ForexPros Daily Analysis May 6, 2010

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

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Fundamental Analysis: Nonfarm Payrolls

Traders of the US anticipate the publication of the Nonfarm Payrolls. The Payrolls measure the change in the number of employed people during the last month of all non-farming businesses. The total non-farm payroll accounts for approximately 80% of the workers who produce the entire gross domestic product of the United States. It is the single most important piece of data contained in the employment report, which considered to offer the best overview of the economy. The monthly changes and the revisions in payrolls can be quite volatile. A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD. Analysts predict a future reading of 187.00K.

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Euro Dollar 

The Euro fluctuated before breaking the support 1.2948, surpassing both the resistance & supports with about 10 pips each, fooling us that there is a break, only to frustrate us with a move in the opposite direction. Then, it made up its mind, and broke 1.2948, falling & reaching both suggested target 1.2885 & 1.2820. Today, the price is still trading below the falling channel, clearly, and that leaves us with no reason to change the negative technical outlook (even after a drop of 550+ pips). In fact, this outlook will not change unless we go back to trade inside the channel, which is something that needs a break of the resistance 1.2935 to happen. Before this important resistance, there is short term resistance at 1.2854, this is the one we will focus on for today. If the Euro breaks the resistance 1.2854, it will have a chance to take a breath, and test the bottom of the broken channel at 1.2935. In case we actually surpass this first target and go back to trade within the channel, we will be heading towards the first Fibonacci retracement level for the whole drop from 1.3347. The support is at 1.2802, breaking it is a sign that everything is going ok for the downtrend, and that it will continue to target new lows below 1.30, for today they are 1.2721 & 1.2638.

Support:• 1.2802: important intraday support, protecting yesterday’s low.• 1.2721: Fed 12th 2009 important low.• 1.2638: Feb 18th 2009 high.

Resistance:• 1.2854: important intraday top.• 1.2935: a clear hourly support, and the retest level for the broken channel.• 1.3002: Fibonacci 38.2% for the drop from 1.3347.

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USD/JPY

The Dollar/Yen broke the support specified in yesterday’s report 94.56, and successfully reached the first suggested target 93.91, and stopped halfway to the second target 93.30. What is more important than this is that the price has broken both the rising trend line from 92.80 & 91.58. This very important event has turned the technical outlook negative. Thus, we expect the sliding to go on for another day, but it needs to go through the 93.62 gate. If his support is broken, everything will go ok for the downtrend, and the next set of targets will be 92.97 & the important 92.13. On the other hand, the most notable resistance is at 94.01, we do not expect it to be broken at this stage, such a break would make a “small surprise”. But, if this surprise actually happens, a strong jump will take us to 95.05 at least, and may be later 95.90.

Support:• 93.62: intraday support.• 92.97: Apr 28th low.• 92.13: Apr 19th top.

Resistance:• 94.01: the retest level for the broken trend channel..• 95.05: Aug 24th high.• 95.90: Jul 29th low.

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Forex Trading Analysis written by Munther Marji for ForexPros.

---Disclaimer: Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.