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Tuesday September 28, 2010 - 09:42:23 GMT
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Forexpros Daily Analysis - 28/09/2010
ForexPros Daily Analysis September 28, 2010
The Euro jumped to a new 5-month high yesterday at
1.3503, only 6 pips below the important 50% Fibonacci level for the
medium term. This accurate reversal at a Fibonacci level leaves the Euro
vulnerable, it could drop hard, any minute from anywhere, and it will
be like this unless it breaks 1.3509. Therefore, the Euro has 2 choices,
not 3: either it breaks 1.3509, or it collapses. 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 (were 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. Back to short term
analysis: resistance is at the important medium term Fibonacci level
1.3509, while the support is at 1.3448. If the resistance is broken,
this rally will continue, probably with obvious strength, as it will
target 1.3589 & 1.3690. On the other hand, breaking 1.3448 will give
the Dollar an opportunity to create a considerable bounce as it leans
on the important Fibonacci at 1.3509. If this level is broken, we will
â€˘ 1.3448: Fibonacci 50% for the micro-term.
â€˘ 1.3368: Fibonacci 61.8% for the rise from 1.3285.
â€˘ 1.3285: Fridayâ€™s low.
â€˘ 1.3509: Fibonacci 50% for the whole massive drop from 1.5143 to
â€˘ 1.3589: Apr 1st & 2nd high.
â€˘ 1.3690: Apr 12th high.
Dead boring, this pair just does not want to move,
and to add to it, there are authorities that are â€śwatching closelyâ€ť. It
is not a very promising situation, but we believe everything will change
if 84.03 is broken. In the wake of the FEDâ€™s statement late Wednesday,
We broke below 85 for the first time after the intervention took us
above it. We dropped to 84.94 immediately after the Fed, and then to
84.76 during the Asian session. But even after this move, the technical
outlook has hardly changed, but speculators have! Dropping below 85
could mean that they are no longer fearful of the Japs, and they are
ready for another round with them! But before breaking 84.03 the Yenâ€™s
strength will be subdued. On the other hand, the all important trend
line falling from May 5th top, is currently at 85.10. The price has
tried several times to break this line in the past few days without
success. The Dollar needs to break this line in order to keep going.
Simply said, breaking 84.03 or 85.10 is the single most important factor
in determining the direction for the medium and short term. If we break
84.03, this means that the speculators have launched a new attack on
the Japanese authorities, and that price will target the important 83.73
then 82.87. But, if the price managed to break 85.10 somehow, the
technical outlook will change dramatically, and we will be heading to
the important levels above 86, most important to us are 86.25 &
â€˘ 84.03: Fibonacci 61.8% for the short term.
â€˘ 83.33: Sep 8th low.
â€˘ 82.87: Sep 14th low, and the low for the last 15 years.
â€˘ 85.10: the falling trend line from May 5th top on the daily chart.
â€˘ 86.25: Jul 20th high.
â€˘ 86.95: Jul 1st low.
The resistance specified in yesterdayâ€™s report as
1.5871 proved its importance as yesterdayâ€™s rise stopped only 6 pips
below it (yesterdayâ€™s high was 1.5865). Then the price started dropping
to areas below 1.58. The technical indicators show a state of
â€śoverbnoughtâ€ť which leaves the possibility of a sharp correction there,
but the short term trend is a rising one after breaking the 1.5728
level. This is why we strongly recommend not to pick sides today before
breaking the specified support or resistance, and we believe that the
short term direction will not show itself before a break! Short term
support is provided by the bottom of the rising trend channel on the
hourly chart, which is at 1.5784. If this level is broken , we will drop
to more important Fibonacci level at 1.5684 &1.5641. On the other
hand, the most important resistance for the short term is 1.5834, and
probably we will not break it, but if it gives way then the party will
continue! In this case, targets will be 1.5922 & 1.6000.
â€˘ 1.5784: the bottom of the rising trend channel on the hourly chart.
â€˘ 1.5684: short term Fibonacci 50% support.
â€˘ 1.5641: short term Fibonacci 61.8% support.
â€˘ 1.5834: the falling trend line from yesterdayâ€™s top on intraday
â€˘ 1.5922: Aug 3rd high.
â€˘ 1.6000: psychological level.
trading analysis written by Munther
Marji for Forexpros.
Trading Futures and Options on Futures and Cash
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