ForexPros Daily Analysis July 6, 2010
Fundamental Analysis: Canadian Ivey PMI
North American traders anticipate the publication of the Ivey Purchasing Manager’s Index (PMI). The index measures the activity level of purchasing managers in Canada. Any reading above 50 indicates expansion, while a reading below 50 indicates contraction. It gives an indication about the health of the manufacturing section and production growth in Canada. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. A higher than expected reading should be taken as positive/bullish for the CAD, while a lower than expected reading should be taken as negative/bearish for the CAD. Analysts predict a future reading of 64.20.
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Euro Dollar
The Euro stopped ahead of the resistance specified in yesterday’s report 1.2563 (the high for the past 24 hours is 1.2556). Later, it dropped, breaking the support specified in the report 1.2527, and went down as expected, but only to find another support at 1.2479, standing between it & its target at 1.2451. The most important technical event, was approaching the top of the rising channel on the hourly chart on Friday. We could be before an important turning point at 1.2609, since we saw the price falling away from this level yesterday. We should carefully watch the top of this channel, which is at 1.2656 currently. We will not be able to escape the fact that a break here will be a very positive signal for both the short & medium terms. But, if we keep trading below this top, we could be facing a turning point which will probably lead to a drop of hundreds of points. Short term support is at 1.2510, and once we break it, we will start drifting away from the channel top, and will target 1.2442, and may be 1.2370. The resistance is at 1.2570, and if broken we will target another test of the channel top at 1.2656. If this one is also broken, 1.2737 will be a first & modest target for this break, on the way to higher targets.
Support:
• 1.2510: important intraday level.
• 1.2442: May 18th high.
• 1.2370: May 25th high.
Resistance:
• 1.2570: important intraday resistance.
• 1.2656: the top of the falling channel on intraday charts.
• 1.2737: May 12th high.
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USD/JPY
In spite of the obvious trend line break to the upside, we have not seen a reaction to match the importance of this break until this moment. But fear not, this does not change the positive technical outlook for this pair. We still believe in the possibilities of a strong bounce. With this consolidation around 88, and after bouncing from the support area shown on the hourly chart below, and after clearly breaking the falling trend line from June 21st top (please refer to the attached chart), we think that the possibility of a bounce is rising, even if that was for a correction. Short term support is at 87.57, and breaking it would indicate a continuation of the drop to 86.95 & 86.47. The resistance is at 87.96, and breaking it would mean that the Dollar is about to capitalize on the break of the above mentioned trend line, which will ideally target short term Fibonacci levels: 88.67 & 89.20. This pair is going as expected, in the expected direction, and in convergence with our negative technical outlook for the medium term. We absolutely expect the fall to continue on the medium term. But after hitting 87, we should not neglect the enormous possibilities of a bounce up: a bounce is highly probable, even if it was a temp, but the trend is down without a shadow of a doubt!
Support:
• 87.57: the rising trend line from Thursday’s low.
• 86.95: Thursday’s low.
• 86.47: previous well known support.
Resistance:
• 87.96: important intraday resistance level just above the (broken) falling trend line from Jun 21st top on the hourly chart.
• 88.67: Fibonacci 38.2% for the drop from 91.45.
• 89.20: Fibonacci 50% for the drop from 91.45.
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Forex trading analysis written by Munther Marji for Forexpros.
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