Forexpros Daily Analysis - 01/06/2010

ForexPros Daily Analysis June 1, 2010


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Fundamental Analysis: PPI

European traders anticipate the publication of the Producer Price Index on June 2nd. The PPI is an inflationary indicator that measures the average change in selling prices received by domestic producers of goods and services. The PPI measures price change from the perspective of the seller. The PPI looks at three areas of production: industry-based, commodity-based, and stage-of-processing-based companies. When producers pay more for goods and services, they are likely to pass the higher costs to the consumer, so PPI is thought to be a leading indicator of consumer inflation. A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR. Analysts predict a future reading of 0.70%.

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Euro Dollar

The Euro traded below the resistance specified in yesterday’s report 1.2333 for the whole 24 hours since the issuance of yesterday’s report. It did not break it, only to trade in a narrow range, which has postponed the drop but did not delete its possibility. We still believe that the Euro is ready to dive, and we still believe that the most important resistance is Fibonacci 61.8% at 1.2472! We do not see any reason to change our negative technical outlook for as long as the price is below it. And since that the price has touched the channel top, and came close to Fibonacci then it started to fall, then the negative outlook is still here, strongly! As for the short term the support is at 1.2244, and breaking it will drag the Euro to the important 1.2142 then to a new cycle low at 1.2068. The resistance is at 1.2312, and breaking it indicates a continuation of the rising correction which will target 1.2411 first, then its ideal target at 1.2472. It goes without saying that this is the single most important resistance for the time being, and the separating point between a continuation of the current downtrend, and a reversal to an uptrend! We still believe that the drop to a new cycle low below 1.2142 is only a matter of time, nothing will change that except for breaking 1.2472.

Support:
• 1.2244: Asian session low.
• 1.2142: This cycle’s and 4-year low.
• 1.2068: Apr 13th 2006 low, the last important support before the 1.2000 level.

Resistance:
• 1.2312: the top of the rising channel on the hourly & 4-hour charts.
• 1.2411: Fibonacci 50% for the drop from 1.2670.
• 1.2472: Fibonacci 61.8% for the drop from 1.2670.

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USD/JPY

The Dollar/Yen retreated a little bit, and consolidated around 91, but we still believe that we could see the price targeting the most important resistance for now: Fibonacci 61.8% for the short term at 91.84. But in order for it to hold to these chances, the price should hold above the 90.87 support, and not to start drifting lower and away from 91! The resistance 91.84 is the separating level between a positive & a negative medium term outlook. If price stops at or around 91.84, the odds of going back down will be enormous, and a top around here could provide us with a wonderful chance to sell for medium term. But if broken, we will see a strong jump to 92.95 and may be 93.65. Support is at 90.87, and if broken, the price will retreat to 90.26 then to the very important 89.67. We still believe that 91.84 is still the most important medium term resistance for now, while the medium term support is at 89.67.

Support:
• 90.87: important intraday level.
• 90.26: short term 50% Fibonacci level (for the rising move from 88.96).
• 89.67: the slowly rising trend line on hourly chart.

Resistance:
• 91.84: Fibonacci 61.8% for the short term, the most important resistance at all for the time being.
• 92.95: May 18th high.
• 93.65: Apr 6th low.

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Forex Trading Analysis written by Munther Marji for Forex Pros.

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