Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors. Daily Analysis - 29/10/2009

Traders await tomorrow’s announcement (Oct 30) by the Bank of Japan’s Monetary Policy Committee (NYSE:MPC) on the new monthly short term interest rate.

The decision on where to set interest rates depends mostly on growth outlook and inflation. The primary objective of the central bank is to achieve price stability. High interest rates attract foreigners looking for the best "risk-free" return on their money, which can dramatically increases demand for the nation's currency.
A higher than expected rate is positive/bullish for the JPY, while a lower than expected rate is negative/bearish for the JPY.
Analysts expect no new changes from the bank’s executives, with this months interests remaining stable at 0.10%.


Euro Dollar

In agreement with the negative technical outlook we talked about in the past two days, the Euro stopped at the first resistance in the report 1.4844 with great accuracy (highest price after the issuance of the report is 1.4840), then dropped breaking the support 1.4801, and reached the first target of that break 1.4702. And after reaching 1.4702, we should not neglect the rising probability of an upward correction for the drop from 1.5061, which reached almost 400 pips so far. Short-term support is Fibonacci 61.8% for the whole rise from .4480, which is at 1.4702, and breaking it would mean that the drop coming from 1.5061 will be larger than our expectation, and the next targets will be 1.4649 and 1.4610. Short-term resistance is 1.4737, and breaking it would target the Fibonacci 38.2% at 1.4827, and may be Fibonacci 50% at 1.4872. If the negative outlook is to persist, the Euro should not break the most important resistance for the medium-term 1.4916.

• 1.4702: Fibonacci 61.8% for the whole move from 1.4480.
• 1.4649: Oct 7th low.
• 1.4610: previous support.

• 1.4737: short-term resistance.
• 1.4827: Fibonacci 38.2% for the drop 1.5061.
• 1.4872: Fibonacci 61.8% for the drop 1.5061.



Dollar-Yen broke 90.76 and had some drop after that, but it stopped before 90. In spite of that, the technical outlook became more negative, because we broke the rising channel that we have been monitoring lately. The most important support for the short-term is 90.16, and until this moment it managed to hold above it. If it can maintain to do so, we expect a correction for the down move from 92.31. But if it is broken, more of the drop is to be expected, first towards the important 89.61, the last important support above 89, since the next important support is 88.82. On the other hand, the most important resistance for the short-term is 91.02, which represents both Fibonacci 38.2%, and also the retest level for the broken channel. If broken, we expect to rise towards the important 91.52, and if we are in front of a correction, we should not break this level. But if a surprise happens and we break it, the price would be on the way back to 92.17.

• 90.16: short-term support.
• 89.61: previous support & Oct 12th low.
• 88.82: previous support & Oct 14th low.

• 91.02: Fibonacci 38.2% for the short-term, and the retest level for the broken channel, important resistance.
• 91.52: Fibonacci 38.2% for the short-term, important resistance.
• 92.17: previous well known resistance area.


Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.