ForexPros Daily Analysis August 09, 2010
Fundamental Analysis: Nonfarm Productivity
The Nonfarm Productivity measures the annualized change in the average
productivity level of US workers when producing goods and services,
excluding the farming sector. The Nonfarm Productivity is calculated by
dividing the GDP by the number of hours worked. Growth in Nonfarm
Productivity is usually seen as a sign of a healthy economy.
A drop in Labor Productivity indicates inflation – since it’s equivalent to
a rise in wages. It can be quite volatile. A higher than expected reading
should be taken as positive/bullish for the USD, while a lower than expected
reading should be taken as negative/bearish for the USD. The analysts
predict a future reading of 0.10%.-
The Euro broke the resistance specified in Friday’s report 1.3212, and
successfully reached the first suggested target 1.3311, reaching the highest
level in more the 3 month in the Dollar-aftermath which followed the coming
out of the US monthly employment report. Technically, what is really
important is that we came close on Friday to a very important trend line,
and we are still around it: the trend line rising from June 29th low on
hourly the chart, which is running at 1.3194. Therefore, we should keep eyes
& mind open today, and consider all scenarios, and keep separate trading
plans ready. If we test the above mentioned trend line, it will be the
single most important technical to start the week with. As we said, this
line is at 1.3194, and should not be broken in order to keep the technical
outlook positive. But before we get ahead f ourselves, there is another
important support at 1.3265, if broken we will target a test of the above
mentioned line. And if it is also broken, we will witness a strong drop to
1.3118 at the very least. On the other hand, short term resistance is at
1.3306, and it is the key for more gains. If we break it, we will target
1.3383 & 1.3442. When approaching such an important trend line, the
following move is usually massive, whether it is broken or it manages to
reverse the direction. That is why we will focus our attention on this line,
until it is broken to the downside, or the price shoots up very far from it!
* 1.3265: short term 38.2% Fibonacci.
* 1.3194: the rising trend line from Jun 29th low, the most important short
* 1.3118: Aug 5th low.
* 1.3306: Fibonacci 61.8% for the drop from Friday’s top.
* 1.3383: Mar 31st low.
* 1.3442: Feb 19th important low.
The Dollar/Yen broke the support specified in Friday’s report 85.74, and
dropped to a new yearly low at 85, only 19 pips above the 15 year low we
have seen in November 09! With this, the falling wave has successfully
managed to reach yet another target, but what are the next targets? In the
attached chart, which is a weekly one, we can see the falling channel from
Sep 07 top. Although the bottom of this channel is very far away, and is
just above 74, but there is an interesting trend line inside it, combining
the monthly lows of Dec 08, Jan & Nov 09. This line is around 82.65
currently, providing us with a perfect target for this dropping wave, since
we still expect, as we did before, that it will dive below 84.81. Therefore,
we expect the price to reach this target, and as we do, we also realize that
the limited volatility of this pair indicates that this will take some time.
As for the short term, the support is at 85.31, and breaking it would
indicate that we are already moving lower with the objective of breaking
84.81, and reaching lows not seen in 15 years. This break will target 83.87
& at a later time 82.65. The resistance is at 85.89, and if broken, the
price will continue its bounce, targeting 86.58 & 87.49.
* 85.31: Aug 4th low.
* 83.87: Fibonacci extension level 138.2% for the falling wave from 86.86,
compared to the wave which started at 88.10.
* 82.65: the trend line combining the monthly lows of Dec 08, Jan & Nov 09,
on the weekly chart.
* 85.89: the falling trend line from Jul 28th high on intraday charts.
* 86.58: the retest level for the rising trend line which combines the lows
of Jul 16th & 22nd.
* 87.49: Jul 29th high.
Forex trading analysis written by Munther Marji for Forexpros.
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