ForexPros Daily Analysis May 25, 2010
Fundamental Analysis: New Home Sales
Traders of the US anticipate the publication of the New Home Sales. It measures the annualized number of new residential buildings that were sold during the previous month. This report helps to analyze the strength of the US housing market, which helps to analysis the economy as a whole. The new home sales report is quite volatile and subject to huge revisions. A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD. Analysts predict a future reading of 425.00K.
The Euro broke the support specified in yesterday’s report 1.2492, and reached both suggested targets 1.2406 & 1.2295 with perfect success. This “collapse” which dropped the single currency more than 200 pips in less than 24 hours came as a result of breaking the rising trend line from this cycle’s low on the hourly chart 1.2142, which we said about “we believe that a break of this line (in case it happens) will be the technical event of the day.” The subsequent drop matched the importance of this line, and really exciting! This drop broke the Fibo 61.8% support at 1.2344, although it tricked us at the beginning that it will stop at that important level, when it reached an intraday low of 1.2343 and then bounced back above 1.24. Now, we have two heavyweight technical evidences that the trend is down: Breaking the above mentioned trend line, and breaking the Fibo 61.8% support. Therefore, we see a very gloomy technical outlook for the Euro, we believe dipping below 1.2142 is only a matter of time. Today’s support is at 1.2256, and breaking it, would resume this collapse, targeting a test of this cycle’s low 1.2142, and then the psychological 1.2000. As for the resistance, it is provided by the falling trend line from Friday’s top. Breaking this line will take the price higher to Fibonacci retracement levels for the short term, in te area between 1.2420 & 1.2515.
• 1.2256: important intraday level & a previous support area which showed strength.
• 1.2142: This cycle’s low, and the low of the last 4 years!.
• 1.2000: psychological level.
• 1.2364: the falling trend line from Friday’s top on intraday charts.
• 1.2420: Fibonacci 38.2% for the drop from 1.2670.
• 1.2515: Fibonacci 61.8% for the drop from 1.2670.
The Dollar failed to capitalize on its consolidation above the 90 landmark, and gave up to the Yen at 90.60, then dropped more than 100 pips to reach the support specified in yesterday’s report exactly (the support was 89.56 & today’s low until the moment of preparing this report is 89.56).Today, Yen’s strength will completely depend on its ability to break the support 89.56. If the Yen can push the Dollar Below this level, we will witness a strong drop, targeting the same set of targets we suggested in the last 2 reports: 88.96 & 87.99. The resistance is at 90.23 and breaking it (if it happens) will target Fibonacci retracement levels 91.24 & 91.89. The latter is the most important resistance for the short (and may be medium) term for now. The downtrend needs to hold below the falling intraday trend line to keep things going smoothly (which is currently at 90.23). If broken, the short term negative technical outlook will change dramatically. The yes in still the one wearing the pants in this relationship, but beware of 90.23.
• 89.56: important intraday level, just below the falling trend line on the hourly chart, and also today’s low at the moment of preparing this report.
• 88.96: Thursday’s low, and a previous very important support.
• 87.99: Mar 6th low.
• 90.23: the falling trend line from yesterday’s top on intraday charts.
• 91.29: Fibonacci 50% for the short term.
• 91.84: Fibonacci 61.8% for the short term.
Forex Trading Analysis written by Munther Marji for Forex Pros.
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