Daily EUR/USD, GBP/USD, EUR/JPY Analysis September 1st 2014
The move on the EUR/USD last Friday is definitely not typical for an end of the month push. It qualifies as a first long term push out of the range which is something we rarely see at the end of a month as the big boys are usually closing the books for the month liquidating positions for profit. This is whats known as the end of month flows which almost always has a pullback of the months move. To be honest I didn’t mention it in Fridays commentary because with the months move being only 300 pips I really just expected them to hold the range but as we can see they had reason to actually make a push. From what I can see it had more to do with the news Friday as the German Retail Sales dropped into negative territory while later the US Chicago PMI and Michigan Consumer Sentiment were better than expected. There was also a decent but aggressive entry an hour or so before the NY session opened but would have been risky to hold through the US news releases. I will cover that in the live London session tomorrow.
Today I will have a bias for the next push down but will be open for the long on the potential for the fake out. Considering the conviction I have my doubts they will try to push weak holders out but its surly possible. At this point the best level for the short is at 1.3142 but if the current lows during London hold they may push up to 1.1.3152. Otherwise the only way I will take a long is if the current lows hold and they make a decent push up before running stops below 1.3128. I should also mention the big daily level at 1.3113 and just below at 1.3100. These will be tough to break so I expect a decent bounce there before the finishing of the push down. Having said that the fundamental picture for the Euro is getting bleaker with the piling up of bag German data. Be ready for a bounce if we start hearing the Bundesbank getting looser on releasing QE.
There is not much to say about the GBP/USD today with the move Friday just chopping around all day. I doubt there is really much GBP strength causing it to hold up but with the EUR/GBP having a bad day being the reason for the main cause of the GU holding the 50 pip range along with the big pop at the end of the day. At this point we still have no directional bias so I will be waiting for a test of the high or low Friday to take an entry on this pair. There is the 1.6580 level in the middle but I will need a situation screaming at me to take a long there today. The risk is just too high when the level being beat like it has.
The EUR/JPY is in a similar situation as the GU. The swing up and down on Friday has messed up our potential levels and shown us no clear direction. However its worth pointing out that all the gaps we see this morning all together point to a risk aversion move over the weekend. If this is the case we wont likely see the EJ move or break the range from last Thursday. I will be open on direction here as well looking at the extremes of Fridays move for an entry. Otherwise the 136.80 has potential but with the UJ staying above its Friday highs this morning the entry there is too risky with the potential of a risk off scenario looming.
Forex News Today
The calendar starts off early again with German GDP figures expected flat. A disappointment here has potential to push the Euro either way. If it stirs some ECB officials to talk about starting QE sooner then we will likely see a pop up once they start mentioning it. The one to watch is Jens Weidmann. Since he runs the Buba he will be the one they need on board most to get an earlier start to QE. Otherwise if they hold fast the drop has more potential to continue. Next is Manufacturing PMI data from Italy, France, Germany and the Euro Zone. These are all expected flat as well so I will be watching for Germany to drop below 50 or larger misses to the downside on the others. The UK also has its Manufacturing PMI expected to drop slightly but still remain well above the 50 level so it will need a large miss to get some GBP weakness from it. I expect they will be pushing the EG around again and we wont get much from the GU.
The US is on vacation for Labor day so its likely to be slow during the NY session.
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