Daily Analysis – 18/05/2010

ForexPros Daily Analysis May 18, 2010

Fundamental Analysis: GDP (QoQ)

Traders anticipate the publication of the Japanese Gross Domestic Product. GDP 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 JPY, while a lower than expected reading should be taken as negative/bearish for the JPY. Analysts predict a future reading of 1.40%.

Euro Dollar

The Euro broke the resistance specified in yesterday’s report, and jumped for more than 100 pips, without reaching the suggested target 1.2435 (yesterday’s high was 1.2412). This climb has brought the Euro close to the top of the hourly channel falling from May 10th high. The upper line in this channel has a great significance, and it is the line which is guarding the downtrend. It goes without saying that breaking this line will result in a change in direction for the short term. But, we highly doubt that it can change the medium term dark outlook. This line is currently running at 1.2399, and if broken, a dramatic rise will takeoff up to the important 1.2511. If this one is also broken, the next target will be 1.2604. on the other hand, the support is obviously provided by the rising trend line from yesterday’s low on intraday charts. This line is at 1.2336 currently, and by breaking it the price will continue to trade within the channel. This will lead to another drop, targeting a test of yesterday’s low 1.2223 first, then a new 4-year low at 1.2113.

• 1.2336: the rising trend line from this week’s low (so far).
• 1.2223: yesterday’s low.
• 1.2113: Apr 17th 2006 low.

• 1.2399: the top of the falling channel on the hourly chart..
• 1.2511: May 10th low.
• 1.2604: May 12th important low.


After 3 times of touching and holding above the support we specified in yesterday’s report 91.79 (today’s high until the moment of preparing this report is 91.75), the price is back above 92. Actually it is closing on the most important resistance for the short term: 92.99. The importance of this levels comes from the fact that it is Fibonacci 61.8% for the drop from 93.62. Incase the Dollar can go above it, this pair will test the exciting resistance 93.49, and if this one is also broken we will jump to 94.31. On the other hand, the support has become far now, it is still at 91.79, which proved with no doubt that it is very Important. As long as the price is above this level, the technical outlook will be neutral to positive. But if it is broken, the price will probably drop to two very important levels 90.75 & 90.09. The latter is the single most important support at this stage.

• 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.

• 92.99: Fibonacci 61.8% for the short term..
• 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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