ForexPros Daily Analysis March 3, 2010
Fundamental Analysis: Interest Rate Decision
European traders anticipate the publication of the European Central Bank (ECB) decision on short term interest rate. The decision on where to set interest rates depends mostly on growth outlook and inflation. The primary objective of the central bank is to achieve price stability. High interest rates attract foreigners looking for the best “risk-free” return on their money, which can dramatically increases demand for the nation’s currency. A higher than expected rate is positive/bullish for the EUR, while a lower than expected rate is negative/bearish for the EUR. Analysts predict a reading of 1.00%.
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Euro Dollar
The Euro broke the support specified in yesterday’s report 1.3465, but it did not break the important bottom 1.3422. Then it bounced back very sharply, breaking the resistance 1.3578 and successfully reaching the first suggested target 1.3652 with astonishing accuracy (the high so far is 1.3653). Evidence now shows that there is a respectable probability that we have formed a short term top at 1.3653. Such evidence is provided by the overbought indicators, stopping at a well known resistance, and the retreat that started immediately after reaching the target. If this turns to be the case, the price will fall, and break short term support 1.3600. And here, the odds will clearly favor a short term drop. Ideal targets would be the important 1.3517, and if broken 1.3450. We do not advise to take any kind of bias towards the Euro before breaking the current daily high 1.3653. If this happens, the Euro’s uprising will continue, targeting 1.3740 & 1.3810.
Support:
• 1.3600: Fibonacci 23.6% for the short term & 38.2% for the micro term.
• 1.3517: Fibonacci 61.8% for the short term.
• 1.3450: Feb 25th low.
Resistance:
• 1.3653: important resistance level on hourly charts.
• 1.3740: previous well known resistance area.
• 1.3810: Feb 10th high.
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USD/JPY
Dollar-Yen broke the support 88.81 only to stop in the middle of the way to the suggested target, settling for 88.46. This break gives chance to more of the drop, but on one important condition. This condition is to stay below, and not break, the falling trend line from 92.13, which is currently only pips below the current price, at 88.88. If the price stays below this line, more drop is to be expected. Short term support is at 88.53, and if broken we will move slowly towards 88, where the targets 88.00 & 87.35 awaits. The technical outlook stays negative as long as we are below the resistance of the day 88.88. But in case this level is broken, USDJPY will enter a long awaited correction for the whole drop from 92.13, with the ideal targets at Dow & Fibonacci levels 89.68 & 90.30.
Support:
• 88.53: the most important support on intraday charts.
• 88.00: Fibonacci 61.8% for the short term.
• 87.35: Dec 9th low.
Resistance:
• 89.88: the falling trend line from 92.13 on the hourly charts, the upper limit for the downtrend.
• 89.68: Dow 33.3% for the drop from 92.31.
• 90.30: Fibonacci 50% for the drop from 92.31.
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Forex Trading Analysis written by Munther Marji for ForexPros.
For information on US dollar index see ForexPros.
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