ForexPros Daily Analysis February 3, 2010
Fundamental Analysis: Ivey PMI
Canadian traders anticipate the publication of the Ivey Purchasing Manager’s Index (PMI) tomorrow, February 4. The index measures the activity level of purchasing managers in Canada.
Any reading above 50 indicates expansion, while a reading below 50 indicates contraction. It gives an indication about the health of the manufacturing section and production growth in Canada.
Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
A higher than expected reading should be taken as positive/bullish for the CAD, while a lower than expected reading should be taken as negative/bearish for the CAD. Analysts predict a reading of 52.00 versus a past lower reading of 48.40.
The Euro broke the resistance 1.3933, and although the rising move did not reach 50 pips, but closing above it indicates that this is a valid break, and makes us believe that the short term down trend is over. This break faces a difficult resistance at Monday’s top 1.3985, and if this break is serious, we should see a break for this resistance specifically. Breaking resistance 1.3985 will initiate a correction for the whole drop from 1.4577, targeting 1.4062 first, then ideal targets start at 1.4128. On the other hand, support is provided by the rising trend line from Monday’s bottom 1.3851, which is currently at 1.3930. Breaking this support means that we will test the important 1.3824, and if broken, targets start at 1.3747.
• 1.3930: the rising trend line from this week’s low on intraday charts.
• 1.3851: this week’s low so far.
• 1.3747: Jun 16th low.
• 1.3985: Jan 29th high.
• 1.4062: Fibonacci 61.8% for the last drop from 1.4192.
• 1.4128: Fibonacci 38.2% for the whole drop from 1.4577.
Dollar-Yen traded in a very tight range, without breaking support or resistance from the report, and we are still watching this bounce, which started to lose momentum. This fine bounce may manage to capitalize on the break of 90.36 to go higher, going through the resistance 90.79. If the Dollar is meant to achieve more gains from this bounce, it is preferred that we do not break support at 90.34 where the SMA100 moving average is. And between 90.79 & 90.34, we will await a break of either of them to set the direction for the short term. If we break the resistance 90.79, the price will already be in a correction for the whole drop from 93.75, with ideal targets at 91.44 & 91.98. In case of a break of the support 90.34, we will target 89.57 and if broken we will be going back to the same trend line that provided last week’s support, which is currently at 88.48.
• 90.34: the moving average SMA100 on the hourly chart.
• 89.57: Jan 29th low.
• 88.48: the support of the falling trend line from 90.58.
• 90.79: important intraday top.
• 91.44: Fibonacci 50% for the whole drop from 93.75.
• 91.98: Fibonacci 61.8% for the whole drop from 93.75.
Forex Trading Analysis written by Munther Marji for ForexPros.
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