Forexpros Daily Analysis - 23/09/2010

ForexPros Daily Analysis September 23, 2010


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Euro Dollar

The Euro broke the resistance specified in yesterday’s reports 1.3332, and reached our suggested target of 1.3414 with complete success. This pair had broken an important resistance at 1.3118 on Wednesday, but it was not until the FED issued its statement that it literally “exploded” in the face of the Dollar! Reaching 1.33 once again has pushed us to revisit the long term analysis, 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 collapse and drop 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 1.3438, if broken then this rally will go on, and will target a very important Fibonacci level at 1.3509, then 1.3625. Support is at 1.3381, and if broken a correction is due, with ideal targets at 1.3281 & 1.3184.

Support:
• 1.3381: Asian session low.
• 1.3281: Fibonacci 38.2% for the rise from 1.3027.
• 1.3184: Fibonacci 61.8% for the rise from 1.3027, and the rising trend line from Sep 10th low on the hourly chart. The single most important support at the moment without a doubt.

Resistance:
• 1.3438: Yesterday’s top.
• 1.3509: Fibonacci 50% for the whole massive drop from 1.5143 to 1.1875.
• 1.3625: Mar 19th high.

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USD/JPY

This pair has praised our analysis yesterday as it “stole” the low from our report. Bottoming at 84.25, the same exact level we specified as support, down to the pip! Later, it consolidated above this level. In the wake of the FED’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 Yen’s strength will be subdued. On the other hand, the all important trend line falling from May 5th top, is currently at 85.28. 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 85.28 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 85.28 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 & 86.95.

Support:
• 84.03: Fibonacci 61.8% for the short term.
• 83.33: Sep 8th low.
• 82.87: Sep 14th low, and the low for the last 15 years.

Resistance:
• 85.28: the falling trend line from May 5th top on the daily chart, and short term Fibonacci 61.8% level.
• 86.25: Jul 20th high.
• 86.95: Jul 1st low.

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GBP/USD

There is absolutely no change to the technical outlook provided yesterday. In spite of the FED, in spite of the Euro soaring to 1.33, and the Swiss Franc breaking above parity with the Dollar, the Pound did not break, or even test 1.5728. This charming resistance will still be our most important level for now, there is nothing more important. The Pound jumped strongly (As everybody else did) after the FED, breaking through 1.56 and topping very close to 1.57 (the high at the moment of preparing this report is 1.5697). But , even with all this action, the technical outlook will not change before breaking 1.5728. Currently, and as we said in previous reports, we do not say that the Pound is weak, but it is surely vulnerable as long as it is trading below 1.5728, it could collapse any minute! Only a break of 1.5728 will change this sad status, and if we get this all important break, we will soar to 1.5854 first, then to 1.5906. On the other hand the support is at 1.5662, and a break here will initiate a correction for yesterday’s spike, targeting the important 1.5576 first, then 1.5448.

Support:
• 1.5662: the rising trend line from yesterday’s low on intraday charts.
• 1.5576: short term Fibonacci 61.8% support.
• 1.5448: Sep 15th low, a well known support area.

Resistance:
• 1.5728: Fibonacci 61.8% for the whole drop from Aug 6th top.
• 1.5854: Aug 4th low.
• 1.5906: Aug 10th important top.

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Forex Trading Analysis written by Munther Marji for ForexPros. ---

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