ForexPros Daily Analysis August 02, 2010
Free webinar on ForexPros - How to Objectively Use Sentiment in Your Forex
Trading to Start Winning
Expert: Kris Matthews
When: Thu, August 12, 2010, 11:00a.m. GMT
Have you ever put a trade on after seeing the market run nicely in one
direction only to see the market immediately move in the opposite direction?
Do you find that getting the direction right is something you need to take
care of? What most traders tend to forget is that the market is not made up
of charts and economic data, but rather human beings. Thus the most powerful
driving force in the forex market is sentiment. Kris Matthews shows us in
Part 1 of a four part series how to objectively use sentiment to get your
direction right and increase your win rate.
Fundamental Analysis: Interest Rate Decision
The Reserve Bank of Australia (RBA) decision on short term interest rate.
The decision on where to set interest rates depends mostly on growth outlook
and inflation. The primary objective of the central bank is to achieve price
stability. High interest rates attract foreigners looking for the best
risk-free return on their money, which can dramatically increases demand
for the nation's currency.
A higher than expected rate is positive/bullish for the AUD, while a lower
than expected rate is negative/bearish for the AUD. The analysts predict a
future reading of 4.50%.
The Euro broke support specified in yesterday's report 1.3028, and came
close to hitting the suggested target of 1.2962, but it stopped a few steps
before it, then it bounced clearly. It is clear that the Euro is facing some
difficulties ahead of and around 1.31: there is the well known resistance
1.3092, Friday's top 1.3105, and now we can also see that after the open,
the price has bumped into 1.3086 a couple of times during the Asian session.
If the price can go back to trade above 1.3086, reaching 1.32 (and above)
will be only a matter of time! The targets in this case will be 1.3200 & the
bottom we still remember 1.3266. On the other hand, short term 61.8%
Fibonacci level has became the most important support for today, especially
that it is just above the rising trend line from June 29th low on the hourly
chart. In case we break this support which is at 1.3020, the price will drop
& correct the whole move up from Tuesday's low 1.2731 to yesterday's top,
which will ideally target the area between 1.2950 & 1.2874. It is worth
mentioning that the latter is the most important support for the time being.
* 1.3020: Fibonacci 61.8% for the rise from Friday's low.
* 1.2950: Jun 27th low.
* 1.2874: Fibonacci 38.2% for the whole rise from Jul 21st low to Friday's
* 1.3086: Asian session high, tested twice.
* 1.3200: Apr 23rd low.
* 1.3266: Apr 25th important bottom.
Finally, we have clearly surpassed wave 5 bottom, which indicates that the
correction we have been monitoring for the past days is finally over, which
makes it official: we are in a new down wave! But the bounce from Friday's
low 85.93, which is closing on the important resistance 86.81 this morning,
warns of a correction to what we have seen of the new wave so far (the drop
from 88.10 to 85.93). Nevertheless, with a correction in these areas, or
without, dropping far below 86 and may be below 84.81 itself has turned into
a most probable scenario. The resistance which will determine if this bounce
from Friday's low will go on or stall, is 86.81. If broken, the Dollar will
keep shooting higher, targeting 87.49 & then what we imagine as the
ceiling for the price at this stage 88.10. But, if we break the exciting
support 86.25 instead, we will start dropping to areas below Friday's low,
we find 85.60 & 84.81 to be the most attractive of which.
* 86.25: Jul 16th low, just 2 pip below Thursday's low.
* 85.60: the falling trend line combining the daily lows of Jul 1st & 16th.
* 84.81: Nov 27th 2009 low, and the low of the last 15 years.
* 86.81: Jul 26th & 27th lows, and an obvious hourly support.
* 87.49: Jul 29th high.
* 88.10: Jul 28th top.
Forex Trading Analysis written by Munther Marji for ForexPros. For more information about technical analysis visit ForexPros.
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