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Daily EUR/USD, GBP/USD Analysis May 9th 2014

May 09
02:35 2014

Well we don’t call him Super Mario for nothing do we? It only took a few choice words from the ECB head to drive the EUR/USD down 160+ pips from yesterdays highs. Of course they couldn’t resist popping to the upside to catch any orders to stop out on the way down but that is typical for the big boys. I’m glad I stayed out of this pair yesterday as I would have surely been whipped out on the spike.

Of course it always starts with a verbal intervention as it was yesterday but when they use words like “we unanimously agreed on unconventional measures” and “you can use this meeting to telegraph what will happen at the next” Its almost a sure thing they will announce some sort of QE at the next meeting. Its not necessarily guaranteed because if the verbal intervention will be enough to weaken the Euro to a level they are comfortable with then they will hold off until the big boys call any potential bluff. Of which if they don’t do something we can just about guarantee they will test the resolve of the ECB and run the Euro up just to force their hand.

We do have a clear first push down but the large move does leave it open to a pullback before pushing on again. The move was actually rather efficient with a couple exceptions so to think there are many orders hanging out they will want to get is slightly lower than I would usually think. As of now the best level to short from is the daily low at 1.3863 but they could push it as high as 1.3878 and if they really doubt that Draghi will fulfill his promise of QE next ECB meeting they will run it up to 1.3905 and hold the range or even run higher. I think Draghi is serious but only time will tell. I will be open for the long at the four hour 200 since it has yesterdays lows and the Asian lows as confluence this morning. Its also Friday so they may have a desire to take some profits for the end of the week. Of course I will want a good entry and watch for conviction to the downside and exit if I see it and I’m long. Otherwise I will also be open for the long if they drive it down and test 1.3815 if they don’t run it up first during the London session. If they do that and run stops the 1.3815 is significant enough that the probability for them faking it to the downside before the pullback on a Friday is good. If they do run it up first the four hour has a better chance of holding.

EU 1hr chart

The GBP/USD has a cleaner first push down so normally the probability would be they will continue, however considering its Friday and the strength of the GBP lately my thoughts are they will hold it in yesterdays range today. In order to add probability to that it would be nice to see some false conviction during the Asian session but its not looking good so far this morning. If that does happen then I will be more open for the long at the 1.6918 level during the London session. The best level I see for a short is at 1.6946 but if they do show some conviction during the London session it probably wont make it there and I will consider a good set up at the Asian highs for the short.

GU 1hr chart

Forex News Today

The calendar starts early with German Trade Balance but I have my doubts it will miss big enough to cause anything sustained. It could add fuel to the ECB QE potential if it does disappoint big though. Later the UK has its Industrial and Manufacturing production figures both expected to drop slightly. If they do manage to miss to the upside then we will likely see the GBP strengthen. On top of that we do have the potential false Asian conviction this morning so unless London shows conviction below 1.6918 its probably going up or at least back in the range today. Later the UK NIESR GDP figures come out and the same geos for that. A positive miss and we get GBP strength and the opposite if it disappoints. I will say any disappointment will need to be substantial.

Late in the US session there is more Fed speak so keep an eye on tape bombs during that. I have my doubts Kocherlakota will drop any surprises but is possible.

Have a great weekend


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1 Comment

  1. big g
    big g May 09, 19:28

    hope your hands better now text book set up to day on gbp/usd 1 hour time frame hit ADR high as a stop hunt then dropped 3 bar setup on the second leg the volume gave them away really starting to get vsa that screen shot is going on my wall will be signing up in the next few weeks should have been two months ago but the bloody car hit me 1300 in repair bills thanks chad

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