ForexPros Daily Analysis May 17, 2010
Fundamental Analysis: German ZEW Economic Sentiment
European traders anticipate the German ZEW Economic Sentiment. The German Zentrum für Europäische Wirtschaftsforschung (ZEW) Economic Sentiment 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 47.00
The Euro broke the Support specified in Friday’s report 1.2608 and dropped hard, reaching both suggested targets 1.2511 & 1.2455 with complete success, and even dropping more than 200 pips below the latter. This new collapse is just another part in this downtrend that won’t get tired! It has reached the lowest level in 4 years, and it seems like it is targeting the psychological level 1.20 on the short term, probably during this week. Today’s support is at 1.2254, and breaking it would indicate a continuation of the drop, and of this brutality of the Dollar towards the Euro. The targets for such a break if it happens will be 1.2113 then the psychological level 1.2000. As for the resistance it is at 1.2294, and breaking it would give us a bounce, actually a strong one after this collapse, in order to create a matching correction. In case this break happens, the targets will be 1.2435 & 1.2511. But even if the Euro reaches 1.2511, that will not harm the negative outlook which dragged the Euro to these low levels.
• 1.2254: important intraday low.
• 1.2113: Apr 17th 2006 low.
• 1.2000: psychological level.
• 1.2294: important intraday level.
• 1.2435: the top of the falling channel on the hourly chart.
• 1.2511: May 10th low.
The Yen is trying to hold on in face of a strong Dollar, It is trying to achieve some gains, not caring about how brutal is the Dollar treating the European currencies. The Yen managed to push the Dollar lower, to break Friday’s support 93.07, and fall more than 100 pips after that, but without reaching our suggested target 91.40. The question now is: Could the Yen go on with outperforming the Dollar? In order to do so, it needs two things: to hold under the resistance 92.40 & to break the support 91.79. If we break the support 91.79 the Yen will stay in the lead in this game, and will drag the Dollar to 2 important levels 90.75 & 90.09. The latter is an important level for both the short & medium terms. On the other hand, if we break the resistance 92.40, the Yen will give up to a very strong Dollar (against other currencies), and this pair will shoot to 92.49 & 94.31.
• 91.79: important intraday level.
• 90.75: Fibonacci 50% support for the rise from Thursday’s low.
• 90.09: Fibonacci 61.8% support for the rise from Thursday’s low.
• 92.40: the top of the falling trend channel on hourly charts.
• 93.49: previous hourly resistance, very close to last Monday’s top.
• 94.31: previous hourly support.
Forex Trading Analysis written by Munther Marji for Forex Pros.
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