ForexPros Daily Analysis July 29, 2010
Fundamental Analysis: GDP
The Gross Domestic Product (GDP) is the broadest measure of economic
activity and is a key indicator for the economy’s health. The Annualized
(quarterly change x4) percent changes in GDP shows the growth rate of the
economy as a whole. Consumption is by far the largest component in the GDP
of the US and has the most affect on it. The figures can be quite volatile
from quarter to quarter.
A higher than expected reading should be taken as positive/bullish for the
USD, while a lower than expected reading should be taken as negative/bearish
for the USD. The analysts predict a future reading of 2.50%.
Euro Dollar
For the second day in a raw, the Euro didn’t even come close to the support
specified in yesterday’s report 1.2903, finding a bottom at 1.2967, and
refusing to drift away from the 1.30 level for more than a third of a cent,
before trying to break 1.3026, only to stop 2 pips above it. Therefore, we
await a test of the set of important resistance levels in the neighborhood
1.3026, 1.3044, and 1.3035, the last of which is our favorite, since it is
presented by the trend line drawn from Tuesday’s high on hourly chart. But,
we will not lose interest in our newly found rising channel we talked about
yesterday, and when we look at the hourly chart, we find that Friday’s dive
has stopped at the bottom of a new rising channel which will be placed under
our focus for today, knowing that the bottom of the channel is just below
1.2980. Moreover, we find the area between Fibonacci 61.8% at 1.3075 and May
10th top 1.3092 to be very interesting. Thus, we recommend giving attention
to all these areas, and we believe that each of them will play a role in
dictating today’s direction! In case we break the support at 1.2980, we will
drop with the Euro for today and probably the next few days, targeting
1.2888, and 1.2737. On the other side, the resistance is at the important
1.3035. If broken, the Euro will continue its bounce from the channel
bottom, targeting 1.3092 & 1.3200.
Support:
- 1.2980: the rising trend line from Tuesday’s low on the hourly chart.
- 1.2888: Fibonacci 50% for the whole rising move from Jul 21st bottom to
Jul 27th top. - 1.2737: a well known support resistance area, which includes a number of
daily extremes, such as May 12th high, and Jul 22nd low.
Resistance:
- 1.3035: the falling trend line from Jul 20th top & 2-month high on the
hourly chart. - 1.3092: May 10th high.
- 1.3200: Apr 23rd low.
USD/JPY
The Dollar/Yen reached the first of the “ideal” targets for this rising
correction: short term 61.8% Fibonacci level at 88.01, and then retreated
sharply, dropping for more than 100 pips, which could be read as an
"exhaustion" in upside activity. Therefore, and even though we are negative
about this pair on the medium term, we should not neglect these signs which
force themselves upon us for today! Short term support is at the seriously
important 86.81, and if broken, the price will resume its drop after a
3-wave correction, targeting 85.84 & 84.81. Resistance is at 88.01. A break
here indicates that the odds of a continuation of the correction of the 5
waves down from 92.87 are still massive. This will target Fibonacci
retracement levels for the whole drop from 92.87, with the first 2 of them
at 88.78 & 89.56. It is worth mentioning that breaking wave 5 bottom 86.25
even with a few pips would strongly indicate the termination of the
correction we are currently living, and will officially announce a new wave
down!
Support:
- 86.81: Jul 26th & 27th lows, the bottom of the corrective channel, and an
obvious hourly support. The most important short & medium term support
without a shadow of a doubt. - 85.84: Nov 30th 2009 low.
- 84.81: Nov 27th 2009 low, and the low of the last 15 years.
Resistance:
- 88.01: Fibonacci 61.8% for the drop from 89.09.
- 88.78: Fibonacci 38.2% level for the whole drop from 92.87 (the 5 waves
down). - 89.56: Fibonacci 50% level for the whole drop from 92.87 (the 5 waves
down).
Forex trading analysis written by Munther Marji for Forexpros.
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