ForexPros Daily Analysis September 14, 2010
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The Euro jumped after the market’s open and continued a bounce it started on Friday, going back above 1.28 in the morning, and hitting 1.2890 in New York. Now the question is will the EUR succeeds in creating yet another test of 1.2920? In fact, we do not believe it will, and even if it did, this will provide a selling opportunity. As we approach 1.2920, sort of (yesterday’s high was 1.2890), we believe that topping and creating a medium term top to fall from for days is very possible. But there is a very critical condition to this gloomy scenario, which is to top below or close to 1.2920, and not to break this level decisively. Short term support is at 1.2853, if broken, the real journey away from 1.2920 will start. In this case we expect a strong drop to the important 1.2737, and to 1.2658, and even lower than that given enough time. On the other side, 1.2920 is definitely the resistance of the day, and only a break here will change the negative outlook. If this happens, we will target 1.3000 & the important 1.3047.
• 1.2853: Sep 1st high.
• 1.2737: short term Fibonacci 61.8%.
• 1.2658: Wednesday’s low.
• 1.2920: Aug 19th top.
• 1.3000: psychological level.
• 1.3047: Fibonacci 61.8% for the medium term.
We broke the support specified in yesterday’s report 83.79, and the price dived to 83.07 so far. This was completely expected, and we do hope that we are on the way to our long awaited target of 82.00. Last week, we adjusted the falling trend line on the hourly chart to include Friday’s jump. We still believe in USD\/JPY weakness, and we believe it will travel south. Only a break of this line in specific will change our minds. This line is currently running at 84.48 (please refer to the attached chart). To keep trading below it, indicates more downside activity, especially after the BoJ disappointed again last week, as the “Japs” said once again they are watching closely, but they did nothing! The market has had it with these comments, and now the Japanese authorities should buy tickets to the “Yen Show”, and see what it will do to the Dollar & the Euro! Short term support is at 83.22, and if broken, we will be on the way to our long-awaited target at 82.00, then we will see the psychological level at 80.00. On the other hand, the above mentioned trend line is at 84.48. If broken, the Dollar will be violent to us all, and actually this break could be a sign of an intervention, and it will shoot up to 86.25 & 86.95.
• 83.22: Fibonacci 61.8% for the micro term.
• 82.00: the falling trend line on the weekly chart, combining the monthly lows of Dec 2008, Jan & Nov 2009.
• 80.00: psychological level.
• 84.48: the falling trend line from June 4th top on the hourly chart
• 86.25: Jul 16th bottom.
• 86.95: Jul 1st low.
The Pound jumped after the market’s open and continued a bounce it started on Friday, going back above 1.54. The question we presented yesterday was will it succeeds in creating yet another test of 1.5490? And we have recommended selling close to this level. The price behavior was completely in line with our analysis. The price stopped at 1.5486 (4 pips before our resistance) and dived to 1.5347 (3 pips before the target). That was the 4th time this month we test the massive 1.5490! and we still believe that if there was a 5th time, it is a good selling opportunity, with a stop above 1.5532. The reasons behind this belief are two: we have seen how this massive resistance level has rejected the price 4 times recently, and because the falling trend line from Aug 16th top is just above it providing another important resistance. It is hard to picture this pair breaking both levels today. On the other hand, breaking 1.5490 decisively is not probable today, but if it happens, the Pound will target 1.5575 at the very least, and then 1.5646. support is at 1.5360, and a break here would be a signal of a big fall, targeting 1.5262 & 1.5147.
• 1.5360: important intraday level.
• 1.5249: Jul 23rd low.
• 1.5147: Jul 22nd low.
• 1.5490: the massive resistance level containing the highs of Sep 1st & 6th.
• 1.5575: Aug 30th high.
• 1.5646: Fibonacci 50% for the whole drop from Aug 6th top.
Forex trading analysis written by Munther Marji for Forexpros.
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