EUR/USD, GBP/USD and Gold Analysis May 21, 2014
The EUR/USD did finish off a first push yesterday but needing two days to do it leaves some doubt as to whether or not there is a plan for a second today. At this time its best to stick with the current plan of looking for manipulation at key levels. They will probably wait for the Fed meeting minutes later in the day to push this pair depending on what they talked about at the last meeting. I expect it will be the same as the statement pretty much discussing how rosy things are but still have certain problems that will need to continue to improve before they can raise rates.
My problem with this idea is now that Bernanke can speak a little more freely as a citizen he has recently said that the Fed funds rate will not normalize in his lifetime. I have to say that’s quite a statement showing that even though they keep saying the recovery is here he was pretty much lying when he told congress that he expected the Fed to be going back to more normal policy in the end of 2014 or early 2015. Ok he really didn’t go as far as to actually say it but at a dinner that bankers paid a whopping 250K to hear his insights of what the Fed will be doing in coming years at least one of them left the dinner with those thoughts. You can check out the Reuters article link at the bottom if this post.
The levels I will be watching on the Euro today will be yesterdays highs at 1.3713 for a short but if they how conviction above I will wait for 1.3725. Otherwise the 1.3684 level is the best place to look for a long.
The GBP/USD did give the third push even though it was a little shy and lackluster on the mildly better CPI data yesterday. At this point I would also say it has made the reversal we would expect for a 40 pip move while now holding in the third push chop leaving direction open as well on this pair today. The small conviction above Mondays highs don’t really tell us much because of the pin created during the news. It does increase the probability they will test the highs at 1.6860 but that’s really it. True conviction in higher prices would need to be above 1.6860. As I have said before the safest levels to trade in this situation are at the extremes but if they can show some conviction above 1.6848 during the London session I will be open for the riskier long at the Asian lows or just below at 1.6823. Otherwise I will be looking for the short at the highs around 1.6860.
As we were discussing gold hitting the upper level at 1290.51 during the London session room I wasn’t too happy with the trapping going n even though a couple members took the entry. I hope you only got hit break even on the dump at the NY open and had the nerve to take it again when it had a clear confirmation entry at the better level of 1287.99. Once it made the nice pullback for entry it was off to the races for a nice 8.00 move.
This what looks to be more of a fake out to the lows that has shown some conviction above yesterdays Asian highs does leave me thinking they will make the next push up but I think it would be best to keep an open mind. I will be looking for a short around 1301.43 or above and a long around 1287.99 again.
Forex News Today
The calendar has UK MPC Meeting Minutes along with their Retail Sales data released at the same time. If the Sales figures surprise we will probably see a small spike depending on the miss and direction but if its close they will be watching the minutes release more. I expect it will mirror what Carney said before in that they ill not be raising rates even if inflation gets above 2%. That’s not much different than what King did because even though inflation was high the economy was stagnant and a rise in rates would hurt and make it worse. The same is true today although things do look a tad bit better due to the help to buy housing scheme.
Later there is a Fed member speech but my thoughts are before they make any move during the NY session they will wait for the Fed Meeting Minutes. If I am in a trade I will be tightening up y stop to at least break even and pushing the take profit out just incase the relase is in my favor.
Asian session traders need to watch the Chinese HSBC Manufatcuring PMI. Expectations are for a small rise but still well below 50. I think it would need a larger miss to the upside to effect the AUD much. Otherwise if it does disappoint the miss don’t need to be as large to potentially hurt the AUD.
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