ForexPros Daily Analysis August 11, 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
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 465.00K.
The Euro broke the support specified in yesterday's report 1.3133, and
dropped as expected, only to stop at 1.3070, without reaching the suggested
target. Then (which is a lot more important), the price jumped in the
post-Fed chaos to 1.3226 (7 pips below our resistance), testing the
previously broken trend line, accurately (please refer to the attached
chart). If it a well known technical principle that such an accurate retest
confirms the break it followed, and the new direction, which is down in this
case. Looking at the attached chart, we can see that: 1. the rising trend
line was broken decisively and 2. the price retested this line in an
accurate fashion. These are obvious indication of a falling trend.
Therefore, unless the price goes back up to trade above the broken trend
line, we expect more downside activity. Short term support is at 1.3032,
which we are trading just above at the moment. If broken, the price will
drop targeting the important Fibonacci level 1.2961, and if broken 1.2875.
On the other hand, resistance is at 1.3158, and if broken, this pair will
contradict all what we have said, and will shoot up to 1.3255, and may be
* 1.3032: Fibonacci 61.8% for the whole rising move from 1.2731 to Friday's
& 3-month high.
* 1.2961: Fibonacci 61.8% for the whole rising move from 1.2731 to Friday's
& 3-month high.
* 1.2875: Jul 26th low, a well known support/resistance area.
* 1.3158: short term 61.8% Fibonacci level.
* 1.3233: the retest level for the broken trend line.
* 1.3347: May 3rd unforgettable top.
The Dollar/Yen broke the support specified in yesterday's report at 85.78,
and dropped to 85.16, approaching this year's low of 85.00 which we have
seen on Friday. However, the price consolidated above 85, and corrected the
drop up to 85.45. With this, we see a continuation of the correction from
Friday's low, after hitting another, lower target for the downward wave we
have been talking about for weeks, , 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 85.16, 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 will target 83.87 & at a
later time, we still believe in our 82.65 target. The resistance is at
85.81, and if broken, the price will continue its bounce, targeting 86.43 &
* 85.16: post-Fed low.
* 83.87: Fibonacci extension level 138.2% for the falling wave from 86.86,
compared to the wave which started at 88.10.
* 82.65: the trend line combining the monthly lows of Dec 08, Jan & Nov 09,
on the weekly chart.
* 85.81: short term Fibonacci 61.8% level .
* 86.43: the top of the rising corrective trend channel on the hourly chart.
* 87.49: Jul 29th high.
Forex Trading Analysis written by Munther Marji for ForexPros. For more information about technical analysis visit ForexPros.
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