ForexPros Daily Analysis September 29, 2010
Euro Dollar
Yesterday, we said “the Euro has 2 choices, not 3: either it breaks 1.3509, or it collapses”, and indeed the Euro did break 1.3509 and reached our first suggested target 1.3589 successfully & accurately (the 2-day high for yesterday & today until the moment of preparing this report is 1.3594). Earlier yesterday, the Euro broke the support at 1.3448 and almost made it to our first suggested target 1.3368, but it stopped 12 pips before achieving this unique happening of reached the sell strategy target & the buy strategy target on the same day. Breaking 1.3509 is a solid confirmation of the righteousness of our medium term outlook. Last week, we had analyzed the medium-long term, and after doing all the necessary analysis using classical technical analysis, Elliot & Fibonacci, we found that most probably the first leg up from 1.1875 to 1.3332 is wave A of a 3-wave correction up. We also found that, most probably, the drop which followed is wave B, which stopped at Fibonacci 50% level of wave A with not-so-well kind of accuracy as it bottomed at 1.2586 whereas the Fibonacci level was 1.2604. If this move has stopped closer to the Fibonacci level, we would have expected this current rise from the first step it took around 1.26. So, currently, we are in wave C, which will ideally target the equality level (where wave A = wave C) which is at 1.4043, or the Fibonacci 61.8% level for the massive drop from 1.5143 to 1.1875 which is at 1.3895, or the top of the rising channel on the daily chart, which is currently at 1.3794 and will rise with time. This leaves the area between 1.3895 & 1.4043 as the proffered target area for this wave. We do believe we are heading there on in a matter of weeks. We expect to reach the target area by December, which is a month famous for introducing medium & long term tops for EURUSD. From there we could see the Euro collapsing and dropping to areas below 1.18, but it is too early to talk about this issue now, and we will leave the next stage discussion to a more appropriate time. Keep in mind that breaking 1.3509 confirms this analysis, and it supports the idea that we are heading to the target area suggested in the medium term analysis. Let’s talk short term now: resistance is at 1.3589, and if broken, we will target 1.3690 and then 1.3787. Short term support is at 1.3554, and if broken we expect a drop to 1.3461, and if broken to 1.3380.
Support:
• 1.3554: important intraday level.
• 1.3461: Fibonacci 61.8% for the rise from 1.3380.
• 1.3380: Yesterday’s low.
Resistance:
• 1.3589: Apr 1st & 2nd high.
• 1.3690: Apr 12th high.
• 1.3787: Feb 17th high.
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USD/JPY
Finally, we broke 84.03 which was under our spotlight for several days. The drop which followed reached 83.59 so far. This break opened the door wide for a test, and most probably a break, of the 15-year low 82.87. We believe that getting there is only a matter of time. As you probably remember, the importance of 84.03 comes from the fact that it is the 61.8% Fibonacci level for the rise from the 15-year low of 82.87 to the post-intervention top 85.91, therefore, it is the “guardian” of the 15-year bottom. This makes breaking 84.03 the first step in breaking 82.87, and reaching fresh 15-year lows. But the question is will this drop be fast, and we see these levels relatively soon, let’s say before the weekend? Or will it be a slow drop that will consume many days to get there? Short term support is at 85.30, and if broken, the drop will go on, and target areas below 83, we love 82.87 & 82.40 most of them. Short term resistance is a bit far, and it is at 84.71. If broken, we will shoot up 85.91 & 86.95, very unlikely at the moment, unless we have an intervention.
Support:
• 83.50: Sep 7th low.
• 82.87: Sep 14th low, and the low for the last 15 years.
• 82.40: the trend line combining the monthly bottoms of Dec 2008, Jan & Nov 2009.
Resistance:
• 84.71: the falling trend line from May 5th top on the daily chart.
• 85.91: Sep 16th high.
• 86.95: Jul 1st low.
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GBP/USD
Violent fluctuations seen yesterday, jumping to 1.5894 then dropping hard in a matter of 3 hours to 1.5718 is most probably a play to hit the largest number of stops on both sides, before initiating a large move. Technically speaking, breaking 1.5871 yesterday is definitely a positive sign, indicating strength. It was the second positive sign after breaking 1.5728 last week. Today, there is a notably important resistance at 1.5880, this level could give the green light to moving higher, or decline this attempt. We believe that breaking this level or failing at it is the single most important factor determining the short term direction. If we break 1.5880, the Pound will not settle for less than 1.60 seen for the first time in months! And may be later 1.6056. On the other hand, failure here will give the Dollar a chance to breathe, and go back down to test 1.5838. If broken, the Pound will suffer a downward correction, targeting yesterday’s low first, then the very important Fibonacci level 1.5651.
Support:
• 1.5838: important intraday level.
• 1.5718: Yesterday’s low.
• 1.5651: short term Fibonacci 61.8% support.
Resistance:
• 1.5880: important intraday level.
• 1.6000: psychological level.
• 1.6056: Jan 7th high.
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Forex trading analysis written by Munther Marji for Forexpros.
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