June 16, 2014 EUR/USD, GBP/USD, Gold Daily Analysis
The move on the EUR/USD last Friday shows more that the first push was false rather than them planning to run it up on USD weakness or the potential for what Super Mario did and said at the ECB press conference really causing a good reason to be going into risk currencies like the Euro. Having said that it would be clearer if we did get some conviction below Thursdays lows to give me a bias for the short today. Since that didn’t happen I will be keeping an open mind on direction. Adding up all the probabilities, the lack of conviction to make the second push, false break of Thursdays highs and intraday push down, the higher probability for a break is to the downside the way I see it. However the safer way to treat it is being open for the long from the low as well with a good set up.
The best level to be looking to short from is the 1.3575 where the hourly 200 sits but the lower level at 1.3545 is valid also but carries more risk. What I will want to see in order to take a trade there is either some conviction below Thursdays lows or see several trapping patterns more or less screaming at me that they wont let price move higher. Otherwise if they do run it straight down early in the London session I will consider the long with a stop run below 1.3512 while watching for any conviction to get out and look for the short at either the Asian box lows or highs.
The GBP/USD did make an attempt at the yearly highs of 1.6994 Friday but did get rejected some what. I would have expected it to make a clean push if they planned on turning to at least get some orders that were missed during the move up Thursday on the Carney speech. Again it will be safest to be open on direction today since they could run it either direction along with there not being much significant news releases to give them cause to push. It does seem like the higher probability is for the break to the upside right now but given the UK is in the same position regarding interest rates as the US (rising interest on government debt making default imminent) the big boys will need to be surely convinced that they will raise them and in my view they simply cant. Having said that, that don’t mean they wont try and get some stops above before any push down.
The best entry long will be at 1.6940 or just below at Fridays lows of 1.6920. Otherwise I would like to see the stop run above 1.6994 or at least clear manipulation just below like we saw on Friday. If they do show the conviction below 1.6920 they will most likely run out the ADR and potentially go as low as 1.6851.
Gold looks to be ready for the next push up with the four hour 200 holding it down for well over a day and the late daily close above on Friday. I would normally expect the 1278.71 to hold it back a bit as well but although that level is the most significant daily low there are a couple others to the upside as well with 1305.45 or higher being where it is most likely to push in coming days once the 1278.71 breaks. If they don’t try to smack it down here then the daily 200 at 1310.30 will be the next best opportunity. However with the two months of previous chop they could try at any of the levels in between.
At this point if they don’t spend the money to beat it down in the coming days it will most likely get to 1305 and potentially higher if they are really starting to lose control of it. The issue is they will only be willing to lose so much money trying suppress the price before they just let it pop and try at a higher price that I am sure they will try eventually. The only real reason for investors to sell gold is good global data of which we haven’t seen from anywhere but the UK so (their good days will end once the housing bubble pops) fundamentals point to higher gold prices
The best level for a long today will be a retest of Fridays highs or just below at the four hour 200 but could just run off without me. Otherwise 1286.61 is valid for a short but if they keep the conviction going during the London session I will leave the short alone until the NY session and potentially trade a pullback but hope to be long waiting for a break upward.
Forex News Today
The calendar is slow as usual for a Monday with Euro Zone CPI data first during the London session. Expectations are for most to be flat with the monthly headline data the exception looking to see a drop below zero. Considering this if it does surprise above zero then the Euro may strengthen as deflation fears potentially subside but a print just above zero may not do much for that so a bigger miss would be needed in my view. Otherwise a disappointment would be bad and not need to be as big.
The US has Empire State Mfg. the TIC long term purchases and Industrial Production data. Empire State is expecting a significant drop so a small miss to the downside will be bigger than a small miss up. In order to cause any USD strength this will need a larger deviation upwards. The TIC data is expecting significant more foreign purchases of US debt than last month so if tit disappoints big it could have an impact but a small miss will probably be ignored. Industrial Production is expected to get above zero so if it does should be good for the USD and my thoughts are it will need a big miss to really create USD weakness.
Tomorrows Asian session traders need to look out for the RBA meeting minutes tomorrow since if they discussed anything not mentioned at the last press conference there will be some AU movements early on tomorrow.
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