EUR/USD, GBP/USD, EUR/JPY Daily Analysis July 31, 2014
The EUR/USD did see the next push to the downside yesterday getting stiff rejection off the lows and coming within 7 pips of hitting the next daily level at 1.3357. In normal circumstances I would only be looking for the next push down with the clearest way to look at this is a two push scenario. However Im sure we can all agree that the markets are far for normal so I will be open for the reversal as well. The issue I am seeing is the potential for the third push down along with being the last day of the month. If you look back over the last two years worth of data there were only two instances of them pushing to a new monthly H/L on the last day and only one of those made the extended daily close while the other was rejected. The odds are not good for getting a push lower today.
The potential levels are tight again today with the best short being from 1.3415 while the 1.3403 is valid if we can get Asia to push lower before testing it during the London session. The best level for the long is 1.3371 but the 1.3380 is valid as well but weaker being a breakout level. I will be open for the entry at the Asian lows if we get the conviction above 1.3406 without testing 1.3415 during the London session.
The GBP/USD is in the same situation as the EU with the difference being it went into the chop for almost 3 days before starting these last two pushes. I will say it has a slightly higher ratio of getting end of month pushes to new levels but its not that much. On top of that there is NFP day tomorrow so unless they have good reason to make a push today the more likely scenario is hold out to see what that brings or even better, take month end profits. Of which would cause the rise rather than fall with this month being all down, much like the EU.
Having the daily close below 1.6917 is somewhat significant but the conviction isn’t all that convincing. however if it holds during the Asian session then it does give it a bit more weight for a potential short during London today. Otherwise the could push to 1.6927 or higher. The only level I will consider a long is 1.6893 and will need to see they just wont let it pass.
The EUR/JPY had a great day yesterday. Its too bad it didn’t set up during the Asian session like the UJ and GJ did or I would have been on for the ride, however this wont be the first or last trade I missed. With such a blown out move the safer way to treat this is with out a bias. They may want to go back and retrace some of the inefficiency in the move today. If they don’t then they will stop it at 137.55 and go for the next push up. I expect somewhat that they will test the Asian highs during London and run it down since there is quite a bit of headway trying to push it upward with the four hour 200 along with daily and monthly levels they will need a lot of conviction to break.
Forex News Today
The calendar starts off early with German Retail Sales expected to rise above zero. I expect this to be close but if it does bump below zero again they may see fit to make the down push if they really think the ECB will be closer to full blown QE. At the same time the UK Nationwide HPI is released expected to drop slightly. A disappointment would mean the housing market is slowing which may weaken the GBP since its only the help to buy scheme that’s supporting the UK economy now. Once that slows or stops the party is over unless by some chance it has spilled over and other sectors start to grow. Word on the street is its not. Later German unemployment data comes out. I doubt the rate will budge but with 5k expected to come off the unemployed list, if that is more, than it would erase and bad vibes from a disappointing Retail sales and if they both are better than expected we can be rather sure the ECB will be held back by the Bundesbank.
Next is Euro Zone CPI data expected flat at .5%. The big news would be if it drops below zero. Otherwise if its a miss to the upside then again lowers any probability of ECB QE
The US has Thursday Unemployment Claims and Chicago PMI. The bigger will be the PMI data unless the Claims missed very big. Otherwise Chicago PMI is expected to rise slightly and I expect this to be close also. The larger the miss the more chance for a move but I have my doubts it would trump any large disappointment from European data.
Asian session traders need to be aware of the Chinese Manufacturing PMI data tomorrow. Mainly on the AUD crosses but a big miss could effect the Yen pairs as well. However with the BOJ Gov Kuroda speech they will likely wait to see what he has to say before pushing the Yen around