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August 27, 2014 Daily EUR/USD, GBP/USD, EUR/JPY Analysis

The EUR/USD did make the third ugly push yesterday after running stops above the 1.3209 highs from Monday after they couldn’t get any interest to push above the daily breakout level at 1.3206. In a normal situation I would be looking to trade the reversal and I will have a small bias for that to happen today. However considering how it made the last two pushes there is a good possibility that they make an extended push today to go down and test the next daily level at 1.3113. That is where there would be good enough support to turn and at least push out weak holders if they do want to continue to the downside. Fundamentally the Euro should weaken with the deflation pressure still on the rise but how and when they do it is the question.

Most everybody thinks the ECB could start the printing any time but what they don’t consider is how Germany holds the cards on ECB policy so like I have said many times we will need much more bad German data before that happens. If they do keep up this downward pressure on the Euro then when it does happen eventually, it will most likely be a “printing is good for the Euro” scenario and the currency will rise for a time until they learn the same lesson the BOJ and Fed have learned the hard way. QE don’t work.

Even though we consider this stage of the cycle a third push chop we need to see some what of a reversal before its in any sort of chop so I will expect at least a push up into the 1.3183 level or higher before considering a short today. It would be best to see them run it up to 1.3208 for the full reversal, however I do have some doubts they will do that today. The best chance for a long position for the reversal is a stop run below 1.3164 during London after testing the 1.3183 during the Asian session. Otherwise I will consider the short at 1.3183 if they show clear signs of trapping during London after holding price close to the lows this morning. Any entry will be more risky so the set up will need to be clear with a great entry to try and minimize risk if they do run the full reversal.

EU 1hr chart

The GBP/USD made an intraday push to the downside yesterday but it would have been nicer to see them show some conviction to get a clearer bias on direction. I will be bias for the short today but still open for the long with a stop run to the lows at 1.6538 but would be better to see them hit stops beyond 1.6534. The best level I see for a potential short is 1.6561 daily lows but they could push it higher to the breakout level from yesterday at 1.6565

GU 1hr chart

The EUR/JPY made an attempt at making the third push but since its not getting any help from the UJ they couldnt make a move close enough to the ADR to really count. At this point I will be more open on direction but as long as the Euro weakness continues this pair should follow. Especially if the Yen starts to strengthen seeing the UJ drop. The best levels to short are at the one and four hour 200 EMAs with the 137.40 being the best due to the hourly 200 at 137.26 not getting much respect yesterday. Otherwise I will be open for a long with a stop run below 137.00 during the London session.

EJ 1hr chart

Forex News Today

The calendar starts off early today and then pretty much drops off with no more events after the German GFK Consumer Climate. Expectations are for it to be flat at 9. The way I see it is it has a better chance of disappointing but even if it does miss to the upside they could take it as bad for the Euro due to the prolonging of any QE from the ECB. The thing is as long as Germany holds out the more the Euro Zone spirals toward deflation and things will need to get pretty bad for Draghi to disregard the Bundesbank if German figures are not getting worse. Interesting times for the Euro Zone these days.

Aussie traders need to keep an eye on the housing data tomorrow during the Asian session. A big miss will more than likely cause a spike.

Happy Trading


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