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Daily EUR/USD, GBP/USD, EUR/JPY Analysis August 25th 2014

As I was talking about in the London live session Thursday last week they are still running intraday pushes on the EUR/USD. Of course its more reliable when they run the long term ones but for some time now we have had to be open for the reversals after the three intraday pushes. Now our picture is much clearer on the EU having the false push up and first push down Friday. Today I will have a bias for the second push down expecting the them to eventually run to the next daily level of 1.3113. There is a daily break out level at 1.3206 but I have my doubts they will turn it there without good reason due to some big news event.

There wasn’t much real news from the Jackson Hole event other than Yellen not being quite as dovish as some expected. Draghi showed he is in wait and see mode blaming the lower inflation on the Russians. Something I don’t get since they were worried about deflation long before the Russians banned produce and meat products from Europe. Putin just gave him someone to blame so he didn’t have to admit the weakness in European economies. Thanks Putin for saving Super Mario.

The best level to take a short will be at 1.3259 but they may push as high as 1.3274 if they don’t have the conviction to break below 1.3206 today and still get a full ADR move. Otherwise I will be open for the short at the Asian highs if we get the early push down during London and retest. I will be open for the long since this is a first push scenario but will need to see they wont let it pass Fridays lows and prefer to see a stop run early on during the London session.

Update: As you could probably tell I tried to write todays commentary over the weekend due to a heavy schedule today. The gap down does change things a bit with the levels and conviction. If they do hold the EU below the daily level at 1.3206 during Asia and the first couple hours of the London session then it will become a level to short from. Otherwise they will most likely push it to 1.3226 to try and draw weak holders into the market before the next push. I will still be somewhat open for the long but will need to see them push and show conviction above 1.2326 and then come back to test 1.3205. Having said that the higher probability is they make the push down today.

EU 1hr chart

With the GBP/USD staying in the Thursday range the best thing to do is wait for some conviction and trade in that direction or trade the extremes of the range. The best level to short is at 1.6595 while the best potential long is down at 1.6562. With the Friday close on the lows for the day I do see the break down as higher probability but would still prefer the entry at the highs to take it. Otherwise if we do get conviction I will look for the backside entry at Fridays lows or up at the 1.6584 level if they can push it there.

Update: The same goes for the GU except the level for the short is 1.6562 if they hold below during London while if they show conviction above that level the gap open at 1.6547 I will consider the long if all criteria are met wit6h a clear set up.

GU 1hr chart

The EUR/JPY also made a first push down but also is showing signs of a bottoming formation so I will be cautiously bias for the short. If they do show they are running the Yen crosses off the Yen this morning I will be open for the long if all agree. The best level to short is up at 137.78 considering where current price is even though the 137.72 is valid as well. The  best level for a long is 137.53 but being so close to current price and the daily level just below the entry will need to be super clear and I will watch for any conviction on the EJ or UJ to get out if I do take an entry.

EJ 1hr chart

Forex News Today

The calendar during the London session only consists of German IFO Business Climate so barring a big miss or tape bomb it might be a quiet session. Expectations are for a drop from 108 to 107 so I expect most of that is priced in already. I do see the better probability on a miss being to the downside but since Draghi is in wait and see mode the Euro may only weaken against the GBP instead of move the EU.

Later the US has its New Home Sales expected to rise by 30K. If this manages to get a decent bump above that then they may see it as housing improving and go with some USD strength and we will get our push on the EU. However if is close or a disappointment they will most likely hold the 1.3306 level and wait for Tuesday.

Happy Trading


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