ForexPros Daily Analysis June 10, 2010
Fundamental Analysis: Core Retail Sales
Traders of the US await the Core Retail Sales publication. It is a monthly measurement of all goods sold by retailers based on a sampling of retail stores of different types and sizes in the US, excluding auto. It is an important indicator of consumer spending and also correlated to consumer confidence and considered as a pace indicator of the US economy. 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 0.10%.
The Euro broke yesterday’s resistance 1.1975, and rose as expected for almost 100 pips, but without reaching the suggested target 1.2085, as it settled for 1.2072. Unlike what some might think, this behavior was not a surprise, but a normal part of wave 4 which we have talked about. This behavior enhances our hypothesis that we are in a wave 4 of a 5-wave decline, since its known in (The Wave Principle) that wave 4 price action appears to be random while this wave is developing, just as it is the case for wave B as well. Breaking below 1.20 on Friday has opened the door for guessing the long term targets in these areas, the question now is where are these targets? In our opinion, we believe that there is one target, one point, which stands out of the crowd, and that is 1.1211, which will be our target for the next few weeks. The importance of this level is that it is the 61.8% Fibonacci for the whole move from the historical low to the historical high. For the short term, the wave count illustrated on the chart, shows a 4-wave drop, in which Tuesday’s “break” is wave 4, and we still have room for another leg down below 1.1875, in what would be wave 5. Short term support is at 1.2021, and if broken the Euro will continue its drop to 1.1875, and then 1.1825. The resistance is at the important 1.12085, and breaking it will give the chance for the Euro to catch a break, and rise to 1.2176 & 1.2264.
• 1.2021: important intraday level.
• 1.1875: Monday’s low, this cycle’s low, and the 4-year low.
• 1.1825: Feb 27th 2006 low.
• 1.2085: Fibonacci 61.8% for the last drop from 1.2214.
• 1.2176: May 25th low.
• 1.2264: May 28th low.
Dollar/Yen reserved the “boredom” state in which it spent the previous two days. This very limited action, has postponed the excitement, hopefully for no longer than today, especially after a critical level has appeared this morning, catching all of our attention since yesterday. This level is the support at 90.62. The reasons which makes this level a shining star standing out is that it combines the rising trend line from May 20th, with May 26th high (approx.), giving this level a double importance. But, before we can test this level, we need to break Monday’s low 90.96. And if we do, we will drop to test this very important (and hopefully very exciting) level 90.62. Breaking here would have serious consequences on this pair, and 89.81 will only be a first & modest target for this break, on the way to lower levels. Resistance is at 91.48, and if broken, the important support test scenario will be void, and we will target 92.56 & 93.62.
• 90.96: Monday’s low.
• 90.62: May 26th high (approx.) & the important rising trend line on hourly charts.
• 89.81: May 26th low.
• 91.48: the falling trend line from Monday’s top on the hourly chart.
• 92.56: Apr 13th low.
• 93.62: May 13th high.
Forex Trading Analysis written by Munther Marji for Forex Pros.
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