ForexPros Daily Analysis June 29, 2010
Fundamental Analysis: GDP
European traders anticipate the publication of the Gross Domestic Product (GDP). It is the broadest measure of economic activity and is a key indicator for the economy’s health. The quarterly percent changes in GDP shows the growth rate of the economy as a whole. A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP. Analysts predict a future reading of 0.30%.
The Euro broke the support specified in yesterday’s report 1.2358, and dropped as expected, and reached the first suggested target 1.2260, successfully! What is funny, is that the Euro dropped more than 150 pips from the top it reached after this week’s open, while the Pound reached a 7-week high above 1.51, and consolidated just below it. Therefore, it is hard to channel the direction of the European currencies against the greenback, and this in itself calls for caution. In the case of the Euro, its fall to meet our suggested target at 1.2260 is a negative sign for the short term without a doubt, If added to the fact that this drop came after the failure to break the top of the descending channel, we can see that this is also negative for the medium term as well. Today’s support is at Fibonacci 38.2% for the medium term at 1.2240, which we trade just above at the time of preparing this report. If broken, we will fall to test the more important Fibonacci levels: 50% At 1.2170, and 61.8% at 1.2100, which is the most important medium term support. The resistance is at 1.2337, and only with a break above here, this pair will improve its negative technical outlook for the short term. If broken, we will target 1.2396 once again, and if this one is also broken, we will be on the way to 1.2519.
• 1.2240: Fibonacci 38.2% for the whole rising move from this cycle’s low to last week’s high.
• 1.2170: Fibonacci 50% for the whole rising move from this cycle’s low to last week’s high.
• 1.2100: Fibonacci 61.8% for the whole rising move from this cycle’s low to last week’s high.
• 1.2337: Fibonacci 61.8% for the short term.
• 1.2396: the weekly high so far.
• 1.2519: May 6th low.
The Dollar/Yen continued to drop slowly, a bit faster than usual this morning, in yet another confirmation that the bears are beating the bulls! USDJPY broke the support specified in yesterday’s report 89.20, and reached a new bottom for this recent falling trend at 88.59 without being able to meet our suggested target 87.99. This confirms the negative technical outlook we have seen lately. And we believe it will persist as long as we are trading below the falling trend line from June 14th top, which is currently at 90.64. Short term support is at 88.67, and breaking it will be another evidence that we are going down. This break will target 87.99 & 87.35. The resistance has shifted to 89.45, where we see an important level for several reasons. Breaking this level will give this pair a chance to test the important trend line at 90.64 as a first target, and if this one is broken, things will go against our outlook, as we will target 92.07. This pair is going as expected, in the expected direction, and in convergence with our negative technical outlook for the short & medium terms. We expect the fall to go on, but we hope to see it go faster, and more exciting. But for today in specific, we should be careful since we could see a bounce, because we came very close to the descending trend line illustrated on the attached chart, a bounce is highly probable, even if it was a temp.
• 88.67: important intraday level.
• 87.99: May 6th low.
• 87.35: Dec 9th 2009 low.
• 89.45: important intraday level.
• 90.64: the descending trend line from Jun 14th top on the hourly chart.
• 92.07: the important resistance area holding Jun 7th & 14th.
Forex trading analysis written by Munther Marji for Forexpros.
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