Early Technical Analysis for Wednesday August 2 2006

Full report with charts on Forexalt.com

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Early Technical Analysis: The Dollar has Fallen

The dollar has fallen on Tuesday on closing of positions after the block of the mixed economic data. Predictably, reports in the greater degree have justified expectations. Exception has made industrial ISM which appeared better forecasts, having shown growth up to 54.7 in July against 53.8 month earlier. However it rendered only time support to dollar. Some occasion for purchase of the American currency has given new secretary of US Department of the Treasury Henry M. Paulson who has noted, that "the American economy at all does not face recession". Meanwhile, the majority of analysts expect that the central bank will make in August a pause in 2-years campaign on toughening a monetary policy. From the beginning of year the dollar has fallen to 7.2 % in relation to eurocurrency on speculation of reduction of differential of rates between the USA and Europe. Last month FOMC in 17-th time has raised the basic rate of refinancing up to 5.25 %. At the moment futures on Federal Funds take into account 31 %-s' probability of increase on August, 8 rates up to 5.5 % that is lower than 85 % month earlier.
The confidence of the future pause of actions FOMC began to become stronger from performance of the chapter of the Federal reserve of Ben Bernanke on July, 19. Then it has declared, that delay of rates of economic growth is observed. The president FRB on San Francisco Janet L.Yellen eve has declared, that the current rate of refinancing practically answers a necessary level. The separate report yesterday has shown that spending has increased for 0.4 % in June, and incomes - on 0.6 %. Inflationary a component (PCE) the report also has justified forecasts, having shown growth on 0.2 %. In opinion of many analysts, PCE it is carefully traced by the Federal Reserve for studying the inflationary environment in the country.
The euro-currency in the beginning of day has rolled away from 3-week maxima against dollar as traders have preferred to close a part of positions before session ECB on this Thursday. However already at the American session of euro has taken a strong level of resistance at 1.2778 and figure 1.2800. The last month president ECB Jean - Claude Trichet has noted, that the central bank continues to keep "vigilance" concerning inflationary processes in region. It has strengthened gamble on a theme of continuation of increase of rates ECB. Interrogation of economists has shown that ECB on August, 3 will raise the basic discount rate up to 3 %. Moreover, analytics believe, that by the end of the current year the rate will reach 3.25 %. On July, 6 Trichet has declared, that the central bank is ready to speed up process of increase of cost of credits under condition of growth of inflationary pressure. According to the reports published yesterday, industrial PMI the Euro-Zone has reached 6-years peak while a rate of unemployment in Germany has fallen to a 2-years minimum.
Today promises to be quiet. The important news for today it is not planned.

EUR
Weekly chart EUR trend – Range
Resistances
1.2834 (today high), 1.2860 (high 07.07.2006), 1.2971/78 (highs 05.15.2006 and 06.05.2006)
Supports
1.2771/78 (high 07.28.2006 at 1.2771 and 61.8% retracement of 1.3483 to 1.1640 at 1.2778 and 61.8% retracement of 1.2978 to 1.2459 at 1.2778), 1.2705/06 (23.6% retracement from 1.1825 to 1.2978 at 1.2705 and 61.8% retracement from 1.2860 to 1.2459 at 1.2706), 1.2660/57 (50.0% retracement of 1.2860 to 1.2459 at 1.2660 and 38.2% retracement of 1.2978 to 1.2459 at 1.2657)

GBP
Weekly chart GBP trend - Range
Resistances
1.8800 (target and psychological level), 1.8877 (high 06.05.2006), 1.8960/1.9023 (76.4% retracement of 1.9554 to 1.7047 at 1.8960 and high 05.17.2006 at 1.9023)
Supports
1.8672/87 (Thursday high 07.27.2006 at 1.8672 and Monday’s high 07.31.2006 at1.8687), 1.8595/1.8605 (61.8% retracement of 1.9554 to 1.7047 at 1.8595 and 23.6% retracement of 1.7229 to 1.9023 at 1.8605), 1.8555 (the bottom line of the “yellow” channel)

CHF
Weekly chart CHF trend - Bullish
Resistances
1.2285/83 (50.0% retracement from 1.1287 to 1.3284 at 1.2285 and 76.4% retracement from 1.2185 to 1.2593 at 1.2283), 1.2337/41 (61.8% retracement from 1.2185 to 1.2593 at 1.2341 and 38.2% retracement from 1.1920 to 1.2593 at 1.2337), 1.2365 (Tuesday high 08.01.2006)
Supports
1.2231 (23.6% retracement from 1.3237 to 1.1920), 1.2185/78(low 07.07.2006 and 61.8% retracement of 1.1920 to 1.2593 at 1.2178), 1.2015 (low 06.05.2006)

JPY
Weekly chart JPY trend – Capped?
Resistances
115.40 (61.8% retracement from 119.37 to 108.96), 115.77/81 (23.6% retracement from 108.96 to 117.86 at 115.77 and low 07.21.2006 at 115.81), 116.70/90 (resistance line from high 12.04.2005 to 04.11.2006 at 116.70 and 76.4% retracement of 119.37 to 108.96 at 116.90)
Supports
114.19 (50.0% retracement from 119.37 to 108.96), 113.44/43 (low 07.10.2006 and 50% retracement of 108.96 to 117.86 at 113.43), 112.95 (38.2% retracement from 119.37 to 108.96)