ForexPros Daily Analysis July 28, 2010

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Fundamental Analysis: Initial Jobless Claims

The Initial Jobless Claims is a seasonally adjusted measure of the number ofpeople who file for unemployment benefits for the first time during thegiven week. This data is collected by the Department of Labor, and publishedas a weekly report. The number of jobless claims is used as a measure of thehealth of the job market, as a series of increases indicates that there arefewer people being hired. On a week-to-week basis, claims are quitevolatile. Usually, a move of at least 35K in claims, is required to signal ameaningful change in job growth. A higher than expected reading should betaken as negative/bearish for the USD, while a lower than expected readingshould be taken as positive/bullish for the USD. Analysts predict a futurereading of 464.00K.

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Euro Dollar

The Euro didn't even come close to the support specified in yesterday'sreport 1.2872, finding a bottom at 1.2950, and refusing to drift away fromthe 1.30 level for more than half a cent, before trying to break 1.3026,without being able to hold above it. Therefore, once again, we await a testof the important resistance 1.3026, where there is the 2-month high. But, wewill not lose interest in our newly found rising channel we talked aboutyesterday, and when we look at the hourly chart, we find that Friday's divehas stopped at the bottom of a new rising channel which will be placed underour focus for today, knowing that the bottom of the channel is at 1.2903.Moreover, we find the area between Fibonacci 61.8% at 1.3075 and May 10thtop 1.3092 to be very interesting. Thus, we recommend giving attention toall these areas, and we believe that each of them will play a role indictating today's direction! In case we break the support at 1.2903, we willdrop with the Euro for today and probably the next few days, targeting1.2792, and 1.2691. On the other side, the resistance is at the important1.3026. If broken, the Euro will continue its bounce from the channelbottom, targeting 1.3092 & 1.3200.

Support:* 1.2903: the bottom of the rising trend channel on the hourly chart.* 1.2792: Friday's low.* 1.2691: Fibonacci 38.2% for the whole rise from 1.2150.

Resistance:* 1.3026: Jul 20th top & 2-month high.* 1.3092: May 10th high.* 1.3200: Apr 23rd low.

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USD/JPY

The Dollar penetrated the resistance specified in yesterday's report  87.37,and came extremely close to the suggested target 88.01 (yesterday's high was87.96). As we have said several times in last week's reports, signs showthat the possibility of a rising correction to correct the fall from June3rd top 89.09 to July 16th low 86.25 is growing. On the top of these signs:the inverted 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, and approaching one ofits ideal targets (short term 61.8% Fibonacci level at 88.01). Therefore,and even though we are negative about this pair on the medium term, weshould not neglect these signs which force themselves upon us for today!Short term support is at 87.25, and if broken, the price will resume itsdrop after a 3-wave correction, targeting 86.46 & 85.84. Resistance is at88.01. A break here indicates that the odds of a continuation of thecorrection of the 5 waves down from 92.87 are still massive. This willtarget Fibonacci retracement levels for the whole drop from 92.87, with thefirst 2 of them at 88.78 & 89.56. It is worth mentioning that breaking wave5 bottom 86.25 even with a few pips would strongly indicate the terminationof the correction we are currently living, and will officially announce anew wave down!

Support:* 87.25: the rising trend line from Jul 22nd low on the hourly chart.* 86.46: Jul 19th low.* 85.84: Nov 30th 2009 low.

Resistance:* 88.01: Fibonacci 61.8% for the drop from 89.09.* 88.78: Fibonacci 38.2% level for the whole drop from 92.87 (the 5 wavesdown).* 89.56: Fibonacci 50% 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 currency charts visit ForexPros.

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