ForexPros Daily Analysis July 5, 2010
Fundamental Analysis: RBA Rate Statement
Traders anticipate the publication of the RBA Rate Statement. The Reserve Bank of Australia’s monthly interest rate statement describes its latest decision regarding changes to the country’s short term interest rates, monetary policy, and the direction of the economy. Short term interest rates are the key factor in currency valuation. A dovish statement could push AUD down against its rivals, while hawkish statement could boost the currency.
The Euro broke the resistance specified in Friday’s report 1.2508, and stopped only 7 pips before the suggested target 1.2616 (Friday’s high was 1.2609). The most important technical event, was approaching the top of the rising channel on the hourly chart. We could be before an important turning point, and we should carefully watch the top of this channel, which is at 1.2646 currently. We will not be able to escape the fact that a break here will be a very positive signal for both the short & medium terms. But, if we keep trading below this top, we could be facing a turning point which will probably lead to a drop of hundreds of points. Short term support is at 1.2527, and once we break it, we will start drifting away from the channel top, and will target 1.2451, and may be 1.2370. The resistance is at 1.2563, and if broken we will target another test of the channel top at 1.2646. If this one is also broken, 1.2737 will be a first & modest target for this break, on the way to higher targets.
• 1.2527: a rising trend line on intraday charts.
• 1.2451: May 28th high.
• 1.2370: May 25th high.
• 1.2563: important intraday resistance.
• 1.2646: the top of the falling channel on intraday charts.
• 1.2737: May 12th high.
The Dollar/Yen dropped below the resistance we talked about on Friday: Fibonacci 38.2% for the short term at 88.67. It did not test it or even approach it. With this consolidation around 88, and after bouncing from the support area shown on the daily chart below, and after clearly breaking the falling trend line from June 21st top, we think that the possibility of a bounce is rising, even if that was for a correction. Short term support is at 87.67, and breaking it would indicate a continuation of the drop to 87.00 & 86.47. The resistance is at 88.15, and breaking it would mean that the Dollar is about to capitalize on the break of the above mentioned trend line, which will ideally target short term Fibonacci levels: 89.20 & 89.73. 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 after hitting 87, we should be careful since we could see a bounce, because we already touched the descending trend line illustrated on the attached chart, a bounce is highly probable, even if it was a temp, but the trend is down without a shadow of a doubt!
• 87.67: the rising trend line from Thursday’s low.
• 87.00: Nov 27th 2009 high.
• 86.47: previous well known support.
• 88.15: an important intraday resistance level just above the falling trend line from Jun 21st top on the hourly chart.
• 89.20: Fibonacci 50% for the drop from 91.45.
• 89.73: Fibonacci 61.8% for the drop from 91.45.
Forex trading analysis written by Munther Marji for Forexpros.
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