Daily Analysis - 23/02/2010


Master Trader
Mar 31, 2009
ForexPros Daily Analysis February 23, 2010

Free webinar on ForexPros - Mapping Out the Banking System & Foreign Exchange Dealing Process, Part II.

Expert: Dan Cook
When: Tomorrow, Feb 24, 2010, 11:00 EST

In the second installment of the Webinar ‘Mapping Out the Banking System & Foreign Exchange Dealing Process’, Dan Cook will take a deeper dive into the Foreign Exchange Market. Cook will start by discussing the interbank system and how it differs in form and functionality to the centralized exchange models used for trading stocks and commodities. From there, he will focus on broker-level dealing and discuss how retail brokers, whether ECN's or Dealing Desk models, make money.
Cook will also take an inside look at dealing desks and speak frankly about the roles and responsibilities of a retail dealing desk, which will include an overview of how brokers hedge currency exposure. The goal of this Webinar is to help traders understand the nuances of the Forex market by shedding light on many of the aspects of currency trading that have previously been shrouded in mystery.

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Fundamental Analysis: New Home Sales

Traders of the US anticipate the publication of the New Home Sales report. It measures the annualized number of new residential buildings that were sold during the previous month.
This report helps to analyze the strength of the US housing market, which helps to analysis the economy as a whole.
The new home sales report is quite volatile and subject to huge revisions.
A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD. Analysts predict a reading of 350K.


Euro Dollar

The Euro broke the support 1.3618 and traveled more than half the way to the target 1.3544 (yesterday’s low 1.3572). The modest drop came after 1.3653 successfully reversed the short term direction. That is why we will consider this top to be resistance of the day. If the price continue to show strength, and broke this resistance, the current rise will go on for the short term at least. We see today’s most important target for such a break will be the test of the falling trend line from 1.3838, which is currently at 1.3737. And if broken the next target will be 1.3810. But if 1.3653 holds, and succeeds in reversing short term correction, then the price will fall to support 1.3612, and if broken the targets will be 1.3544 (which may be an ideal target for such a drop, and then 1.3491.

• 1.3612: a rising trend line on the intraday charts.
• 1.3544: short term 50% Fibonacci level.
• 1.3491: the rising trend line from Feb 19th low on intraday charts.

• 1.3653: Important intraday top.
• 1.3737: the falling trend line from 1.3838 on the hourly chart.
• 1.3810: important intraday top.



The clear “Reversal Day” pattern proved its strength. As we have expected, the price started to fall immediately after breaking 91.55, reaching 90.84 until now (but without reaching the suggested target 90.40). As we said yesterday, the “Reversal Day” pattern is one of the strongest & most reliable reversal patterns, that is why we will keep our bias towards the Yen, but with caution, because as we get closer & closer to the channel bottom, the odds of a rising correction gets bigger & bigger. Short term most important support is the bottom of the rising channel on the hourly chart which is currently at 90.55. We do not recommend going short before it is broken. If this break takes place, the price will drop targeting 89.90, and then 89.22. Resistance is at Fibonacci 38.2% for the short term 91.37, breaking it would mean that we already have a rising correction (at least). Targets of such a break are 92.31 & 93.08.

• 90.55: the bottom of the rising channel on the hourly chart.
• 89.90: Feb 15th low.
• 89.22: Feb 10th low.

• 91.37: Fibonacci 38.2% for the short term.
• 92.31: Oct 27th high.
• 93.08: Jul 22nd low.


Forex Trading Analysis written by Munther Marji for ForexPros.

For information on
US dollar index see ForexPros.



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