Forexpros.com Daily Analysis - 25/01/2010

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Fundamental Analysis: German Ifo Business Climate Index

Traders look forward to the publication of the German Information and Foschung (Ifo) Business Climate Index tomorrow (January 26). The index determines the business sentiment and conditions in the Euro-zone.The reading is concluded from a survey of about 7,000 businesses.A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR. Analysts predict a slight rise to a reading of 95.00 versus a previous reading of 94.70.

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Euro Dollar

We have not seen any major moves on Friday. The Euro kept a bottom at 1.4027, which is very close to the most important support at the moment 1.4014, and started to rise, breaking the report’s resistance 1.4137,but settled for 1.4180 only, closing just a bit below it. Candlestick watchers can notice that Thursday’s candle is in fact a hammer, and that Fridays candle has recorded a higher high, working as a confirmation for the hammer pattern. This makes the odds favor a continuation of the rise that started at 1.4027, to at least create a matching correction for the whole drop from 1.4577. Today’s resistance is provided by the falling trend line from 1.4554 on the hourly chart, which is currently at 1.4184, while the support is provided by short term 61.8% Fibonacci at 1.4085. Breaking resistance of the day would initiate a strong rise targeting 1.4302, and then 1.4367. But if the unexpected happens and we break 1.4085, the strong & sharp drop from 1.4577 that has gained 550 pips until this moment will carry on, and will target the very important 1.4014, and may be later 1.3928.

Support:• 1.4085: Fibonacci 61.8% for the short term.• 1.4014: Fibonacci 50% for the long term (for the rise from 1.2885 to 1.5143).• 1.3928: Jul 15th low.

Resistance:• 1.4184: the falling trend line from 1.4554 on the hourly chart.• 1.4302: Fibonacci 50% for the whole drop from 1.4577.• 1.4367: Fibonacci 61.8% for the whole drop from 1.4577.

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USD/JPY

Dollar-Yen did not move but 75 pips on Friday, and did not break any major levels during that limited move. Thus, our attention is still revolving around 89.79, the most important support at all for now. As we have said in last week reports, the importance of 89.79 comes from the fact that it is the 61.8% Fibonacci retracement level for the whole up move from 87.35 to 93.75. This very accurate stopping indicates that Fibonacci 61.8% has stopped in the way of more dropping, and could cause it trouble. Thus, we will consider 89.79 to be a support capable of reversing the short term direction and initiate a rising move from these levels. In case this support is broken the drop will continue, targeting 88.91 & 88.30. In this case 92.44 will be a critical resistance for both short & medium term. But, in the case of holding above 89.79, the price will move up to challenge the previous important support 90.30. Breaking this support will put attention at two important resistance levels and they are the short term 61.8% Fibonacci resistance level at 91.06 and then the falling trend line from 93.75 which is currently at 91.64.

Support:• 89.79: Fibonacci 61.8% for the whole rising move from 87.35 to 93.75.• 88.91: Dec 18th low.• 88.30: Dec 14th low

Resistance:• 90.30: previous important support.• 91.06: Fibonacci 50% for the short term.• 91.64: the falling trend line from 93.75.

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Forex Trading Analysis written by Munther Marji for ForexPros.

For information on forex charts see ForexPros.

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