Daily Analysis – 25/08/2010

ForexPros Daily Analysis August 25, 2010

Euro Dollar

The Euro broke the support we specified in yesterday’s report 1.2630, dropping modestly to 1.2586, and stopping clearly before meeting our target at 1.2550. 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. And as we reach Fibonacci 50% for this massive move at 1.2604, we should not neglect the possibility that the correction might me over after reaching such an important target. Short term support is at 1.2627, and we believe a break here will indicate that the drop is far from over, and that the Euro will sink below yesterday’s low. In this case the suggested targets will be the same as yesterday: 1.2550 first, then the all important 1.2432. On the other hand, yesterday’s trading proved the importance of Fibonacci 38.2% for the drop from 1.2990. This resistance is at 1.2714, and will be our resistance of the day. If broken, the Euro will jump to other important Fibonacci levels at 1.2792 & 1.2871.

• 1.2627: Asian session low.
• 1.2550: the support area containing Jul 7th & 12th lows.
• 1.2432: Fibonacci 61.8% for the whole rise from 1.1875 to 1.3332.

• 1.2714: Fibonacci 38.2% for the drop from 1.2920.
• 1.2792: Fibonacci 61.8% for the drop from 1.2920.
• 1.2871: Fibonacci 38.2% level for the drop from the 3-month high of 1.3332.


Finally, the Dollar/Yen dropped in the fashion we have been waiting for, and with the strength that we missed! The price broke yesterday’s report, and dived to a new 15-year low to successfully reach our suggested target at 83.87. 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, which we expected, from the very beginning, that it will dive below 84.81. 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 85.45. 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 85.45 we will shoot up targeting 86.81 and may be 87.70. The support is provided by 83.92. If broken, there will be nothing stopping the price from reaching our awaited target 82.65, except for the BoJ. And if the “Japs” keep quiet, we could see 79.75 later, may be next month.

• 83.92: Fibonacci 61.8% for the rise from yesterday’s low, and 15-year low 83.58.
• 82.65: the trend line combining the monthly lows of Dec 08, Jan & Nov 09, on the weekly chart.
• 79.75: this pair’s historical low.

• 85.45: the falling trend line from June 4th top on the hourly chart.
• 86.81: Jul 26th & 27th low.
• 87.70: June 26th top.

Forex trading analysis written by Munther Marji for Forexpros.

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