Forexpros.com Daily Analysis - 31/05/2010

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ForexPros Daily Analysis May 31, 2010


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Fundamental Analysis: ISM Manufacturing Index

Traders of the US anticipate the publication of the ISM Manufacturing Index. The Institute of Supply Management Manufacturing Index tracks the amount of manufacturing activity that occurred in the previous month. This data is considered a very important and trusted economic measure. If the index has a value below 50, due to a decrease in activity, it tends to indicate an economic recession, especially if the trend continues over several months. A value substantially above 50 likely indicates a time of economic growth. The ISM index is the result of a monthly survey of over 400 companies in 20 industries throughout the 50 states. The ISM's leading quality has been proven over time. During a recession, the ISM's bottom may precede the turning point for the economic cycle by some months. 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 future reading of 58.90.

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Euro Dollar

The Euro tried to approach the all important resistance 1.2472, but it topped at 1.2451, and then it went back to drop again, breaking the rising trend line on the hourly chart. We still believe that the most important resistance is Fibonacci 61.8% at 1.2472! We do not see any reason to change our negative technical outlook for as long as the price is below it. And since that the price has touched the channel top, and came close to Fibonacci then it started to fall, then the negative outlook is still here, strongly! As for the short term the support is at 1.2283, and breaking it will drag the Euro to the important 1.2152 then to a new cycle low at 1.2068. The resistance is at 1.2333, and breaking it indicates a continuation of the rising correction which will target 1.2411 first, then its ideal target at 1.2472. It goes without saying that this is the single most important resistance for the time being, and the separating point between a continuation of the current downtrend, and a reversal to an uptrend! We still believe that the drop to a new cycle low below 1.2142 is only a matter of time, nothing will change that except for breaking 1.2472.

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