Following is a selection of comments from analysts on important technical developments in the foreign exchange market.
EURO/DOLLAR: "Not only did the euro surrender the 38.2 percent retrace of the third quarter rally, but the 50 percent target has also been violated. The magnitude of losses has probably indicated forced liquidation of 'trapped' euro/dollar longs.
SIGNIFICANCE: When traders are forced to surrender losing positions, such as third quarter euro/dollar longs, they will likely not re-enter these positions quickly. Downside Risk? The primary August message should be one of consolidation.
However, the opportunity to retrieve $1.2555, the 38.2 percent retracement of the December/July sell off has been denied. Inability to recover this target in the third quarter would favour further euro losses towards $1.1600 before year-end."
EURO/YEN: "Thursday's closing violation of 134.75 yen has enhanced the significance of the August trendline failure. Near-term directional tone very much range bound now. Intra day outlook: August shorts can be maintained below 136.00 yen, but for today we favour modestly constructive euro positioning."
DOLLAR/YEN: "This week's rebound off 109.10 yen was further enhanced by Thursday US dollar gains. Early advances this morning have challenged 110.80, the 38.2 percent retrace of the third quarter sell off.
A decisive close above this level would neutralise third quarter downside risk, and improve the opportunity for a renewed challenge to 113.00.