ForexPros Daily Analysis January 19, 2010


Fundamental Analysis: Core CPI (MoM)

Traders look forward to the publication of the Canadian Core Consumer Price Index (CPI) which will be released tomorrow (January 20). The CPI measures the changes in the price of goods and services excluding food and energy. Also, it measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation in Canada. A higher than expected reading should be taken as positive/bullish for the CAD (as the common way to fight inflation is raising rates, which may attract foreign investment), while a lower than expected reading should be taken as negative/bearish for the CAD. Analysts predict a reading of 0.20% versus a past reading of 0.40%.

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Euro Dollar

We will put all our focus for today on 1.4303, where there is the rising trend line from December 22nd bottom. Staying above it or breaking it will determine the direction for today. If broken, what we called a minor probability in last week’s report (that we have bumped into a medium term reversal level at Fibonacci 38.2%) will get boosted. In this case, the drop from 1.4577 will carry on, and its targets will be the Dec 22nd bottom 1.4216, and the important support at 1.4176. Short term resistance is still at 1.4421, and breaking it will bring back a little bit of the positive outlook, targeting 1.4509 & 1.4555.

Support:
• 1.4303: the rising trend line from Dec 22nd bottom.
• 1.4216: Dec 22nd bottom.
• 1.4176: Sep 1st low.

Resistance:
• 1.4421: yesterday’s resistance that stopped the rise.
• 1.4509: Nov 3rd low.
• 1.4555: Jan 11th high.

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USD/JPY

Dollar-Yen broke the support that we put under our surveillance in the last few days 90.76, and although this break was not followed by a big move, closing below it indicates momentum in the downtrend. Now, it is important for the price to stay below the most important resistance 90.90, which is provided by the falling trend line from 93.75. Staying under this trend line in specific means that the downtrend is going on. Short term support is 90.37, breaking it would initiate a down move that we expect to be stronger that what we have seen lately, and would target 89.79 and 89.22. And as we said, the most important resistance is 90.90, we do not expect it to be broken today, but if a surprise happens, we will be in an upward correction for the whole drop from 93.75, which will ideally target the 3 main Fibonacci retracement levels 91.64, 92.04 & 92.44.

Support:
• 90.37: intraday support.
• 89.79: Fibonacci 61.8% for the whole rising move from 87.35 to 93.75.
• 89.22: a previous well known support/resistance area.

Resistance:
• 90.90: the falling trend line from 93.75.
• 91.64: Fibonacci 38.2% for the whole move down from 93.75.
• 92.44: Fibonacci 61.8% for the whole move down from 93.75.

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Forex Trading Analysis written by Munther Marji for ForexPros.

For information on stock prices see ForexPros.

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