ForexPros Daily Analysis August 10, 2010
Fundamental Analysis: Trade Balance
The Trade Balance index measures the difference in worth between exported
and imported goods (exports minus imports). This is the largest component of
a country’s balance of payments.
Export data can give reflection on the US growth. Imports provide an
indication of domestic demand. Because foreigners must buy the domestic
currency to pay for the nation’s exports, it may have sizable affect on the
USD. 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
In an obvious concern about the uptrend, yesterday’s headline was “The whole
short-term uptrend at stake”, and so it happened. The Euro broke the support
specified in yesterday’s report 1.3265, and successfully reached the first
suggested target 1.3195, and even came close to the second suggested target,
stopping only a few steps before hitting it. Technically, what is really
important is that we have, and without any room for doubt, broken a very
important trend line: the ascending trend line from June 29th low on hourly
the chart, at 1.3194. Therefore, the technical outlook has completely
changes the minute this line was broken. The Euro is left vulnerable for
severe losses, which we have seen almost 60 pips of which until the moment.
But we highly doubt that this is it, and we strongly believe that this pair
will continue moving south in the shadow of a technical outlook which
changed radically yesterday. Short term support is at 1.3133, if broken, the
price will drop to 1.3026, then to a very important medium term level at
1.2961. On the other hand the resistance is at 1.3233 and only with a break
here that the dark outlook will be changed! If this happens, a strong jump
to 1.3347 is to be expected, and may be later we will see 1.3442.
* 1.3133: Asian session low, which is only 3 pips above a well known support
* 1.3026: Jul 20th high.
* 1.2961: Fibonacci 61.8% for the whole rising move from 1.2731 to Friday’s
& 3-month high.
* 1.3233: the retest level for the broken trend line.
* 1.3347: May 3rd unforgettable top.
* 1.3442: Feb 19th important low.
The Dollar/Yen did not break the support or the resistance specified in
yesterday’s report yesterday, but it tried to break the resistance 85.89 a
few hours ago during the Asian session. With this, we see a continuation of
the correction from Friday’s low, after hitting another, lower target for
the downward wave we have been talking about for weeks, , 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. 78, 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
will target 83.87. The resistance is at 86.43, and if broken, the price will
continue its bounce, targeting 87.49 & the important 88.10.
* 85.78: the bottom of the rising corrective trend channel on the hourly
* 84.81: Nov 27th 2009 & a 15-year low.
* 83.87: Fibonacci extension level 138.2% for the falling wave from 86.86,
compared to the wave which started at 88.10.
* 86.43: the top of the rising corrective trend channel on the hourly chart.
* 87.49: Jul 29th high.
* 88.10: Jul 28th high.
Forex trading analysis written by Munther Marji for Forexpros.
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