Forexpros.com Daily Analysis - 10/05/2010

Fundamental Analysis: German CPI

European traders anticipate the publication of the German CPI. The German Consumer Price Index (CPI) measures the changes in the price of goods and services. The CPI measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation in Germany. A higher than expected reading should be taken as positive/bullish for the EUR (as the common way to fight inflation is raising rates, which may attract foreign investment), while a lower than expected reading should be taken as negative/bearish for the EUR. Analysts predict a future reading of -0.10%.

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Euro Dollar

The Euro broke the support specified in Friday’s report 1.2735, and we saw the price drifting away from the channel bottom, reaching both suggested 1.2854 & 1.2935 successfully. The most important technical event in the past week was not the exciting collapse, but reaching the bottom of the falling trend channel on the daily chart (please refer to the attached chart). And after a rebound of almost 450 pips, this bottom has proved important. We could be in front of a turning point not just for the short term but for the medium term as well. But on the other hand, the price has reached, and stopped at, Fibonacci 38.2% for the whole drop from 1.3690 to 1.2511. This technical evidence favors that we are in a rising correction from last week’s low. A correction that met its first target (Fibo 38.2%). The question now is will this correction settle for 38.2% or will it shoot to the more important Fibonacci retracement levels 50% & 61.8%? This question can be answered with staying below, or breaking 1.2966. If this resistance is broken, the correction will go on, and we will target Fibonacci 50% at 1.3105 first, then 1.3165. Here, difficulties will face this move and make it harder for it to go on. The support is at 1.2900, breaking it would indicate a drop, drifting away from 1.2966 and targeting 1.2795 & 1.2690.

Support: • 1.2900: important intraday support. • 1.2795: Fibonacci 38.2% for the rise from 1.2519. • 1.2690: Fibonacci 38.2% for the rise from 1.2519.

Resistance: • 1.2966: Fibonacci 38.2% for the drop from 1.3690. • 1.3105: Fibonacci 50% for the drop from 1.3690. • 1.3165: previous well known support/resistance.

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USD/JPY

The Dollar/Yen’s rise from 87.99 has slowed down significantly, after rocketing for more than 500 pips in less than 18 hours! But now we have come back from excitement to boredom, the good news is that the important levels are much closer to each other than it was on Friday. The resistance is at 92.83 & the support is at 92.46. We will be waiting for one of these two levels to give way. If 92.46 gives way, a correction for this rocking jump will start, with its first target at 91.22 and the second important target is at 90.61. The resistance is at 92.83, and if broken the price will jump to the resistance that we find very attractive 93.96. If this one is also broken, 95 will become near, as we will target 95.05. In the next few days, important evidence on medium term direction will emerge, and we will be on the watch for them.

Support: • 92.46: intraday support. • 91.22: Fibonacci 38.2% support for the rise from Thursday’s low. • 90.61: Fibonacci 50% support for the rise from Thursday’s low.

Resistance: • 92.83: intraday resistance. • 93.96: previous hourly resistance. • 95.05: Aug 24th high.

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Forex Trading Analysis written by Munther Marji for ForexPros.

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