ForexPros Daily Analysis August 05, 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: Unemployment Rate
The Unemployment Rate is a measure of the percentage of the total labor
force that is unemployed but actively seeking employment and willing to work
in the US. A high percentage indicates weakness in the labor market. A low
percentage is a positive indicator for the labor market in the US and should
be taken as positive for the USD. The analysts predict a future reading of
The Euro broke both the support and resistance specified in yesterday's
report, without being able to reach the targets specified. However, the
dollar managed to drag the Euro to 1.3130. And as we said yesterday's
report: 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. And up until now, we have seen the price dropping from
Tuesday's top almost 130 pips! Technically, what is really important is that
we are approaching a very important trend line, and are about to test it:
the trend line rising from June 29th low on hourly the chart, which is
running very close to yesterday's low. Therefore, we should keep eyes & mind
open today, and consider all scenarios, and keep separate trading plans
ready. If we test the above mentioned trend line, it will be the single most
important technical event for the rest of the week. This line is at 1.3130,
and should not be broken in order to keep the technical outlook positive.
But if broken, we will witness a strong drop to 1.3026 at least, and
probably will be followed by a test of the important 1.2933 as well. On the
other hand, short term resistance is at 1.3194, and it is the key for more
gains. If we break it, we will target 1.3311 & 1.3383.
* 1.3130: the rising trend line from Jun 29th low & yesterday's low. The
single most important support for the time being.
* 1.3026: Jul 20th high.
* 1.2933: Fibonacci 61.8% for the rise from 1.2731.
* 1.3194: the falling trend line from Tuesday's high on intraday charts.
* 1.3311: Mar 24th low.
* 1.3383: Mar 31st low.
The Dollar/Yen did not break the support specified in yesterday's report,
not even with a single pip. It consolidated above it, and edged higher until
it reached 86.43. We can classify that as a clear attempt to rebound, coming
after the current falling wave (which we talked about several times) has
reached its first suggested target at 85.52. Nevertheless, we see these
attempts as weak and shallow. We believe the falling wave will continue to
seek lower targets, after a limited correction, 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 85.74, 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 86.58, and
if broken, the price will continue its bounce, targeting 87.49 & the
* 85.74: Fibonacci 61.8% for yesterday's bounce.
* 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.
* 86.58: the retest level for the rising trend line which combines the lows
of Jul 16th & 22nd.
* 87.49: Jul 29th high.
* 88.10: Jul 28th high.
Forex Trading Analysis written by Munther Marji for ForexPros. For more information about technical analysis visit ForexPros.
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