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Daily EUR/USD, GBP/USD EUR/USD Analysis August 11, 2014

August 10
23:59 2014

The EUR/USD got a boost starting from worse than expected German Trade Balance figures that proved to be a “bad news is good ” scenario for the Euro. The issue is like I have said before with every piece of German data that gets worse over time the probability that they will get on board with the ECB on full QE goes up. Again one would think this would be bearish for the EU but that is not the case as the QE as a last resort will at first be bullish as it has a small chance of boosting the economies in the short term since it has been the austerity crushing them for the last several years.

Therefore as the ECB starts buying the bonds instead of the banks there is a chance that banks will lend out to business and people boosting the economies. All good right? Well nit does have a small chance if they lend to good businesses and individuals that do something to boost production in the economy but if they do what the banks did in the US and sit on the cash and do massive stock buybacks to protect themselves. It will be a carbon copy of what is happening in the US. Plus keep in mind European banks are still so much more over leveraged than banks were or are now in the US so I would have to say that good, constructive lending from European banks after the ECB goes full QE has low probabilities.

The move we had on Friday looks more like a two push in one day scenario as they moved two full runs of the ADR. However I am only going to be looking at this as a first push due to the topping formation at the daily level of 1.3431. At this point this months highs are just 10 pips away and its going to take some conviction to break them. Meaning more bad German data so the chance that they hold the EU in this range for the time being is better than a break of the monthly highs.

The best level I see for the long is at 1.3395 but they may dip as low as 1.3384 before a turn. There is also the hourly 200 just above at the psych 1.3400 but in order to take the long there I will need to see them leave the Asian box closer to the highs before a test during the London session. Otherwise the safest short entry would be from a test of Fridays highs confirming the topping formation but if they do intend to hold this range the daily high of 1.3424 has a good chance while the 1.3416 level will need some typical hitting of breakout traders and clear trapping afterward to get me short from there.

EU 1hr chart

The GBP/USD showed one of the rare occasions of having a conviction move during the Asian session that held true and made the push down during London after a test Friday. Good job to the members that caught the short after the rejection and trapping during the London session. I know that some members took the safe route and closed before the NY open while others took the risk and made some pips. Either way it was a good trade and you followed your plan so a good trade win or break even.

Right now the cleaner way to look at this pair is having three pushes and expect a reversal. My issue with that is the weakness of the bottoming formation along with the GU tendency to go into extended pushes lately. There is also the fact of the next daily level to test for conviction on lower prices being 40 pips below current price. Therefor I will be slightly bias for the long and reversal but open for the short from preferably the 1.6797 level but open at the spike high to 1.6787 at the end of the day Friday as well. The only place to be looking for the long is at the lows of 1.6766 with the profit target of 1.6797 since a reversal trade often don’t make a full push.

GU 1hr chart

The EUR/JPY got what looks more like a fake out to the lows Friday plowing upward on the German data with Euro strength since the USD/JPY couldn’t find a reason to break free of its ADR. At this point the EJ has the first long term push after seeing a failed second intraday push so I will have the bias for the long but also considering the extended move Friday they may hold below 137.11 this morning depending on what the BOJ monthly report has to say. Of course the BOJ wants a weaker Yen so the higher probability is it will move up on the news but just how far, and will it be a sustained move is still in question. I wont be entering before the news but later be open for the long at 136.70 or 13648. As long as the news don’t pop it up to 137.11 I will be open for the short at the gap open of 137.00 or just bellow at the hourly 200. Of course I will need the other Yen crosses to agree before taking the trade during the Asian session.

EJ 1hr chart

Forex News Today

The calendar is rather bare on significant releases other than the BOJ Monthly Report this morning. They do pick up tomorrow with more Japanese data in the Asian session and German ZEW during London.

Happy Trading


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1 Comment

  1. Animesh Debbarma
    Animesh Debbarma August 11, 00:21

    Just want to thank you Chad for your morning analysis!

    Reply to this comment

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