected lower demand, but the gold rallied. The US financial catastrophe is spreading and European governments were forced to step in to rescue Belgium’s Fortis – and others. The Congress will revisit the TARP later this week and we can only hop they will improve and then ratify it. The failure to do so could have gigantic negative repercussions at a time when the money market is broken. The dollar exploded higher versus the European and the commodity currencies on Monday and sank versus the yen, as crosses are taking the upper hand. Today is the end of the month, end of quarter and Rosh Hashanah, so trading should take a breather. But volatility could increase. The dollar/Europe is biased higher.

Euro/dollar

The euro/dollar sank to as low as a two-week low and my model went short. The pair is attempting to recover briefly, but the short-term outlook remains bearish. Immediate support is at 1.4305. The next level is 1.4255. Distant support is at 1.4095. Initial resistance is seen at 1.4450. The next levels are 1.4495 and 1.4555. Above 1.4695, resistance remains at 1.4810.

Oscillators are mixed.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Dollar/yen

Dollar/yen collapsed to a three-week low and my model went short. It’s got to stay above 103.55 or risk forming a massive head-and-shoulders formation. Good support is at 103.40 from a 50-point pivot, which targets 102.90 and 103.90. The next level is 102.50. Immediate resistance is at 104.50 by a 50-point pivot, which targets 104.00 and 105.00. The next level is 105.60 from a 50-point pivot that targets 105.10 and 106.10.

Oscillators are mixed.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Mixed

Sterling/dollar

Sterling/dollar fell sharply on Monday but my model went short. The downside is favored in the short term, but only a break below 1.7905 confirms this. Initial support is at 1.7960. Below 1.7905, support is at 1.7805. This is followed by 1.7710. Initial resistance is at 1.8070. Good resistance follows at 1.8180. Above the strong level at 1.8245, further resistance is at 1.8375.

Oscillators are falling.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Dollar/Swiss franc

Dollar/Swiss franc rallied sharply but closed flat on Monday. M y model went long. The initial bias is bullish, but not for long. Initial resistance still comes at 1.0973. The next level is 1.1055. This is followed by 1.1185 and 1.1279. Immediate support remains at 1.0890. Below 1.0790, support is now pegged at 1.0698.

Oscillators are mixed.

NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Tue, Sep 30 2008, 06:12 GMT