ForexPros Daily Analysis August 24, 2010
Free webinar on ForexPros - How Measuring Currency Strength can Reveal the True Sentiment of the Market
Expert: Kris Matthews
When: Thu, Aug 26, 2010, 07:00 ET
In Part 2 of a four part series on trading sentiment, Kris Matthews reveals
how to rank currencies individually from strongest to weakest and pick
currency pairs where money is flowing most directly to ride trends that are
most likely to be profitable.
Fundamental Analysis: Core Durable Goods Orders
The Core Durable Goods Orders measures the change in the total value of new
orders for durable goods, excluding transportation.
Because aircraft orders are very volatile, the core number gives a better
gauge of orders trends.
Higher reading indicates activity increase by manufacturers.
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. The analysts predict a future reading of 0.50%.
The Euro dropped after breaking the support we specified in yesterday's
report 1.2680, dropping almost 70 pips, and stopping only a few steps before
meeting our target at 1.2604 (the low at the moment of preparing this report
is 1.2617). With this new extension to the medium term drop from 1.3332, the
size of this drop has become enormous, and cannot be ignored. Last week, we
suggested a wave count with 5 complete waves up from 1.1875. But, until this
moment, we have not reached but only the first Fibonacci retracement level
for the 5-wave move at 1.2775. Therefore, in spite of the size of this drop,
we highly doubt that it has shown all its cards. We believe this drop is
capable of reaching Fibonacci 50% at least, or even go lower than that. But,
what increases the risk in these areas, is that after such a huge move, the
Euro is subject to a correction at any time, and from any level. Short term
support is not at the important Fibonacci 50% at 1.2604, but rather at
1.2630. If broken, we will drop to the exciting 1.2550, then the all
important 1.2432. On the Other hand, resistance is at 1.2750, this pair
cannot go on achieving the kind of gains we have seen after hitting Friday's
low, unless we break the resistance 1.2750. In case we get this break, we
will be heading to 1.2829 & 1.2891.
* 1.2630: the rising trend line from Asian session low on intraday charts.
* 1.2550: the support area containing Jul 7th & 12th lows.
* 1.2432: Fibonacci 61.8% for the whole rise from 1.1875 to 1.3332.
* 1.2750: the falling trend line from Aug 6th high on the intraday chart.
* 1.2829: Aug 12th low.
* 1.2891: Fibonacci 38.2% level for the drop from the 3-month high of
It seems like speculators are insisting on pushing the Japanese government
to the limit! Although the Dollar/Yen traded in a very dull range of just 49
pips yesterday, it was pushed by speculators below the 85 landmark again.
Against the Euro, the Yen hit a 9 year high for the Yen, 9 year low for the
pair at 107.19. Let's leave the daily & weekly charts we have been obsessed
with lately, and just focus on the hourly chart. We can see that there is a
very exciting trend line, dropping from June 4th top. This line is running
currently at 85.66. Therefore, all of our attention is at the exciting trend
line & the importance it provides. As long as we are trading below this
line, the downtrend will be ok, but if we break the resistance 85.66 we will
shoot up targeting 86.81 and may be 87.70. The support is provided by the
Asian session low at 84.84. If broken, there will be nothing stopping the
price from reaching our awaited target 83.87, except for the BoJ. And if the
Japs keep quiet, we could see 82.65.
* 84.84: Asian session 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.
* 85.66: the falling trend line from June 4th top on the hourly chart.
* 86.81: Jul 26th & 27th low.
* 87.70: June 26th top.
Forex Trading Analysis written by Munther Marji for ForexPros. For more information about technical analysis visit ForexPros.
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