ForexPros Daily Analysis February 18, 2010
Free webinar on ForexPros - Mapping Out the Banking System & Foreign Exchange Dealing Process, Part II.
Expert: Dan Cook
When: Wed, Feb 24, 2010, 11:00 EST
In the second installment of the Webinar ‘Mapping Out the Banking System & Foreign Exchange Dealing Process’, Dan Cook will take a deeper dive into the Foreign Exchange Market. Cook will start by discussing the interbank system and how it differs in form and functionality to the centralized exchange models used for trading stocks and commodities. From there, he will focus on broker-level dealing and discuss how retail brokers, whether ECN's or Dealing Desk models, make money.
Cook will also take an inside look at dealing desks and speak frankly about the roles and responsibilities of a retail dealing desk, which will include an overview of how brokers hedge currency exposure. The goal of this Webinar is to help traders understand the nuances of the Forex market by shedding light on many of the aspects of currency trading that have previously been shrouded in mystery.
Click here to join free.
Fundamental Analysis: US CPI (MoM)
Traders of the US look forward to the publication of the Consumer Price Index (CPI). The index 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 the US. A higher than expected reading should be taken as positive/bullish for the USD (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 USD. Analysts predict a rise from the past reading to a reading of 0.30%.
The Euro stopped just 8 pips above the resistance specified in yesterday's report 1.3778, before collapsing completely, breaking the support 1.3740 and successfully reaching both suggested targets 1.3685 & 1.3626. As we always say, stopping close enough to a Fibonacci resistance is an evidence of a downtrend, and this is what happened yesterday. Today, it seems we will have a correction for yesterday's huge drop, before continuing to go lower is such a strong downtrend. Intraday support 1.3562 is an important support, and as long as we hold above it, the odds for having our correction will be immense. But, if we break it, this sharp strong drop will go on and the next set of targets will be the very important support 1.3482 & if broken 1.3422. On the other hand, if we survive above 1.3562, we will test the resistance 1.3594, and if broken the correction will be immediately initiated, wit an ideal target at 1.3671, and if broken the next target will be 1.3724.
• 1.3562: the most important intraday support.
• 1.3482: Fibonacci 61.8% for the long term.
• 1.3422: May 18th low.
• 1.3594: Feb 12th low.
• 1.3671: Fibonacci 50% for yesterday's collapse.
• 1.3724: hourly resistance.
As expected, the Dollar-Yen maintained trading inside the channel we talked about yesterday, broke the resistance 90.53 & successfully reached the first suggested target 91.14. its only coincidence that short term Fibonacci 61.8% is almost at this level, specifically at 91.15. If it is broken, we will continue to rise and target the important Fibonacci 61.8% at 91.76. And this is an important resistance that if it is broken we can say with confidence that the Dollar has freed itself from short term downtrend. The first target of this freedom will be Oct 27th top 92.31. Short term resistance is at 90.80, and breaking it would reverse the strength signs we have seen in the past two days, creating a modest surprise. If this surprise actually happens, then we will target the most important short term support at 90.12, and only if broken we expect the Dollar-yen to reach 89.54.
• 90.80: Asian session low.
• 90.12: the bottom of the rising channel on the hourly chart.
• 89.54: Feb 11th low.
• 91.15: short term Fibonacci 61.8% resistance.
• 91.76: Fibonacci 61.8% for the whole drop from 93.75.
• 92.31: Oct 27th high.
Forex Trading Analysis written by Munther Marji for ForexPros.
For information on US dollar index see ForexPros.
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.