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Daily Analysis of EUR/USD, GBP/USD and Gold June 17, 2014

The EUR/USD didn’t make any conviction move yesterday but rather hit stops below Fridays lows never taking them below the more significant level of 1.3512. This leaves direction open again with a slightly higher probability for the break to the upside along while the potential of them holding this range slightly higher than a break. Its more of a doubt that either currency should be stronger than the other at this point giving the holding of the range just a slight edge. However that is not enough to give me a bias so I will remain open for either direction and look to the higher probability levels to take a trade today.

There are a couple scenarios I prefer to be taking the long today which are either seeing a stop run to the highs early in the London session then a run to the Asian lows or 1.3564. The other is having the current highs hold and a run down to either 1.3556 or 1.3546 with some clear trapping going on. The only way I will consider the long from the Asian lows is with hourly conviction above 1.3581 during the London session. In order to be confident with a short position getting the stop run to yesterdays highs would be preferred after price leaving the Asian box closer to its lows and at least down by 1.3564 or lower.

EU 1hr chart

The GBP/USD was the pair I traded yesterday after they showed the conviction to the upside and made the pullback to close the gap open. The set up was nice and they gave me my entry at 1.6966. The problem was it was getting close to the NY open without shifting off so I closed it about a half a pip up before giving the NY boys a chance to whip me out. Of course it made the move just after the open but its better to be safe since they could have easily popped my stop at Fridays lows before making the move.

Today I will have a slight bias for the long due to the conviction while keeping in mind that the 1.7002 level is a multi year high that will take more conviction to break. At this point with potential loading up over the last two trading days the possibility is better but at the same time like I mentioned in yesterdays commentary, its really a bit farcical that the BOE will be raising rates any time soon so the conviction simply may not be there. The best level I see for the long is down at 1.6940 but I will also be watching the 1.6959 lows from yesterday if they push up and leave the Asian box towards the highs. Otherwise I will be open for the short with a stop run above 1.7008.



Gold had somewhat of a bad day yesterday while equities got a bounce with the S&P tapping the monthly lows getting rejected. I don’t see this as the beginning of the smack down just yet but more of the natural flow into risk or at least the stock markets defending the monthly low since if that breaks they have a decent distance to drop. What I will be looking for today is conviction below yesterdays lows for a short or these lows holding through the London session for a long. I will also be open for a long at the hourly 200 if I miss the short during London but will want to see clear manipulation at the beginning of the NY session.

1hr Gold chart

Forex News Today

The calendar starts off with inflation data from the UK. The CPI figures are expecting a small drop while PPI a rise above zero on the main monthly data. Depending on if and how big each of these miss they could either offset each other or create GBP strength/weakness. I have my doubts a higher CPI figure will do much unless it pops above 2% on he yearly numbers, which is unlikely. Even if it does it will need to be well above to spark much “interest rates will rise” momentum. If they do disappoint then the potential rising of rates should go down and the GBP weaken. Mostly against the Euro as usual lately.

There is also German and Euro Zone ZEW Economic Sentiment expected to rise on both. As long as these are as expected or better there is potential for some Euro strength, more so against the GBP I would think but they will also be considering and big deviations on the UK data so the EUR/GBP may be rather choppy today depending on these releases.

The US has CPI data released at the same time as Building Permits and Housing starts. CPI is expected to be flat on the Core data and drop slightly including food and energy. Any big drop will spark deflation thoughts and the untapering while better than expected figures will do the opposite as long as its a big miss to the upside that has a low probability. The housing data will only cause a move on a large miss and so far I don’t see anything of note saying the housing market in the US is getting better so I have my doubts they will deviate much to the upside and has a higher chance of disappointing.

Asian session traders need to watch out for the BOJ Meeting Minutes  but since they are already all in I don’t see how they might  talk of throwing more all in. They might have something of another scheme they are thinking of implementing to weaken the Yen but they have little options. Japan Exports could have a big miss as well to stir things up. A large disappointment should weaken the Yen while I think it would take a substantial rise above zero to cause much strength.

Happy Trading


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1 Comment

  1. Animesh Debbarma
    Animesh Debbarma June 17, 03:49

    Very Good Analysis Chad. Keep it up!

    Reply to this comment

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