August 15, 2014 Daily EUR/USD, GBP/USD, EUR/JPY Analysis
The EUR/USD made another attempt to run for the highs but was yet again firmly rejected to end the day. Of course the worse than expected Unemployment Claims form the US helped at the beginning of the NY session but it wasn’t enough to make them show any conviction on higher prices. Its looking like they may be holding this range longer than I thought originally, however looking at the daily chart it still shows the probability for the break to the downside is increasing. We will most likely need to see the data from Germany be consistently worse over the next week or more in order to get the break.
Direction is still foggy at this point and as price works its way into a triangle is becomes more risky taking entries at the daily highs/lows with other daily levels right behind them. The levels I like best for the short are the 1.3379 where the hourly 200 will be within the next few hours but with it being violated over the last two days I have to admit its a riskier level. The good thing is its almost 20 pips from current price and has confluence. Otherwise the 1.3406 is better but if price reaches that high I would prefer to be long looking to take profit. The levels for the long are a bit tighter and closer with 1.3347 having the best probability. The 1.3355 is valid and carries more risk so seeing them push up first would be needed unless they are hitting breakout traders. The 1.3336 is the big one they have been beating on for so long so if it did reach there I would hope to be short and waiting for the big break.
The GBP/USD made the bounce off the daily 1.6661 level but I have to say it wasn’t much of a turn if I am going to be convinced on a reversal. That is not enough to give me a bias but it does help for holding any short for the probable break down. The best level to short from is yesterdays highs at 1.6695 but with current price being so close they have a good chance of pushing up to 1.6723. The only long I will consider is off the lows of 1.6661 while watching for any conviction below.
The EUR/JPY went into a chop yesterday but I will still have a small bias for the next push up today. The levels haven’t changed much, although they did dial them in a bit better for us. The best long is from 136.78 while the 136.84 is valid but carries more risk. The only place I will look to short is a stop run to 137.22 but if it gets there I hope to be long waiting for the break.
There also is a dynamic at play with the EJ that I should mention. Notice how its moving more on the Euro rather than the Yen these days. This does have its moments that it falls apart but the correlation is tighter between the EJ and EU than it is with the UJ for the most part. The reason I mention this is that if the EU is going to break down I think it will need help from the EJ and EUR/GBP for that matter. In other words being cautious on any long bias is warranted.
Forex News Today
The calendar starts off with UK GDP data expected to be flat. At this point I think it would take a large miss in either direction to cause much of a move. I will say the probability of a miss upward is better but I suspect it will be close or as expected.
The US has PPI data with the headline figures expected to drop to almost zero. If it does slip below they will likely get a bit stirred about deflation and the USD will get weak depending on how much they think it will effect the taper. Otherwise as long as its close or better we probably wont see much. The Empire State Mfg. Index has a decent chance to give them a reason to make a push today. It expected to drop from 25 to 20 so a bigger drop should cause USD weakness while a print close to 25 will have the opposite effect. The TIC data has a small chance of getting a reaction on a large miss.
Have a great weekend