Forexpros Daily Analysis - 28/07/2010

ForexPros Daily Analysis July 28, 2010


Fundamental Analysis: Initial Jobless Claims

The Initial Jobless Claims is a seasonally adjusted measure of the number of
people who file for unemployment benefits for the first time during the
given week. This data is collected by the Department of Labor, and published
as a weekly report. The number of jobless claims is used as a measure of the
health of the job market, as a series of increases indicates that there are
fewer people being hired. On a week-to-week basis, claims are quite
volatile. Usually, a move of at least 35K in claims, is required to signal a
meaningful change in job growth. A higher than expected reading should be
taken as negative/bearish for the USD, while a lower than expected reading
should be taken as positive/bullish for the USD. Analysts predict a future
reading of 464.00K.

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Euro Dollar

The Euro didn't even come close to the support specified in yesterday's
report 1.2872, finding a bottom at 1.2950, and refusing to drift away from
the 1.30 level for more than half a cent, before trying to break 1.3026,
without being able to hold above it. Therefore, once again, 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 1.2903.
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 1.2903, 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:
* 1.2903: 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: Jul 20th top & 2-month high.
* 1.3092: May 10th high.
* 1.3200: Apr 23rd low.

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USD/JPY

The Dollar penetrated the resistance specified in yesterday's report 87.37,
and came extremely close to the suggested target 88.01 (yesterday's high was
87.96). 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, and approaching one of
its ideal targets (short term 61.8% Fibonacci level at 88.01). 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 87.25, and if broken, the price will resume its
drop after a 3-wave correction, targeting 86.46 & 85.84. 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:
* 87.25: the rising trend line from Jul 22nd low on the hourly chart.
* 86.46: Jul 19th low.
* 85.84: Nov 30th 2009 low.

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).

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Forex trading analysis written by Munther Marji for Forexpros.

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