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Daily EUR/USD, GBP/USD Analysis August 5, 2013

Isn’t it amazing that we live in a world where the Fed can change its monetary statement by just one word signaling that the US “recovery” is not really recovering, stock markets can hold new highs and have at least the look of a risk on environment? These are truly strange days we live in for sure. So what was the minor change? Well instead of using a “moderate recovery” He said “modest” and in one word gave the signal that there most likely will not be any tapering in the near future.

On top of that lets just imagine what a surprise announcement of tapering would do to the stock market. Yes I know that will only happen in fantasy land where the powers that be do whats right in the beginning instead of hold the status quo so they get richer while the middle class and poor get poorer, but we can dream for a second or two. If history is an example and just a hint of tapering the markets tank then just what would a surprise bring. I would have to say tank is an understatement and that just can not be allowed.

Good old Ben will leave that to the next Fed Chairman and in the words of a commentator I saw this weekend, in order to try and preserve his reputation anything the new head of the Fed will do he will say “oh they should have done the other option”. Therefore absolving himself for what he created as “the only game in town” as senator Chuck Schumer would say. I think we need to start looking for the wizard since the world we live in is nothing short of Oz these days. Ok back to reality

Thanks to Ben we have an first push up intraday and I will have a small bias for the next push up. The levels they may manipulate at are not all that great with them being close to price right now at 1.3265 and just a bit lower at 1.3250. If these cant hold it will probably run down and test the hourly 200 EMA at 1.3232 or even lower at 1.3220 before a ramp up during the US session if stocks are making the push higher due to the no tapering here mantra. There is potential for a short with the right set up that could happen anywhere around the psych level of 1.3300. Keep in mind that the higher the Euro goes the more hurtful for Europe it is so they could turn this anywhere and run it down 3 pushes just to make it look good for Europe.

EUR/USD 1hr chart

The GBP/USD has had a cleaner long term push up thanks to Ben and his cronies and has already pushed the Asian range out to almost 40 pips finding the support at last Wednesdays highs and the 4 hour 200 EMA. This will be the pair I pay most attention to and expect the next push up today. With the test here during the Asian session a stop run below possibly reaching as low as 1.5241 will be optimal during the London session and if that breaks it has a good chance for the retrace of the inefficient move from Friday after the news.

I will be keeping in mind the psych 1.5200 and 1.5180 are in there to and could stop price and turn it but with nothing in the background the set up will need to be very nice and happen during the US session expecting the risk on sentiment while stocks rise. There is also the slight possibility for the short with a clear stop run of Fridays highs but they will need to show me clearly that they wont let it pass along with the Euro heading down also confirming the USD strength.

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GBP/USD 1hr chart

Forex News Today

There is not much news to warrant discussion during the London session other than Retail sales due from the Euro Zone. Expectations are for a drop into negative territory so the bar is set low the way I see it. I would expect that for any substantial movement we will need a large miss in either direction.

The UK has their Services PMI figures due a bit later expected to rise showing the UK may be getting better with a move to the 57 range. If this can manage a surprise upward it will be GBP positive since the UK is a service based economy and the chance for more Asset Purchases goes down.

The US has the ISM Non Manufacturing Index expected to rise along with Fed Member Fisher speaking later. I have my doubts these will move the markets due to the Fed Friday and Fishers opinions are well known already. The wild card here would be if he does change his hawkish stance to more dovish but since he is not a voting member right now his comments carry less weight.

Happy Trading


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