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Tuesday July 6, 2010 - 09:41:24 GMT
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Forexpros Daily Analysis - 06/07/2010
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 companyâ€™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
The Euro stopped ahead of the resistance specified in yesterdayâ€™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.
â€¢ 1.2510: important intraday level.
â€¢ 1.2442: May 18th high.
â€¢ 1.2370: May 25th high.
â€¢ 1.2570: important intraday resistance.
â€¢ 1.2656: the top of the falling channel on intraday charts.
â€¢ 1.2737: May 12th high.
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!
â€¢ 87.57: the rising trend line from Thursdayâ€™s low.
â€¢ 86.95: Thursdayâ€™s low.
â€¢ 86.47: previous well known support.
â€¢ 87.96: important intraday resistance level just above the (broken)
falling trend line from Jun 21st top on the hourly chart.
â€¢ 88.67: Fibonacci 38.2% for the drop from 91.45.
â€¢ 89.20: Fibonacci 50% for the drop from 91.45.
trading analysis written by Munther Marji for
Trading Futures and Options on Futures and Cash
Forex transactions involves substantial risk of loss and may not be
suitable for all investors. You should carefully consider whether
trading is suitable for you in light of your circumstances, knowledge,
and financial resources. You may lose all or more of your initial
investment. Opinions, market data, and recommendations are subject to
change at any time.
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