ForexPros Daily Analysis June 14, 2010
Fundamental Analysis: German ZEW Economic Sentiment
European traders await the publication of the German ZEW Economic Sentiment. It determines the sentiment of German institutional investors. Above 0 indicates optimism while below 0 indicates pessimism. It’s a leading indicator of business conditions. The reading is concluded from survey of about 350 German institutional investors and analysts. A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR. Analysts predict a future reading of 48.70.
The Euro broke the resistance 1.2127 which we said that it “will be very positive for the short term”, and successfully reached the first suggested target 1.2176, confirming the “break of the downtrend” which we talked about on Friday. There is no doubt that the Euro has broken the trend, but that is only for the short term. We should not confuse this actual trend break and the change in direction for the short term, which the persisting downtrend for the medium term which is still going strong. This break has passed the first challenge on Friday by breaking 1.2127, but it is invited to another equally important challenge at 1.2214 today. If the Euro is to continue with its rise, it should break this resistance and should not stop at or near it. In case we do break this resistance the targets will be 1.2295 first, and then 1.2352. On the other hand, the support is at 1.2166, and if we break it, then this “hot” rise will go cold, and we will fall targeting the important 1.2106, then 1.2044.
• 1.2166: important intraday support.
• 1.2106: Fibonacci 61.8 for the short term.
• 1.2044: Friday’s low, and the retest level of the broken trend channel.
• 1.2214: June 4th high.
• 1.2295: May 20h low.
• 1.2352: May 1st high.
Dollar/Yen broke the resistance specified in Friday’s report 91.65, but it barely made it to 92 (the high at the moment of preparing this report is exactly 92.00), which makes us wonder if we will see results to this break. We are full of hope to see some excitement today, as we are betting on the Dollar to capitalize on the break of the falling trend line from last week’s high. And if it breaks the resistance 91.91, that would be probable, and we would be looking forward to reach the 92.56 & 93.62 targets. Having said that, the possibility of a drop remains, but it now needs a break of the support 91.60. If we do, we will target a critical level has appeared this morning, catching all of our attention for the past 3 days. This level is the support at 90.65. The reasons which makes this level a shining star standing out is that it combines the rising trend line from May 20th, with June 7th low, giving this level a double importance. But, before we can test this level, we need to break the 91.60, which is the rising trend line from Thursday’s low. And if we do, we will drop to test this very important (and hopefully very exciting) level 90.94. 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.
• 91.60: the rising trend line from Thursday’s low on the hourly chart.
• 90.94: June 7th low & the important rising trend line on hourly charts.
• 89.81: May 26th low.
• 91.91: June 8th high.
• 92.56: Apr 13th low.
• 93.62: May 13th high.
Forex trading analysis written by Munther Marji for Forexpros.
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