ForexPros Daily Analysis May 3, 2010

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Expert: Mark Hodge, Rockwell TradingWhen: Wed, May 12, 2010, 10:00 EST

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Fundamental Analysis: RBA Rate Statement

Australian traders anticipate the publication of the monthly interest rate statement. The Reserve Bank of Australia's monthly interest rate statement describes its latest decision regarding changes to the country's short term interest rates, monetary policy, and the direction of the economy. Short term interest rates are the key factor in currency valuation. A dovish statement could push AUD down against its rivals, while hawkish statement could boost the currency.

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Euro Dollar 

The Euro broke the hourly chart descending channel on Friday, at 1.3307. But such a break was expected to achieve more than the 40 pips it did! Sadly, the Euro frustrated supporters by going back inside the channel, but it left it with an exciting stop very close to short term 61.8% Fibonacci level at 1.3202 (the low until the moment of preparing this report is 1.3204). Thus, the chances of going up still exist, and they totally depend on this support. We will place most of our attention at 1.3202. If it holds, the price will try once more to break the channel and trade above its top which is running currently at 1.3271. If this most important resistance for the short term is broken, the Euro will jump to 1.3354 first, and may be to 1.3434 as well. On the other hand, a break of the most important level for today 1.3202, will lead the price south, deeper inside the channel, dropping to the important 1.3113 first, and then to 1.3050, the last important support before the 1.30 landmark.

Support:• 1.3202: short term 618% Fibonacci level.• 1.3113: Mar 30th 2009 low.• 1.3050: Apr 20th 2009 high.

Resistance:• 1.3271: the top of the broken channel.• 1.3354: Apr 6th high.• 1.3434: the important low of Mar 2nd.

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USD/JPY

With a single quick look at the Dollar-Yen chart, we can clearly see that the most important level for the short term is 93.47, which combines Fibonacci 61.8% for the short term with the rising trend line from 91.58 on the hourly chart, giving this level double importance. We believe a break of the closest short term support 93.89 will lead to a test of the all important 93.47! And if this level is broken, we will drop to another important level for both the short & medium terms at 92.72. In this case, this support will be critical, since a break here will dramatically change the technical outlook for both the short & medium terms. If broken, the outlook will turn negative immediately. On the other hand, the resistance which captured our attention all last week, at 94.30 will enjoy being the most important for one more day. Breaking it will lead to the same targets we suggested for this break last week, 95.05 first & then 95.90.

Support:• 93.89: Fibonacci 38.2% for the short term.• 93.47: Fibonacci 61.8% for the short term, and the rising trend line from 91.58.• 92.72: the rising trend line from 88.12 on hourly chart.

Resistance:• 94.30: Wednesday’s high which is very close to last Monday’s high, and last week’s high.• 95.05: Aug 24th high.• 95.90: Jul 29th low.

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Forex Trading Analysis written by Munther Marji for ForexPros.

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