ForexPros Daily Analysis August 23, 2010
Fundamental Analysis: Existing Home Sales
The Existing Home Sales measures the annualized number of existing
residential buildings that were sold during the previous month. This report
helps to analyze the strength of the US housing market, which helps to
analysis the economy as a whole. 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 4.75M.
As expected, the Euro landed hard after breaking the support we specified in
Friday’s report 1.2791, dropping more than 125 pips, and stopping only 3
pips before meeting our target @ 1.2660. With this new extension to the
medium term drop from 1.3332, the size of this drop has become enormous, and
cannot be ignored. Last week, we suggested a wave count with 5 complete
waves up from 1.1875. But, until this moment, we have not reached but only
the first Fibonacci retracement level for the 5-wave move at 1.2775.
Therefore, in spite of the size of this drop, we highly doubt that it has
shown all its cards. We believe this drop is capable of reaching Fibonacci
50% at least, or even go lower than that. But, what increases the risk in
these areas, is that after such a huge move, the Euro is subject to a
correction at any time, and from any level. Short term support is at the
Asian session low 1.2688. A break here would be a confirmation that we are
heading to Fibonacci 50% at 1.2604, and at a later time 1.2522. On the Other
hand, resistance is at 1.2791, this pair cannot continue achieving gains
unless we break the resistance 1.2791. In case we get this break, we will be
heading to 1.2919 & 1.2998.
* 1.2688: Asian session low.
* 1.2604: Fibonacci 50% for the whole rise from 1.1875 to 1.3332.
* 1.2552: Jul 13th low.
* 1.2791: the falling trend line from Aug 6th high on the intraday chart.
* 1.2919: Fibonacci 38.2% level for the drop from the 3-month high of
* 1.2998: Fibonacci 50% level for the drop from the 3-month high of 1.3332.
The Dollar/Yen did not break the support or the resistance specified in
Friday’s report. It traded in a very dull range of almost 55 pips, and we
are still waiting for a break bringing some excitement to this pair. 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 85.80.
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 85.80 we will shoot up
targeting 87.00 and may be 87.70. The support is provided by an important
intraday support at 85.18. If broken, we will target 84.70 first, and there
will be nothing stopping the price from reaching our awaited target 83.87,
except for the BoJ.
* 85.18: important intraday level.
* 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.
* 85.80: the falling trend line from June 4th top on the hourly chart.
* 87.00: Jul 7th low.
* 87.70: June 26th top.
Forex trading analysis written by Munther Marji for Forexpros.
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