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August 8, 2013 EUR/USD, GBP/USD Analysis

We did get the third long term push on the EUR/USD yesterday and we should be expecting the reversal today. What concerns me is there is not a topping formation indicating they started to pull money out of the market getting ready for the push down to flush out weak holders or make a three push reversal. I should also mention that with the better than expected data coming from Germany as of late it seems that the strong Euro hasn’t effected them very much and nobody is complaining. This makes me leery and question the probability of the reversal today so I will be keeping an open mind on direction.

The 1.3343 level it stopped at is a fairly significant daily level and if we do see the hourly close above during London today the probability they test the next significant daily high at 1.3389 or even the overall high at 1.3414 is good. I will be open for the short with a stop run above 1.3343 showing some sort of topping formation but I am thinking they are more likely to push up today. The best level for a long is the 1.3322 level but with it being rather close in proximity it has a good chance of hitting 1.3313 as they accumulate or popping as low as the psych 1.3300. If we do get the hourly conviction above 1.3343 then the Asian lows come into play as a level they will trap breakout traders and move off from there.

EUR/USD 1hr chert

The GBP/USD also made the push up thanks to Carney. I did take the nice long entry at 1.5302 a couple hours before the news and got whipped out when he said they were pulling a Bernanke and attaching their “forward guidance” on interest rates to unemployment. What was really good was when he literally destroyed its credibility when he outlined the conditions. This is the good part.

  • the policy stance will depend on economic conditions, and will also be determined by the BOE’s inflation target which remains at 2%
  • the BOE’s guidance won’t hold if the CPI is seen 0.5% over 2% in the next 18-24 months
  • the guidance won’t hold if the BOE’s council sees a financial stability threat
  • Carney refrained from overlooking the BOE’s inflation mandate and reiterated the bank’s commitment to price stability.
  • Carney said that a prolonged period of low rates has stability risks, and added that the UK economy will undoubtedly face shocks in the future which further detracted from the credibility of forward guidance
  • Finally, the BOE forward guidance is not a change in the bank’s reaction function Carney clarified.

After that was when we saw the 300+ pip move from the lows and closing near the daily highs. In a normal situation I would be looking at this as a fake out to the downside and first push up but considering the 300+ pip move it will take some clear conviction in the move up to continue with out try to push out some weak holders first. Therefor I will be open on direction on this pair also. The problem with a long position is that the closest level is still 50+ pips away at 1.5433 so trading it there is a definite possibility and if it does break down and push out some longs it has a good chance of closing the inefficient move down to 1.5393. I am also thinking they may just run it south straight out of the Asian box which will be difficult to catch. Otherwise again a stop run to the highs for the short will be optimal.

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GBP/USD 1hr chart

Forex News Today

The calendar is light today but I should mention for all the Yen cross traders out there that the BOJ is having a press conference tentatively scheduled around the London open so be careful trading Yen pairs today.

The Euro Zone has the ECB monthly report. I don’t expect much of a change from the press conference earlier but if there is then we may see some manipulation from it.

The US has Thursday Unemployment claims expected to rise by 10K. Any decent surprise upward will be USD negative while the opposite will be the reaction in a drop. My thoughts are we will need a 10K or more miss in either direction to make a decent move.

Happy Trading


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