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Daily Market Commentary

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The dollar surged across the board on Tuesday

Wed, Oct 1 2008, 06:16 GMT
by Cornelius Luca

GFT

The dollar surged across the board on Tuesday on expectations that the House of Representatives will actually pass the TARP as early as Thursday. The equity indices recovered nicely after being obliterated a day earlier. Do we still need a TARP? Illiquid market conditions on the last day of September and of the third quarter exacerbated the move. The good US reports on confidence and Chicago PMI were nice but irrelevant, since the surveys were taken before the most recent financial meltdown. But the increase risk to the Eurozone should hurt the euro in the medium term. Following some early strength, the dollar should correct lower. Keep an eye on the Eurozone, UK and US manufacturing PMI.

Euro/dollar

The euro/dollar fell sharply to reach an 18-day low on Tuesday and my model remains short. The pair is likely to bottom early and then to attempt to recover briefly. Immediate support is at 1.4010. The next level is 1.3935. A distant pivotal low is at 1.3883. Good resistance is seen at 1.4210. The next level is 1.4275. Above 1.4335, resistance now follows at 1.4540.

Oscillators are mixed.

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

Dollar/yen

Dollar/yen reversed aggressively from a four-week low after holding above 103.55 and avoiding the risk of forming a massive head-and-shoulders formation, and my model promptly went long. The short-term outlook is only mildly bullish, as the upside looks limited. Immediate resistance is at 106.75 from another 50-point pivot, which targets 106.25 and 107.25. The next level is 107.95 from a 50-point pivot, which targets 107.45 and 108.45. Good support is now at 105.60 from a 50-point pivot that targets 105.10 and 106.10. Further support is 104.50 by a 50-point pivot, which targets 104.00 and 105.00.

Oscillators are rising.

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

Sterling/dollar

Sterling/dollar fell further on Tuesday, nailing a two-week low, and my model remains short. The downside is only mildly and early favored, as the pair is heavily oversold and needs to recover. Initial support is at 1.7760. Below 1.7710, support is at 1.7805. This is followed by 1.7540. A distant pivot low is at 1.7448. Initial resistance is at 1.7916. Good resistance follows at 1.8060. Distant resistance is at 1.8205.

Oscillators are falling.

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

Dollar/Swiss franc

Dollar/Swiss franc exploded higher on Tuesday to the highest levels seen since September 19. My model remains long. The initial bias is bullish, but the pair is overbought and the risk is lower. Initial resistance now comes at 1.1250. The next level is 1.1279. A key pivot high lies at 1.1417. Immediate support is seen at 1.1160. Below 1.1090, support is now pegged at 1.0920. Only a break below 1.0845 would turn the medium-term outlook negative, but this is unlikely.

Oscillators are rising.

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

Published on  Wed, Oct 1 2008, 06:21 GMT