Forexpros Daily Analysis - 27/07/2010

ForexPros Daily Analysis July 27, 2010


Fundamental Analysis: Core Durable Goods Orders

The Core Durable Goods Orders measures the change in the total value of new
orders for durable goods, excluding transportation. Because aircraft orders
are very volatile, the core number gives a better gauge of orders trends.
Higher reading indicates activity increase by manufacturers. 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 0.60%.

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Euro Dollar

The Euro survived just above the support we presented in yesterday's report
1.2883 with amazing accuracy (yesterday's low was 1.2886). Then it went all
the way up to break yesterday's resistance 1.2942, and it is still
approaching the suggested target 1.3026 as we speak (the high until the
moment of preparing this report is 1.3016). Therefore, we await a test of
the important resistance 1.3026, where there is the 2-month high. 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 at 1.2872.
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 1.2872, we will
drop with the Euro for today and probably the next few days, targeting
1.2792, and 1.2691. On the other side, the resistance is at the important
1.3026. If broken, the Euro will continue its bounce from the channel
bottom, targeting 1.3092 & 1.3200.

Support:
* 1.2872: the bottom of the rising trend channel on the hourly chart.
* 1.2792: Friday's low.
* 1.2691: Fibonacci 38.2% for the whole rise from 1.2150.

Resistance:
* 1.3026: last Tuesday's & 2-month high.
* 1.3092: May 10th high.
* 1.3200: Apr 23rd low.

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USD/JPY

As we have said several times in last week's reports, signs show that the
possibility of a rising correction to correct the fall from June 3rd top
89.09 to July 16th low 86.25 is growing. On the top of these signs: the
inverted hammer formation, which appeared on the daily chart, and the
completed 5-wave move, and further more what looks to be the corrective
waves (a) & (b) forming in an ideal manner (please refer to the attached
chart), and wave (c) developing in an ideal fashion. 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 86.81, and if broken, the price will resume its drop after a
3-wave correction, targeting 85.84 & 84.81. Resistance is at 87.37. A break
here indicates that the odds of c continuation of the correction of the 5
waves down from 92.87 are still massive. This will target 88.01, then 88.78.
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: obvious hourly support, which has been tested several times during
the Asian session.
* 85.84: Nov 30th 2009 low.
* 84.81: Nov 27th 2009 low, and the low of the last 15 years!

Resistance:
* 87.37: short term 61.8% Fibonacci level.
* 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).

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Forex trading analysis written by Munther Marji for Forexpros.

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