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Daily EUR/USD, GBP/USD, EUR/JPY Analysis August 19, 2014

The EUR/USD has managed to break free of its triangle increasing the probability of the move to the downside now. Its not quite enough to give me a bias for the day but does increase the potential for the short making the decent move rather than a long. The problem is the best level is up at 1.3380 at the hourly 200. The 1.3365 is valid but with its close proximity to current price I will need to see the breakout traders hit on both sides of the Asian box or something clear they wont let it run above to take the short there today. Otherwise the long from 1.3354 has potential but with all the other potential levels just below it I will be very cautious and need a clear set up for any long trade as well.

Again there isn’t much news for the Euro today and they will likely be waiting to see what happens at Jackson Hole at the end of this week. From what I see they expect Yellen to be dovish but considering she and the rest of the Fed members have been tight lipped about just what the Fed will be doing I have a feeling they will be disappointed. We will see. Its going to be interesting over the next few days to say the least.

EU 1hr chart

The GBP/USD stayed in a 20 pip range yesterday but since it didn’t close the gap it does show they have a higher probability of the push up. I always assume they will eventually close the gap so would prefer to see a set up from 1.6700 at least to close any inefficiency but will be open to take the long from 1.6711 with a clear set up and great entry. There is still the potential for the short from 1.6732, however all things considered along with the tight range yesterday any entry on this pair will be treated as aggressive.

GU 1hr chart

The EUR/JPY has now shown signs of a reversal more than any real potential for a third push. As members know I am not a fan of chart patterns but the head and shoulders showing very clear with yesterdays price action along with how the first and second push formed, the five day attempt with no real desire to move up the odds have changed to where I have to take the chart pattern into account and be more open on direction. The best level for a short is at 137.23 just below yesterdays highs. I will be open for the long at yesterdays lows but the 136.83 level just below has better potential for any long. However if it does get there I hope to be short from yesterdays highs waiting for the break down.

EJ 1hr chart

Forex News Today

The calendar starts off with a bunch of inflation data from the UK  during the London session. The CPI and PPI will be the ones to watch close with expectations of a small drop in CPI and PPI input. If these disappoint then the probability of Carney needing to raise rates drops as well but considering the speech last week they seem to know he wont be raising rates any time soon and even if he did the rise would be negligible. What this means for us is they can still push the GU up on EUR/GBP weakness since they have pretty much priced in the potential or more so, non potential of any significant rise in rates from the BOE.

The US has Building Permits and CPI data also. As long as the building data don’t miss big they will be watching to see if CPI drops below zero sparking potential deflation fears. If it does then the probability for USD weakness goes up substantially and we will get at least a push up on the GU while the EU maybe tests its highs but most likely not break up.

Japan has its Trade Balance and Exports data tomorrow during the Asian session so I will be waiting for that to be relke4ased before taking any entries on the EJ tomorrow.

Happy Trading


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