ForexPros Daily Analysis July 26, 2010

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Fundamental Analysis:CB Consumer Confidence

The Consumer Confidence measures the level of consumer confidence ineconomic activity. It is a leading indicator as it can predict the consumerspending, which is a major part in the total economic activity. Higherreadings point to higher consumer optimism. A higher than expected readingshould be taken as positive/bullish for the USD, while a lower than expectedreading should be taken as negative/bearish for the USD. The analystspredict a future reading of 51.00.

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Euro Dollar

The Euro fluctuated violently on Friday, breaking both the support &resistance specified in the report, but only reaching the target in the caseof the support. After breaking 1.2860, the Euro reached the first suggestedtarget 1.2807 successfully. When looking at the hourly chart, we find thatFriday's dive has stopped at the bottom of a new rising channel which willbe placed under our focus for today. The bottom of the channel is at 1.2807,but after the strong bounce we seen late Friday, the price built anothersupport ahead of the channel bottom at 1.2883. In case we break today'ssupport (1.2883) we will drop to test the bottom of the channel at 1.2807 asa first target. And if this one is also broke, then the rising channel isbroken, which would leave the Euro vulnerable to more downside activity,targeting 1.2731 as a first & immediate target for this break on the way tolower targets. On the other hand, the resistance is at the important 1.2942.If broken, the price will resume its bounce from channel bottom, targetingyet another test of 1.3026, and may be then 1.3075.

Support:* 1.2883: the rising trend line from Friday's low on intraday charts.* 1.2807: the bottom of the rising trend channel on the hourly chart.* 1.2731: yesterday's low.

Resistance:* 1.2942: Asian session top, and the falling trend line from last weeks topon the hourly chart.* 1.3026: Tuesday's & 2-month high.* 1.3075: Fibonacci 61.8% for the drop from 1.3816 to 1.1875.

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USD/JPY

As we have said several times in last week's reports, signs show that thepossibility of a rising correction to correct the fall from June 3rd top89.09 to July 16th low 86.25 is growing. On the top of these signs: theinverted hammer formation, which appeared on the daily chart, and thecompleted 5-wave move, and further more what looks to be the correctivewaves (a) & (b) forming in an ideal manner (please refer to the attachedchart), and wave (c) developing in an ideal fashion. Therefore, and eventhough we are negative about this pair on the medium term, we should notneglect these signs which force themselves upon us for today! Short termsupport is at 87.33, and if broken, the price will resume its drop after a3-wave correction, targeting 86.72 & 85.84. Resistance is at 87.67. A breakhere indicates that the odds of c continuation of the correction of the 5waves down from 92.87 are still massive. This will target 88.37, then 88.78.It is worth mentioning that breaking wave 5 bottom 86.25 even with a fewpips would strongly indicate the termination of the correction we arecurrently living.

Support:* 87.33: the rising trend line from Thursday's low on the hourly chart.* 86.72: Friday's low.* 85.84: Nov 30th 2009 low.

Resistance:* 87.67: important hourly resistance, stopped the price several times afterthe open.* 88.37: Jul 12th low.* 88.78: Fibonacci 38.2% level for the whole drop from 92.87 (the 5 wavesdown).

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Forex Trading Analysis written by Munther Marji for ForexPros. For more information about forex news visit ForexPros.

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