ForexPros Daily Analysis August 04, 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: 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. The analysts predict a future reading of 455.00K.
The Euro broke resistance specified in yesterday's report 1.3174, and came
very close to hitting the suggested target of 1.3200, but it stopped (for
the second day in a row) only 6 pips before it, before retreating
significantly to 1.3181. The fact that the rising move is slowing down warns
of a possible correction for the whole rise from Friday's low. Such a
correction would be a violent one, with its size a little less than 200
pips, since its ideal target is at 1.3086. Therefore, we should keep eyes &
mind open today, and consider all scenarios, and keep separate trading plans
ready. What is requested from the Euro now is to break the resistance 1.3227
which it is trading almost 20 pips below. This resistance is the key to more
fireworks, and is the key to 1.33. If broken, we will target 1.3311 first,
and at a later time 1.3383 as well. On the other hand, correction
possibilities remain weak as long as we are trading above 1.3153. But if
broken, we will be already in a short term correction, which will ideally
target the single most important support for now 1.3086. And if this one is
also broken, we will drop to test Friday's low 1.2979.
* 1.3153: Fibonacci 38.2% for the rise from Friday's low.
* 1.3086: the rising trend line from Jun 29th low, and Fibonacci 61.8%
retracement level for the rise from Friday's low. The single most important
support for the time being.
* 1.2979Friday's low, and the launch point of this recent rising move.
* 1.3227: the falling trend line from yesterday's high on intraday charts.
* 1.3311: Mar 24th low.
* 1.3383: Mar 31st low.
The Dollar/Yen dropped in the down wave we have talked about, it broke the
support specified in yesterday's report 86.25, and successfully reached the
first suggested target 85.52. With this, the first target of the falling
wave is met, but what are the next targets? In the attached chart, which is
a weekly one, we can see the falling channel from Sep 07 top. Although the
bottom of this channel is very far away, and is just above 74, but there is
an interesting trend line inside it, combining the monthly lows of Dec 08,
Jan & Nov 09. This line is around 82.65 currently, providing us with a
perfect target for this dropping wave, since we still expect, as we did
before, that it will dive below 84.81. Therefore, we expect the price to
reach this target, and as we do, we also realize that the limited volatility
of this pair indicates that this will take some time. As for the short term,
the support is at 85.31, and breaking it would indicate that we are already
moving lower with the objective of breaking 84.81, and reaching lows not
seen in 15 years. This break will target 84.81 first, then 83.87. The
resistance is at 86.02, and if broken, we will target the important 86.81,
* 85.31: Asian session low.
* 84.81: Nov 27th 2009 low, and the low of the last 15 years.
* 83.87: Fibonacci extension level 138.2% for the falling wave from 86.86,
compared to the wave which started at 88.10.
* 86.02: the falling trend line from 88.10 on the hourly chart.
* 86.81: Jul 26th & 27th lows, and an obvious hourly support.
* 87.49: Jul 29th high.
Forex Trading Analysis written by Munther Marji for ForexPros. For more information about forex news visit ForexPros.
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