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Daily Analysis of EUR/USD, GBP/USD May 1st 2014

May 01
04:13 2014

The first push on the EUR/USD again failed to make the second yesterday as the CPI data from the Euro Zone was not as bad as they thought it would be. Myself included. It also looks as though they got early notice of the nasty GDP data from the US with the move starting well before the release. Later in the day the Fed did as expected while also painting a rosy picture as usual so all is well right? I have my doubts.

The good news is, even though we again don’t have any clear direction for the day the Euro did make a normal 100 pip move raising hopes that we will start to see the average daily range widen up in the future. There is also a nice exhaustion move at the lows yesterday giving us a clue that the probability of a push out of this range may come today. I could say there is the first intraday push but I think that would be a bit too optimistic for the break. All things considered I will be open on direction but cautiously optimistic for the break to the upside.

The best levels I see for the potential long are 1.3854  and 1.3841. The move upward was efficient enough that the probability for dropping lower today, if they do intend to push it up, is not as good. If that is the case I doubt they will go much lower than the 200 ema to the downside. I will be open for the short from the highs at 1.3878 but will want to see they refuse to let it close above while getting a good entry to minimize risk if they do break it with conviction.

EU 1hr chart

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The GBP/USD made what is most likely a second push but since its not in the normal cycle of them I wont be treating this as a long only day. We rarely see them make the pushes over more than three days but it has happened in the past. However since its not typical we still have to remain open for a potential short today. Of course I will be bias for the long and all things point to the move upward having much more potential with the monthly level at 1.6871 being broke yesterday. What does concern me is they didn’t have the conviction to get the daily close above it.

Right now the best level for the long is 1.6860 but they may push it as low as 1.6844. The 1.6871 is valid but with its close proximity to price and a tight Asian range I would prefer to see them push it up a bit more or at least hit the breakout traders to the Asian highs before taking the long from there today. Having said that if the set up is great and I can get my entry I will take it from there if they can at least test the 1.6887 and leave the Asian box closer to the highs. I will be open for the short from the highs but it will have to be screaming pretty loud they don’t have conviction to push it. If it does break it has some room before the next daily level which is also a yearly high.

GU 1hr chart

Forex News Today

With banks in Germany, France and Italy closed for Labor Day we may have a slow start to the London session today. However London is open and they have some decent news for the UK today with some housing data and Manufacturing PMI. I don’t expect too much from the home price data unless it misses big. With the buy scheme working well so far it should be close. The PMI is expected to rise slightly and I don’t see much reason for it to miss that much. If it does manage to be better than expected we will probably see the break to the upside on the GU while a disappointment could hold it up. My thoughts are it will be close and will take a larger miss to the downside to keep them from making the next push.

The US has Thursday Unemployment Claims along wit another Janet Yellen speech at the same time so it will take a large deviation to trump Janet speaking. Price will likely get jumpy around that time depending on what she says. The taper is still going as planned so I don’t expect her to surprise but there is the chance she will. Later is ISM Manufacturing PMI expected to have a decent bump up. As long as its close to expectations we could see some USD strength and make them think twice about breaking the highs or holding above them if we get the break upwards during the London session. Considering the GDP miss yesterday for the US I expect that will be more USD negative than good PMI numbers being USD positive though.

Happy Trading


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