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Daily EUR/USD, GBP/USD Analysis March 20, 2014

We finally got a push on the EUR/USD thanks to the Fed doing as expected by trimming the QE purchases by another 10 billion as many expected including me. However by the looks of the move there were some that were a bit surprised. The part of the statement that did change was the forward guidance regarding unemployment and what they will be looking at to determine what they will be doing in the future. Also saying they will “take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments”

What is weird s that they are continuing the taper while at the same time saying that things really aren’t so rosy with the US economy. Im guessing that they are finally learning that the print fest has been doing nothing to help and swelling the Feds balance sheet is a bad idea. Having said that when things do turn sour of course they will likely print to try and save the big boys again but then it just may be too late. On to the charts

With this push being as large as it is the probability is that they will need to retrace a decent chunk of it if they do intend to make the next push. However if there is enough conviction in the USD strength they wont. The best level I see in the first scenario is up at 1.3879 where the hourly 200 sits with another fairly significant level just below at 1.3872. The other scenario is that they hold price below 1.3833 during the Asian session and either get the breakout traders there or just above at 1.3847 before they move it off. With this being a first, extended push I am open for the long at yesterdays lows but will need a clear entry and will only hold for the 40-50 pip retracement playing it safe.

EU 1hr chart

The GBP/USD made the same push coming off of Tuesdays highs making the second push to the downside so I will be bias for the short here today also. I should also say that it looks somewhat sloppy with the full retracement of the first push before the move but the probability is they will make the next push potentially to the next daily level around 1.6447 which is just below where the current ADR sits. They also have good potential of trying to push weak holders out first by running it up as high as 1.6585 but the daily level at 1.6567 has a good chance being the level they turn it from also. This all depends on how much conviction they have and considering they retraced the full first push before the move yesterday they could also run the pullback pretty deep as well. Therefor if the manipulation isn’t really clear at the lower levels I will be waiting for the test higher before I take the short.

GU 1hr chart

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Forex News Today

The calendar is rather quiet until later during the US session with only German PPI data and UK CBI Industrial Trends Orders during the London session. Neither of these will be that important unless the PPI data misses significantly to the downside. If that happens then there may be some deflation ideas running around but considering the latest statement from the Bundesbank its going to be a long time before they give a green light to the ECB for any printing.

The US has weekly Unemployment Claims, Existing Home Sales and Philadelphia Fed Manufacturing Index. I don’t expect much from these either barring a big miss and I expect that any disappointment would need to be big in order to stop the current USD strength off the Fed statement.

Happy trading


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