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May 20th 2014 Daily EUR/USD, GBP/USD, Gold Analysis

The EUR/USD did not make a move yesterday so not much has changed regarding direction. At this point my thoughts are it has more probability of pushing to the downside since the ECB really needs to weaken the Euro but like I have mentioned in previous commentaries the big boys will test their resolve until they are forced to act. In this sort of situation we will likely see this range hold and potentially push up due to being at the lows right now unless the ECB is forced sooner rather than later. We will have to wait and see at the next meeting where they have just about promised to lower rates but the kicker will be if they go into full blown QE and do another LTRO.

Having said that with the Buba holding the ECB to their mandate it limits them to only doing the LTRO rather than printing like the Fed is doing. The effect is that although it will weaken the Euro it wont be to the extent of how weak the USD can be if the Fed stops the taper or eventually expands the purchasing program that many think they will be doing as a last resort.

Looking at the tight range on the daily chart that shows there is no conviction for either direction I see the 1.3725 better for a short today. Of course the potential for a long is there but the levels are somewhat questionable due to there being three within the proximity of what I will be looking to trade. Starting at 1.3691 at yesterdays lows and 1.3684 just below. otherwise the 1.3671 is a valid daily level along with the overall lows at 1.3649. If they do test the lower levels I would prefer to be short and looking to take profits at the lower levels. If I do miss a short and they run it down I will look for the lo during the US session.

EU 1hr chart

The GBP/USD didn’t quite make a third push holding at the hourly 200 EMA so the probability we are going to get the third has gone down but still exists. When I took a peek at the EUR/GBP looking to make its third push down, as long as that happens we can get opposite moves in the EU and GU. Having said that I will have the small bias for the long today while still open for the short during the NY session. I would prefer that they push upward during Asia to consider the 1.6806. Otherwise a stop run to the four hour 200 is valid and just below at 1.6785. I will be open for the short at 1.6837 if they leave the Asian box closer to the highs and show they wont let it pass with more than one trapping pattern there. A stop run above the highs yesterday will add more probability and offer a better entry as well. At that point I will watch for any conviction above and close with a small hit or break even if I see it.

GU 1hr chart


Notice how Gold got a beat down during the NY session yesterday? It did push higher than the levels I expected but I am noticing that it has a tendency to do that. With price still compressing on the daily chart it will be interesting to see if they can break it below 1284.08 opening the door for a much larger sell of possibly going as low as 1238.00 in the short term. Otherwise there is still the possibility that if/when the ECB acts it could see a buying spree but I will be keeping in mind that there will be the smack downs on any substantial rise when they see the opportune time.

Again I have no bias on direction but with the 1300.00 level showing they really don’t want price above does add more probability for the break down in the short term. However that may only be because they know the ECB is getting close to acting and want to beat it down a bit before there are actual fundamental reasons to buy physical gold. Also we should all remember that exchanges that hold bullion are running short on physical so the worse things get and more people demand delivery on contracts eventually there will be a refusal to deliver because they don’t have it and gold will spike. At that point they will still beat down paper gold but the premium between physical and paper will most likely jump significantly and it will be clear just how much the big boys manipulate spot prices.

At this time I will only be looking to trade the extremes at 1302.99 or just above for the short or 1290.51 or just below for a long.

Gold 1hr chart

Forex News Today

News releases start early with German PPI data at the open of the Frankfurt Forex markets. Its expected to get just above zero but if it does disappoint then the chance for the ECB acting at the next meeting goes up a bit. Otherwise the only other event during the London session is UK CPI figures expected to rise slightly. Since BOE Governor Carney has said that a rise in inflation most likely wont signal a rise in interest rates this will need a larger miss to the upside to get significant GBP strength. Otherwise if it disappoints we should see a bit more GBP weakness.

The US session only has a couple more Fed members speaking so I don’t expect much from that unless they sing the same tune against more QE.

Tomorrows Asian session has the BOJ press conference so trading the JPY crosses will be safer after that is done. However we all know that Japan needs a weaker Yen so they are most likely to do at least some verbal intervention.

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  1. hermank
    hermank May 20, 22:41

    who is Buba and what do it do?

    Reply to this comment
    • Chad Tell
      Chad Tell Author May 21, 00:20

      The Buba is a nickname they have for the Bundesbank. The central bank of Germany that is also the one that really controls what the ECB does.


      Reply to this comment

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