EUR/USD, GBP/USD Daily Analysis April 28th 2014
As I look at the chart of the EUR/USD this morning it looks as though the big boys have been reading the same things I was over the weekend. The Ukraine/Russia issues are getting more heated as more troops are going to the region. Ukraine shuts the water off to Crimea more or less guaranteeing that without some large payments the natural gas will be shut off to Europe. If that does happen then the word is the ECB will eventually have no choice but to jump on the print fest band wagon, of which only makes sense as the Germans will surely be more compromising when their data does start tanking. This will most likely take some time and one never knows, if cooler heads prevail may not happen at all. However that does not seem to be the case right now.
Looking at price alone we still have no reason to have a bias for today but depending on how the Asian session ends I may have the bias for the short come London session. It has the conviction down now but I will be keeping in mind the potential for the Asian fake out and potential long opportunity from the lows today. If there is no attempt to try and pull it back during Asia then the probability for further down movement during the London session goes up. Of course I will expect a pullback to push out the weak holders first and look for the entry at Fridays lows of 1.3826. I will want a clear set up there because they could push it a bit higher if they cant get orders stacked. Having said that if the risk off situation prevails they may just run it off straight out of the Asian box and take off without me. If that does happen I will be very careful about taking a long since the average daily range is so tight and a risk aversion move could certainly pop that back to the normal 100 pip ranges we like to see.
I will be open for the long at current lows of 1.3814 but only if they hold above during the Asian session and have enough room to make a decent run for stops below. Of course the setup will need to be great and low risk since if this risk off move is what I think then it will continue down today.
The GBP/USD is showing the same risk off move this morning along with the Yen crosses adding probability to this being the case. However that Asian fake out still holds true so I will be open for direction here today also. I will be looking to see that the correlation holds during the London session with these pairs as that will be the sign the risk aversion is true. Its unlikely that they will move the EUR/GBP much during this situation but if they do I expect it to drop as the Euro should be the weaker currency since they stand to lose most and ECB print eventually.
As of now the best level to short is Fridays close at 1.6794 but if it cant move up past Fridays lows and leaves the Asian box closer to the lows then Fridays lows come in as a possible manipulation point as well. Otherwise if they do push the EG down then this pair could rise all the way to the Asian highs if some of the risk move dissipates. The only place I will be open for a long is at the Asian lows of 1.6776 and would prefer to see them pop it above Fridays lows during London first.
Forex News today
The calendar is light today with nothing of note during the London session other than the Hong Kong Import and Export data. This should only effect the Aussie traders out there because if it does miss big then the potential for having a hit to China goes up and therefore affecting the Aussie economy. The bar has been set rather low regarding expectations so the potential may be low but something for them Aussie traders to watch out for.
Later the US has its Pending Home Sales expected to bump above zero but if it cant start showing significant improvement the fairy tale of US housing coming back will be seen for what it is. My thoughts are it will be a non event but if it does miss big we will likely see some manipulation.