Wednesday, August 3, 2011

Daily Technical Analysis - August 4, 2011

US stock markets closed on the green territory yesterday as the ADP non-farm employment change data, showed a better than expected growth. However, the ISM data called lower than expected.

Indices continued falling on the beginning of the day, but short positions covering helped Wall Street to recover. Yesterday's volumes were higher than average and that might indicate for a possible bottom of the recent declines.


The European interest rate is published today and it is expected to remain on 1.5%. Trichet's speech right after the release will set the tone of the Euro on the second part of the day. Wall Street's recovery supported the Euro that made an Engulfing candlestick, which is a bullish signal. The current resistance is at 1.435 and if the investors are encouraged by Trichet, the Euro might rise to 1.45.


As we suspected during the past few days, the GBP was stronger than it looked. It is important to acquire the ability to spot these kinds of things when they occur, and get better prepared for going in before everybody does. The trade idea in the GBP/USD that we analyzed here yesterday gained almost 100 pips. The British official bank rate, which is published 45 minutes ahead the ECB announcement, will impact the pound today. If the currency continues up, it will face the strong resistance at 1.65, and that might be a good level for taking partial or full profits (for those who took the trade in the GBPUSD).


It is hard to tell exactly where this pair is heading, though the YEN is traditionally stronger than the GBP. The interest announcements in both Britain & Japan will probably influence this pair so you should spot levels for a possible break-up or break-down: 127 is the resisting level and 125-125.2 would be the supporting area. Nevertheless, a unique pattern indicates for a possible strike of the GBP. That is the bullish Harami pattern- a large bearish candlestick is followed by a smaller bullish candlestick, and it is indicating that the downtrend may be reversing.

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