Daily Analysis – 19/08/2010

ForexPros Daily Analysis August 19, 2010

Fundamental Analysis: Core CPI

The Core Consumer Price Index (CPI) measures the changes in the price of
goods and services excluding food and energy. The CPI measures price change
from the perspective of the consumer. It is a key way to measure changes in
purchasing trends and inflation in Canada.
A higher than expected reading should be taken as positive/bullish for the
CAD (as the common way to fight inflation is raising rates, which may
attract foreign investment), while a lower than expected reading should be
taken as negative/bearish for the CAD. The analysts predict a future reading
of 0.10%.

Euro Dollar

The Euro’s bounce from the bottom it reached shortly after the weekly open
at 1.2733, halted yesterday at 1.2920. Such a rebound is considered very
“modest” comparing to the drop it followed, which came very close to 600
pips! We can clearly see that we have not even reached the first Fibonacci
level 38.2%. Technically, the most important event was dropping, and now
reaching, another important trend line, which is the rising trend line from
June 7th low (please refer to the attached chart). This line which was
tested accurately on Monday, is running now at 1.2793, and it was touched
and slightly surpassed during the Asian session, with the price bottoming at
1.2781. If this level is broken, we will be already on the way to break this
week’s low 1.2733 as we target 1.2660 first, then 1.2604. On the other hand,
resistance is at 1.2867. Only with a break here will the Euro be able to
move forward. If we get this break, we think that the price will rise with
the target of reaching Fibonacci levels 1.2991& 1.3057.

* 1.2793: the rising trend line from Jun 7th low on the hourly chart.
* 1.2660: Jul 6th high.
* 1.2604: Fibonacci 50% for the whole rise from 1.1875 to 1.3332.

* 1.2867: important intraday level.
* 1.2991: Fibonacci 38.2% level for the drop from the 3-month high of
* 1.3057: Fibonacci 50% level for the drop from the 3-month high of 1.3332.


Boredom is back! Boredom is here again! As we have seen in previous periods
this year, the Dollar/Yen is back to trading in very tight ranges, it did
not break any of the levels specified in yesterday’s report. It approached
85 but failed to make a break, it also stayed the whole time below the
resistance 86.21. Let’s leave the daily & weekly charts we have been
obsessed with lately, and just focus on the hourly chart. We can see that
there is a very exciting trend line, dropping from June 4th top. This line
is running currently at 86.06. Therefore, all of our attention is at the
exciting trend line & the importance it provides. As long as we are trading
below this line, the downtrend will be ok, but if we break the resistance
86.06 we will shoot up targeting 87.00 and may be 87.70. Where if we go back
to trade below the support 85.35, we will target 84.70 first, and there will
be nothing stopping the price from reaching our awaited target 83.85.

* 85.35: the rising trend line from this week’s low on the hourly chart.
* 84.70: This year’s low, and the lowest level since 1995..
* 83.87: Fibonacci extension level 138.2% for the falling wave from 86.86,
compared to the wave which started at 88.10.

* 86.06: the falling trend line from June 4th top on the hourly chart, and
Aug 10th top.
* 87.00: Jul 7th low.
* 87.70: June 26th top.

Forex trading analysis written by Munther Marji for Forexpros.

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