ForexPros Daily Analysis July 13, 2010


Fundamental Analysis: FOMC Meeting Minutes

The American traders anticipate the publication oh The Federal Open Market Committee (FOMC) Meeting Minutes, them being a detailed record of the committee's interest rate meeting held about two weeks earlier. The minutes provide detailed insights regarding the FOMC's stance on monetary policy, so Currency traders carefully comb them for clues regarding future interest rate shifts.

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Euro Dollar

The Euro did not decisively break the support or the resistance specified in yesterday’s report: it stopped 4 pips above the resistance specified in the report, and then found a bottom only 2 pips below the report’s support. The price topped at 1.2720 on Friday, in what turned out to be the most serious test of the top of the rising channel on the hourly chart. The drop which followed the week’s open, raised the possibilities that we could be before an important turning point at the channel top, especially after dropping from Friday’s high 150 pips so far. As we said in our last report: “We will not be able to escape the fact that a break here will be a very positive signal for both the short & medium terms. But, if we keep trading below (or around) it, we could be facing a turning point which will probably lead to a drop of hundreds of points”, and we still stand by this view! Short term support is at 1.2552, and once we break it, we will start drifting away from the channel top, and will target 1.2442, and may be 1.2393. The resistance is at 1.2601, and if broken, the negative outlook we have been praising will get a “shock”, and the Euro will be on the way to 1.2737, and may be 1.2801.

Support:
• 1.2552: Wednesday’s low.
• 1.2442: May 18th high.
• 1.2393: June 25th high.


Resistance:
• 1.2601: the falling trend line from Friday’s top on hourly chart.
• 1.2737: May 12th high.
• 1.2801: May 11th high.

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USD/JPY

The Dollar/Yen retreated a little bit, and found a bottom at 88.37. As we have explained several times, it seems that we are in a wave 4 correction now (please refer to the attached chart), which will ideally target a Fibonacci ratio of the wave 3 dive. But the important question now is this: is the 4th wave correction done? yesterday’s close produced a shooting star pattern on the daily chart, making us believe that this correction is probably over! Short term support is at Friday’s top 88.37, and breaking it would indicate a continuation of the drop to 87.35 & 86.47. The resistance is at 88.76, and breaking it would mean that the Dollar will continue to capitalize its latest bounce, which will ideally target Fibonacci levels for wave 3: 89.52 & 90.13. This pair is going as expected, in the expected direction, and in convergence with our negative technical outlook for the medium term. We absolutely expect the fall to continue on the medium term. But we should not neglect the enormous possibilities of a bounce up targeting Fibonacci levels: a bounce is highly probable, and it is most likely to be just a temp, but the trend is down without a shadow of a doubt!

Support:
• 88.37: yesterday’s low which was tested twice.
• 87.35: an obvious support area on the hourly chart, and Dec 9th 09 low.
• 86.47: previous well known support.

Resistance:
• 88.76: the falling trend line from Asian session high on intraday charts.
• 89.52: Fibonacci 50% for the wave 3 dive (from 92.09).
• 90.13: Fibonacci 61.8% for the wave 3 dive (from 92.09).

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Forex trading analysis written by Munther Marji for Forexpros.

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