EUR/USD, GBP/USD April 23, 2014 Daily Analysis
The movement on the EUR/USD yesterday didn’t really give us much for determining which direction they will go. On the one hand there is a bottoming formation at the lows while also a stiff rejection at the highs during the NY session. Its never a good sign when they keep price sandwiched between the hourly and four hour 200 EMAs along with ever shrinking average daily ranges. This means one of two things. They are either building up for a big move or they have no clue where to push since Europe and the US are pretty much in the same quagmire economically. I am thinking the latter and it will be a case of which frog jumps first that will determine the direction of this pair in the near future.
Therefore today I will be open on direction again but keeping in mind the bottoming formation and prefer a long to the short. I am not necessarily bias for the long but with all things considered it seems to have the best chance. The best level I see that has the most confluence for the long is 1.3794 where the four hour 200 sits. I will be a bit cautious and want a clean set up there with the 1.3788 just below along with the two daily levels they have potential to test right under that. It would also be best if they at least test the one hour 200 above before setting up the long below but not necessarily required with the short daily range we have. The only level I will be looking to short from is the daily high at 1.3821. It has the confluence of the psych 20 just below and reaction over 3 days giving it the highest probability.
The GBP/USD tells a slightly different story showing conviction to the upside but also a potential topping formation at the highs of 1.6838. At this point I will have a slight bias for the long here today as long as we don’t get the potential fake out conviction during the Asian session. I expect them to test it this morning and either show the conviction during London or leave the Asian box closer to the highs then come back to hit stops at the Asian lows or just a bit lower at 1.6815. There is the chance they want to knock out the weak holders from the NY session yesterday and go a little lower but with the psych 20 level holding well this morning I have my doubts they will do it if they are going to push north today. I will be open for the short also but will either want to see they wont let it pass the highs with a clear set up or get the potential fake conviction during Asia looking to short with a set up off the highs created there.
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Forex News Today
The calendar is busy today starting with Services and Manufacturing PMI data from France, Germany and the EU. France is expecting a slight drop while Germany a small rise so as long as the German figures don’t disappoint then we should see potential EU strength. Otherwise if they do miss to the downside then depending on how bad they are they could push the Euro down. The UK has their MPC Meeting Minutes so if I’m not in a trade I will wait on the release. Even though the GU has a tendency to set up just before big UK news this has too much potential to surprise. What will be looked for is any discussion of reducing the Asset Purchases or a shorter timeline for rate hikes. Both of which will be GB positive. Otherwise since most of the UK data has been good the chance of expanding either of those is very low.
The US has Manufacturing PMI and New Home sales with the housing data as high impact while PMI low. Im not sure they have that correct but big misses on either should see some movement even if its just manipulation. If the housing data misses to the upside significantly the coming durable goods data has a better chance of improvement as well.
Asian session traders need to keep an eye on the RBNZ Rate Decision tomorrow. They are expected to bump it up to 3% and if they don’t the NZD will weaken. I expect they will and it will most likely see some strength.
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