Forexpros.com Daily Analysis - 29/07/2010

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Fundamental Analysis: GDP

The Gross Domestic Product (GDP) is the broadest measure of economicactivity and is a key indicator for the economy's health. The Annualized(quarterly change x4) percent changes in GDP shows the growth rate of theeconomy as a whole. Consumption is by far the largest component in the GDPof the US and has the most affect on it. The figures can be quite volatilefrom quarter to quarter.A higher than expected reading should be taken as positive/bullish for theUSD, while a lower than expected reading should be taken as negative/bearishfor the USD. The analysts predict a future reading of 2.50%.

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Euro Dollar

For the second day in a raw, the Euro didn't even come close to the supportspecified in yesterday's report 1.2903, finding a bottom at 1.2967, andrefusing to drift away from the 1.30 level for more than a third of a cent,before trying to break 1.3026, only to stop 2 pips above it. Therefore, weawait a test of the set of important resistance levels in the neighborhood1.3026, 1.3044, and 1.3035, the last of which is our favorite, since it ispresented by the trend line drawn from Tuesday's high on hourly chart. But,we will 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 just below1.2980. Moreover, we find the area between Fibonacci 61.8% at 1.3075 and May10th top 1.3092 to be very interesting. Thus, we recommend giving attentionto all these areas, and we believe that each of them will play a role indictating today's direction! In case we break the support at 1.2980, we willdrop with the Euro for today and probably the next few days, targeting1.2888, and 1.2737. On the other side, the resistance is at the important1.3035. If broken, the Euro will continue its bounce from the channelbottom, targeting 1.3092 & 1.3200.

Support:* 1.2980: the rising trend line from Tuesday's low on the hourly chart.* 1.2888: Fibonacci 50% for the whole rising move from Jul 21st bottom toJul 27th top.* 1.2737: a well known support resistance area, which includes a number ofdaily extremes, such as May 12th high, and Jul 22nd low.

Resistance:* 1.3035: the falling trend line from Jul 20th top & 2-month high on thehourly chart.* 1.3092: May 10th high.* 1.3200: Apr 23rd low.

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USD/JPY

The Dollar/Yen reached the first of the ideal targets for this risingcorrection: short term 61.8% Fibonacci level at 88.01, and then retreatedsharply, dropping for more than 100 pips, which could be read as anexhaustion in upside activity. Therefore, and even though we are negativeabout this pair on the medium term, we should not neglect these signs whichforce themselves upon us for today! Short term support is at the seriouslyimportant  86.81, and if broken, the price will resume its drop after a3-wave correction, targeting 85.84 & 84.81. Resistance is at 88.01. A breakhere indicates that the odds of a continuation of the correction of the 5waves down from 92.87 are still massive. This will target Fibonacciretracement levels for the whole drop from 92.87, with the first 2 of themat 88.78 & 89.56. It is worth mentioning that breaking wave 5 bottom 86.25even with a few pips would strongly indicate the termination of thecorrection we are currently living, and will officially announce a new wavedown!

Support:* 86.81: Jul 26th & 27th lows, the bottom of the corrective channel, and anobvious hourly support. The most important short & medium term supportwithout a shadow of a doubt.* 85.84: Nov 30th 2009 low.* 84.81: Nov 27th 2009 low, and the low of the last 15 years.

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 forex news visit ForexPros.

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