Fundamental Analysis: ECB Press Conference
European traders anticipate the ECB Press Conference. The European Central Bank holds this monthly press conference about 45 minutes after the Minimum Bid Rate is announced. It is about an hour long and has two parts: First, a prepared statement is read; then the conference is opened to press questions. The questions often lead to unscripted answers that trigger market volatility. The press conference, which is broadcasted on the ECB website, is the ECB's primary method for communicating with investors about monetary policy. It covers in detail the factors that affected the most recent interest rate and other policy decisions, such as the overall economic outlook and inflation. Most importantly, it often provides clues regarding future monetary policy. If the statement is more hawkish than expected, that is usually good for the euro.
The Euro broke the resistance specified in yesterday’s report 1.2570, and successfully reached the first suggested target 1.2656 with a very good accuracy since yesterday’s high was 1.2660. The most important technical event, was touching the top of the rising channel on the hourly chart for the second time yesterday, after touching it for the first time on Friday. We could be before an important turning point at 1.2660, since we saw the price falling away from this to 1.2575 during the Asian session. We should carefully watch the top of this channel, which is at 1.2681 currently. We will not be able to escape the fact that a break here will be a very positive signal for both the short & medium terms. But, if we keep trading below this top, we could be facing a turning point which will probably lead to a drop of hundreds of points. Short term support is at 1.2548, and once we break it, we will start drifting away from the channel top, and will target 1.2442, and may be 1.2370. The resistance is at 1.2603, and if broken we will target another test of the channel top at 1.2681. If this one is also broken, 1.2737 will be a first & modest target for this break, on the way to higher targets.
• 1.2548: short term Fibonacci 61.8% level.
• 1.2442: May 18th high.
• 1.2370: May 25th high.
• 1.2603: the falling trend line from yesterday’s top.
• 1.2681: the top of the falling channel on intraday charts.
• 1.2737: May 12th high.
The Dollar/Yen broke the support specified in yesterday’s report 87.57, only to reach 87.33. But this does not change the positive technical outlook for this pair. We still believe in the possibilities of a strong bounce. With this consolidation around 88, and after bouncing from the support area shown on the hourly chart below, and after clearly breaking the falling trend line from June 21st top (please refer to the attached chart), we think that the possibility of a bounce is rising, even if that was for a correction. Short term support is at 87.35, and breaking it would indicate a continuation of the drop to 86.47 & 85.84. The resistance is at 87.72, and breaking it would mean that the Dollar is about to capitalize on the break of the above mentioned trend line, which will ideally target short term Fibonacci levels: 88.67 & 89.20. This pair is going as expected, in the expected direction, and in convergence with our negative technical outlook for the medium term. We absolutely expect the fall to continue on the medium term. But after surviving at 87.35, we should not neglect the enormous possibilities of a bounce up: a bounce is highly probable, even if it was a temp, but the trend is down without a shadow of a doubt!
• 87.35: an obvious support area on the hourly chart, and Dec 9th 09 low.
• 86.47: previous well known support.
• 85.84: Now 30th 09 low.
• 87.72: short term Fibonacci 61.8% level.
• 88.67: Fibonacci 38.2% for the drop from 91.45.
• 89.20: Fibonacci 50% for the drop from 91.45.
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