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Daily EUR/USD, GBP/USD, EUR/JPY Analysis August 18, 2014

The EUR/USD starts off the week with a gap down, which isn’t so unusual theses days. It did have more to do with the weakness in the EUR/GBP as the UK seems to be the cleanest dirty shirt now while the USD shows smaller and smaller impact in forex for now. This more than likely has to do with the Russian sanctions right now with all the news I have seen on how businesses will be losing millions if not billions on the Russian European food ban retaliation. At least for now this has a good chance to continue unless the screaming businessmen get their way and the EU gives in. With several countries already complaining it may not be that long until they withdraw the sanctions but you can bet that the US is keeping up the pressure. Therefore they will have to choose the lesser evil which is probably the US right now.

The chart is still a mess with no clear direction hovering in the triangle I mentioned last Friday. As price compresses like this it does increase the probability that the break will be bigger than a typical push. The levels for potential entry haven’t changed much other than adding the daily levels from Friday. Other than that the 1.3380 level is valid for a long but a higher risk entry in the middle of the chop. I will also consider it for a backside entry today if we get conviction below since the probability of them testing at least Fridays lows or lower is better if we see that. As long as I have the stop to break even I will hold for the potential break down later this week. Since there is no big news today the potential for a break is lower unless we get a tape bomb of sorts.

EU 1hr chart

The GBP/USD had a much bigger gap of 46 pips to the upside telling us that they are still pushing the cheaper to move EUR/GBP which is likely to continue for the time being. With no interest in closing the gap this morning I expect they will try during the London session before pushing up to close the inefficient move from Wednesday last week. I don’t have a solid bias on this pair so I will be open for the short with a very clear set up at the gap high of 1.6732 if they test it without closing it to the lows this morning. However all things considered I would prefer to be long expecting a break of the gap high during the London session.

GU 1hr chart

The EUR/JPY finally made a sloppy second push Friday but the weak US data drove the UJ down on risk aversion making the EJ close almost flat on the day. If the risk factor keeps up today they will drive the JPY crosses down taking the EJ with so even though I will somewhat expect the third push I will still be open for the short if all three Yen pairs show a set up this morning or during the London session. The best level for a long is down at 136.83 but if they do drive it there I will be cautious if all three are pushing on risk and pass on the long if the UJ has broken some significant lows. Otherwise the best level for the short is 137.22. However the 137.17 is valid although weaker. If I do get an entry this morning I will be holding at break even during the London session for the break rather than exit and take any potential long.

EJ 1hr chart

Forex News Today

The calendar is void of anything significant enough to mention so if they are going to push it will likely be on a tape bomb. Otherwise they will wait until tomorrow. Having said that there is not a shortage of potential for a tape bomb today. In other words there is a good chance so be careful out there.

Happy Trading


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