ForexPros Daily Analysis July 21, 2010
Fundamental Analysis: Initial Jobless Claims
The Initial Jobless Claims is a seasonally adjusted measure of the number of people who file for unemployment benefits for the first time during the given week. This data is collected by the Department of Labor, and published as a weekly report. The number of jobless claims is used as a measure of the health of the job market, as a series of increases indicates that there are fewer people being hired.
On a week-to-week basis, claims are quite volatile. Usually, a move of at least 35K in claims, is required to signal a meaningful change in job growth. A higher than expected reading should be taken as negative/bearish for the USD, while a lower than expected reading should be taken as positive/bullish for the USD. The analysts predict a future reading of 445.00K.
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Euro Dollar
Although the Euro penetrated 1.30 and reached 1.3026, it dropped hard, breaking the support of yesterday’s report 1.2952, and bottoming just ahead of our suggested target and at 1.2838. With that, we have even more evidence of a reversal, most important factors in this conception are: 1. No daily close above 1.2997 & 2. A “reversal day” pattern for yesterdays bar/candle on the daily chart. This shows just how important the area around 1.30 is, which is probably the level most qualified to turn the Euro around, and resize this soaring move into a correction! This strong & sharp jump is a natural fruit of breaking the top of the channel after touching it for a record number of times, but eventually the Euro managed to break it! After that serious barrier, the energized Euro had faced even a harder one: Fibonacci 61.8% for the giant move down from 1.3690 to 1.1875. This level is at 1.2997, and will act as a heavy weight barrier in the face of this rise, which in spite of the fact that it has achieved more than 1000 pips so far, it still looks corrective (simply because it did not break the divine ratio 61.8% by closing above it). Now, even after a drop of more than 190 pips from yesterday’s top, 1.2997 will still be the most important resistance in the neighborhood, only a break here means more gains. If broken, we will soar above 1.30 for the first time in more than 2 months, and we will target 1.3092 & 1.3153. On the other hand, the support has shifted down to 1.2869, breaking it would indicate that we are drifting away from 1.2997. And that will target 1.2764 & 1.2707.
Support:
• 1.2869: Monday’s low.
• 1.2764: Fibonacci 50% for the short term.
• 1.2707: Fibonacci 61.8% for the short term.
Resistance:
• 1.2997: Fibonacci 61.8% for the massive dive from 1.3690 to 1.1875.
• 1.3092: May 10th high.
• 1.3153: May 3th low.
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USD/JPY
No change for yesterday’s outlook, after the Yen’s strength penetrated the lows of last December & January, we were left with no notable support protecting the 15-year low which was reached last November at 84.81! We will not be a bit surprised if this pair started to move in that direction, and tried to break that low! On the contrary, we have been expecting this for weeks now, and it was included in our reports several times. But, signs show that the possibility of a rising correction to correct the fall from Wednesday’s top 89.09 to Friday’s low 86.25 is growing. On the top of these signs: the inverted hammer formation, which appeared on the daily chart, and the completed 5-wave move (please refer to the attached chart). Therefore, and even though we are negative about this pair on the medium term, we should not neglect these signs which force themselves upon us for today! Short term support is at 86.94, and if broken, the price will continue searching for new lows, targeting 86.25, then the 15-year low 84.81. Resistance is presented by the Fibonacci level 88.01. A break here indicates that the odds of correction the whole 5 waves down from 92.87 are becoming massive. This will target 88.78 & 89.56.
Support:
• 86.94: the bottom of the rising trend channel from Friday’s low on the hourly chart.
• 86.25: Friday’s low.
• 84.81: Now 27th low, and the lowest level since 1995!.
Resistance:
• 88.01: short term Fibonacci 61.8% level.
• 88.78: Fibonacci 38.2% level for the whole drop from 92.87 (the 5 waves down).
• 89.56: Fibonacci 50% level for the whole drop from 92.87 (the 5 waves down).
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Forex trading analysis written by Munther Marji for Forexpros.
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