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Daily Analysis of EUR/USD, GBP/USD and Gold May 15, 2014

The EUR/USD went back into the tight range yesterday lowering the probability of getting the reversal so I will be open on direction today. Being in a third push chop scenario the best levels to take entries will be at the high or low of the push at 1.3774 for a short and 1.3695 for a long. Otherwise as long as they keep it down during the Asian session, yesterdays highs and the breakout level at 1.3747 are valid for a short as well but do carry higher risk. I will prefer a long trade on this pair today with a stop run to the lows but open for the short with a clear set up.

EU 1hr chart

The GBP/USD made the second push thanks to the miss on the Unemployment data yesterday. There was also a nice set up at the 1.6860 level I mentioned in yesterdays commentary so I took the short just before the release and closed for just under 55 pips before the Inflation Report and Carney speech.

Today I will be bias for the short again expecting the third push. I am a little concerned that it has a bottoming formation at the daily lows of 1.6768 and they will have to show conviction to break it lower so there is a good chance for a deeper pullback before they do as they try to push out weak holders and induce some longs to stop out on the way down.

As long as they keep it low during the Asian session I will consider the short at 1.6787 but if it leaves the Asian box closer to the highs and shows conviction above during London they will most likely test the 1.6817 before they attempt the push today. If they cant break the lows for the third push then we will most likely see it hold above the daily level until they have a good reason to drop it on data or push it back above holding this months range.

GU 1hr chart


Gold made a second push to the upside so I will be bias for the third today. Having the daily close above 1300.00 is also nice to see as it shows conviction in the move as well. That will be the highest probability level with the psych number and four hour 200 EMA for confluence. However with them having already tested the 1302.62 level and hold they may not go that low before running it up. It also don’t have too far to go before testing the next significant daily level at 1314.58 so it will take some conviction to break that and run higher.

1hr gold chart

Forex News Today

The news starts off early today with French and German GDP figures. Germany being the more important but if France misses big it will likely have an impact on the Euro as well. Expectations are for a small drop from France while Germany rises. Considering that German data has been getting worse it has the higher chance for a disappointment the way I see it. Later in the London session is Euro Zone CPI data expected to be flat at .7%. A miss to the downside will weaken the Euro especially if it gets close to or below the big aero level sparking more deflation concerns. With the ECB more and more concerned with deflation this has potential to make them act sooner if it disappoints big. Otherwise a better than expected release will have the opposite effect. There is also GDP data from the EZ but will likely be ignored if the CPI data misses.

The US has CPI, Thursday Unemployment Claims and the Empire State Mfg. Index all releases at the same time. These could offset each other depending on how much they deviate from expectations but the CPI core data will be most important since its really close to zero as well. The same concerns of deflation are bugging the Fed so a drop below zero will most likely make them think the Fed will act and we will see USD weakness. Later they also have the Philly Fed Mfg.Index. This has potential to make them push with a big miss as it has before so if I am in a trade on the Euro I will be tightening the stop or just closing before I go to bed tonight. Janet Yellen aslo has a speech toward the trading days end so watch out for her dropping any comments but I’m doubtful she will.

Asian session traders only need to look out for Japan Industrial Production tomorrow.

Happy Trading


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