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Wednesday May 5, 2010 - 09:48:57 GMT
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Forexpros Daily Analysis - 05/05/2010ForexPros Daily Analysis May 5,
Fundamental Analysis: ECB Press
The European Central Bank holds this monthly press conference
about 45 minutes after the Minimum Bid Rate is announced. It is about an hour
long and has two parts: First, a prepared statement is read; then the conference
is opened to press questions. The questions often lead to unscripted answers
that trigger market volatility. The press conference, which is broadcasted on
the ECB website, is the ECB's primary method for communicating with investors
about monetary policy. It covers in detail the factors that affected the most
recent interest rate and other policy decisions, such as the overall economic
outlook and inflation. Most importantly, it often provides clues regarding
future monetary policy. If the statement is more hawkish than expected, that is
usually good for the euro.
The Euro broke the support specified in yesterdayâ€™s report 1.3173, and
completely collapsed reaching both suggested targets 1.3113 & 1.3050. It
even dropped more than 100 pips below our second target, dropping below the 1.30
for the first time since Apr 28th 2009. It was obvious, even before this recent
drop, that the technical picture is negative, which we have expressed clearly in
yesterdayâ€™s report. But, the pace of this drop has exceeded our expectations. If
we try to explain what happened, it could be a 5-wave drop which is still
developing, out of which we are in the 3rd wave. And since wave 4 could be a
sharp correction or a horizontal one, we must be extra cautious around here. We
could see a sharp correction taking us back to the 1.31 area, before dropping
below 1.29, or we could see a modest correction. Thus, we prefer to concentrate
on the short term levels, and follow of break of any of them. The important
levels for today are resistance 1.2985 & support 1.2948. If we break the
support 1.2948, the price will continue dropping to the important levels in the
1.28 area: 1.2885 & 1.2820. But if we break the resistance 1.2985, the price
will go back to trade inside the broken channel, and will start correcting
yesterdayâ€™s drop, targeting 1.3065 & 1.3130.
1.2948: important intraday support, protecting yesterdayâ€™s low.
â€¢ 1.2885: Apr
22nd 2009 important low.
â€¢ 1.2820: Mar 10th 2009
â€¢ 1.2985: the bottom of the channel which was
â€¢ 1.3065: Fibonacci 38.2% for the short term.
Fibonacci 61.8% for the short
The Dollarâ€™s rise stopped
at 94.96, thatâ€™s 9 pips below our resistance 95.05, then it dropped, to leave us
wondering is this everything? Is the short term rise over, or will it go on?
Everything depends on breaking 95.05 or holding below it. If we hold below this
resistance the price will be expected to fall, and test the rising trend line
from 92.80 at 94.56. If broken the technical outlook will turn negative for the
short term, and we will target the important support 93.91. If this one is
broken, the technical outlook will turn negative for the medium term, and we
will target 93.30 as a first and modest target for this break, on the way to
lower levels later. On the other hand, if 95.05 gives way, it will be hard to
imagine the rise stopping before the 96 station as we will target 95.90 &
may be 96.69.
â€¢ 94.56: the rising trend line from
92.80 on the hourly chart.
â€¢ 93.91: the rising trend line from 91.58.
93.30: Apr 23rd low.
â€¢ 95.05: Aug 24th high.
95.90: Jul 29th low.
â€¢ 96.69: May 19th 2009 high.
---Forex Trading Analysis written
by Munther Marji for ForexPros.
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