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EUR/USD, GBP/USD, EUR/JPY August 26, 2014 Analysis

With the EUR/USD holding below the 1.3206 level all day yesterday it shows they don’t have much interest it pushing price higher after making an attempt to close the 48 pip gap. They did manage to close most of the inefficiency in it but there is a slight chance they will fully close it today. The higher probability is they will make the third push but keeping in mind that most gaps do eventually get closed, if they cant start the third push during the London session today then the bigger the chance gets that they will close that gap. I will have the bias for the third push today but remain cautious.

The best level to short from is the 1.3206 but having beat on that several times yesterday its looking more like they might show some conviction during Asia this morning. If they do then I will look for that to be confirmed during the London session and take the backside entry at 1.3185 or wait for the test of 1.3206. If by some chance they do push above 1.3206 then Fridays lows of 1.3219 is valid but does carry more risk with the probability of closing the gap increases. I wont be looking for the long today due to the added risk and low potential for a decent move up to get a twice my risk trade.

EU 1hr chart

The GBP/USD closed its gap late in the Asian session on its way back into the chop from Thursday and Friday last week mainly due to the weakness in the EUR/GBP. Since it closed the day just above the open it does show they didn’t want to make a push upward but I will still be open on direction today. The best level to short is up at 1.6595 again while the safest long is down at the 1.6547 daily level or just below at 1.6538. The 1.6562 daily low is valid but carries more risk with it being violated on the gap and in the middle of the yesterdays range.

GU 1hr chart

The EUR/JPY has made its second push as well with much clearer price action so this pair will be my preferred trade today. The problem is its already tested the highest probability level during the opening candle this morning and may just run off without me. As long as these lows can hold I will be looking for the test of 137.29 in the next hour or so to trade it during the Asian session or wait to see what happens during the London session later. If it leaves the Asian box closer to its lows then 137.29 has the best chance but if it does leave closer to the highs it raises the chance of them pushing to the next level around the four hour 200 at 137.43.

EJ 1hr chart

Forex News Today

The calendar is rather bare during the London session today. There is UK Mortgage Approvals but barring a big miss it most likely wont give them cause to push. The housing data reliant on the help to buy hasn’t chanced so until they do slow or stop the scheme housing data from the UK shouldn’t surprise much.

Later the US has Durable Goods Orders. Considering the New Homes data yesterday this has a higher chance of disappointing but I should also say that the correlation between these two releases has fallen apart more recently so the chance is smaller than it used to be. They also have CB Consumer Confidence expected to slightly drop. With most consumer data being negative lately I expect this will be the same but since its expecting a small drop my thoughts are it will need a bigger miss to make the USD strengthen or weaken.

Happy Trading


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