Analytical review of EUR/USD with a forecast for August 6, 2010

On Thursday, the European Single Currency increased slightly against the US dollar following the disappointing US Labor market data.
In the first part of the day, the pair had reached a new day low at 1.3122, but then the growth refreshed and within a few hours the euro hit the mark of 1.3235.

The trading day closed with the euro advance, which totaled to 28 points. The volatility was 115 points.

Fundamental review:
As it became known yesterday, the European Central Bank left the key interest rate at the level of 1%. The majority of experts and market participants had been predicting the key policy rate unchanged.

The ECB’s President J.-C. Trichet in his yesterday’s speech said that the Eurozone economy is strengthening, but the current growth pace is unlikely to maintain in the second part of the year.

In his opinion, the second part of the year will be less optimistic than the second quarter. “I think Q2 was very favorable and Q3 would be better than it was expected earlier”, declared he.

According to Trichet, many reports point out positive tendencies in the economy development, but risks appeared because of the renewed arguments on the financial markets, rising crude and other commodities prices can affect negatively the further development.

Concerning the US fundamental statistics, it can be said that the initial jobless claims increased unexpectedly on the week of July 25 – 31.

In accordance with the report, the initial jobless claims rose 19,000 to 479,000, while experts had been expecting a shrink of 2,000.

The previous week’s reading was revised upwardly to 460,000 versus 457,000 reported initially.

Technical analysis:
The pair keeps trading in the descendant price channel from August 3, 2010. The bottom limit of the channel goes through the low of 1.3146 from August 3 and yesterday’s low of 1.3119. the upper limit is built from this month high of 1.3261.

The pair is supported by the level of 1.3173. In case of the breakout of this level the decline can continue to 1.3145 and then to 1.3121-06.

The first resistance level is 1.3214, and if it is broken through, the pair will rise to 1.3238 and to the week high of 1.3261.

Bollinger bands are down-directed and converging gradually indicating the volatility lowering. The trading is held in the upper part of the channel and the mid-band placed at 1.3173 is the support.

MACD is near zero mark pointing out a sideways market movement.
Today’s recommendations:
Support levels: 1.3173, 1.3145, 1.3121.
Resistance levels: 1.3214, 1.3238, 1.3261.

Today it is advisable to buy the pair at 1-hour timeframe closing above the level of 1.3197 with a target – T/P 1.3241 and S/L 1.3172.
It is possible to sell at the closing of 1-hour timeframe below 1.3173 with a target – T/P 1.3133 and S/L 1.3197.

More analysis at