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EUR/USD, GBP/USD Daily Analysis May 12, 2014

May 12
03:45 2014

Of course as Murphys Law would have it, just as soon as I start looking at other pairs to trade the EUR/USD and GBP/USD start to move in a more normal fashion so what I have decided to do for now is look more seriously at Gold and give an analysis on it for this week. As long as the EU and GU can keep up the move back to normal I will stick with trading them but keeping my options open for now.

Now that we have a clean second push on the EUR/USD last Friday I will be looking to see the third today. I am a little concerned that its not a normal cycle in that we will expect the third push on a Monday but it is what it is and we have seen them do this before. The issue is they may not make the next push until Tuesday. However since they did go a little out of character and make the second push on a Friday the probability is still there they have a good chance of making it today. If they don’t I will still be looking to see it Tuesday as long as they don’t run it up past Fridays high.

The best levels I see for the short today is 1.3768 while in normal conditions I would be looking at 1.3790 due to the lower level being close to current price but as long as they hold it closer to he lows during the Asian session I will consider the 1.3768 as valid. The potential to see the push down to the daily level of 1.3695 is good today or tomorrow as long as they have the conviction in this move. It sure seems as though there is some belief in the US recovery at this time since we are seeing equities creeping up on breaking all time highs yet again while at the same time seeing weakness in the Euro and GBP. Could we actually be getting back to the old normal? I have my doubts but at least the façade is looking good for now.

EU 1hr chart

The GBP/USD has the same second push showing a nice 100+ pip run. I am looking at this as the second long term push but a little concerned that we technically have three intraday pushes from the highs and the potential bottoming formation at the lows which is also a significant daily level at 1.6837. It will take some convincing to get me long this pair today but I will keep an open mind for it. The break down will open the door to the daily 1.6775 level but it will take some work to get there considering the chop is has to break through to get there. Otherwise they will most likely pull back around the ADR at 1.6906 before a drop down if they don’t have the conviction to move it today.

GU 1hr chart

Gold Gold Gold

The first think to consider when trading gold is it is probably the most manipulated commodity on the planet. Governments and Central Banks alike see it as a threat to the fiat currency they keep debasing so keeping a lid on gold prices is in all their best interests. What this means to us as day traders is that we would be better off trading with them than against them and the higher probability trades will be shorts for that reason, especially when we see big rises in price to key daily levels. Im not saying not to take long entries but they will need to be managed a little differently if one wants to hold for longer swing trades rather than take the two times our risk as we normally do these days.

Lastly before we get to the chart there are other dynamics we need to consider when trading gold. One is the risk factor. When risk is off gold usually goes up as the flight to safety or at least protection of ones wealth happens. People are not looking to make money in this trade but preserve their purchasing power as the fiat currency they hold goes down in value. When they see things as getting better they dump these trades and we get some drops. The other is that since its priced in USD when the USD is getting strong gold should be going down. Having said all that these dynamics have a come and go kind of mentality due to all the manipulation that happens with the precious metal.

The first thing I look at is the daily chart and see that the 1277 level has been pounded rather well and as they do so, the probability for the break down goes up. The Fed is still tapering and potentially looking to end QE this fall if they can manipulate the data enough to show that the recovery is real when we all know its not. This will have a downward pressure on gold as long as they keep the farce going, which they are likely to do. There was also the late day sell of Friday showing the big boys had something going on to dump that late in the day. I will be treating this as a first push considering the two day chop it was in last week. I will be bias for the short while still open for a long with a stop run below 1277.15. Otherwise the best level to short from is 1292.83 or just above where the 21 day ADR is setting. The 1289.15 level is valid but the set up will need to be clear during London or NY today in order to take the short from there.

1hr Gold chart

Forex News Today

The calendar is rather dead today so barring any tape bombs we should see normal movements. However what the heck is normal these days? 🙂

There is a Fed member speech late in the day but as usual I doubt he will drop anything big out there.

Happy Trading


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1 Comment

  1. LJay
    LJay May 12, 07:22

    Thanks for the extra time in preparing an analysis on XAU. I feel like your efforts are to allow us as traders to have the best shot at being a full time trader as well.
    regards LJay

    Reply to this comment

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