EUR/USD, GBP/USD, EUR/JPY Daily Analysis August 21, 2014
We did get the second push on the EUR/USD yesterday as it moved straight off the Asian highs without looking back until just before the NY session started as they waited for the Fed Meeting minutes to push lower for the day. Today I will have the bias for the short again looking to see them pull back to the 1.3276 level before they make the move. If it does show the conviction during the Asian session this morning I will be waiting for London to confirm it before I take the short.
There is a slight possibility for the reversal since there is three intraday pushes from the highs when it started the break down so if they show they wont let it go below the lows I will consider a long for a pullback but wont hold for a longer move. Having said that and all things considered they are much more likely to push it to the next daily level down at 1.3150 rather than make a reversal to push out weak holders. I have my doubts they will make a move that large in one day but over the next couple days has a good chance. While the best level to see them push from is the 1.3276 the 1.3264 is valid if they show the conviction as well as yesterdays lows at 1.3254 depending on how far they are willing to push below yesterdays lows on the break.
The GBP/USD did make the pullback to bump weak holders out when the BOE Minutes showed there were two unexpected members that voted for a 25bps rate hike at their last meeting. To be honest even I was surprised, not that they voted for the increase but the size being a full quarter of a point. Of course Carney has the last word but having others that are already wanting an increase does change my thoughts a little.
Once the NY session started they took that back and made the push closing the day below Tuesdays lows on the USD strength so I will have a bias for the short here as well today. The best level being the 1.6610 while the 1.6600 is valid the proximity does make me less comfortable with it. The same goes here as the EU on conviction. I will need to see London confirm and look either at the Asian highs or yesterdays lows for the pullback to short from.
My EUR/JPY Asian session trade did end up stopping me out for a 13pip hit when it made the pop above Tuesdays highs. Since it didn’t move off far enough to move the stop to break even I tightened it up after holding for almost three hours and had to leave the office. As you can see once it did make the conviction move it came back for a test and up it went again. I did expect that the Euro weakness would help it but the Yen weakness/USD strength prevailed so now we have a first clean push to the upside on the pair.
The best level to get the long here today is down at the four hour 200 137.37 area. However it don’t look like they are willing to push it that low this morning so I will wait to see if they show the conviction above yesterdays highs and consider the Asian lows or the 137.54 daily level. Considering they didn’t give 137.54 much respect this morning I will need to see something very clear to go long from there and prefer they run it high enough to trade from yesterdays highs.
The calendar starts off with French, German and Euro Zone Manufacturing and Services PMI data today. As usual the German figures will be the most watched and are expected to drop a bit. If it manages to disappoint below the 50 level then we will get more Euro weakness while a miss to the upside will need to be larger to get them thinking the European economy has potential for getting stronger. Most of what we have seen lately shows weakness so that’s what I am expecting. The EZ figures also have potential to drop below 50 so even if German data don’t and the EZ figures do then we will likely get the same reaction.
The UK has retail sales data expected to rise on the monthly figures. A miss to the upside will likely cause a spike up for the GBP but most likely soaked up by the EUR/GBP if the USD strength holds today.
The US has Existing Home Sales and Philly Fed Mfg. Index. The housing data has a smaller chance of missing big but its possible while the Philly Fed data is expecting a sizable drop. Considering the way the Fed has been as of late my thoughts are it will need a bigger miss to the downside to create much USD weakness while any print between last release and whats expected today will be seen as USD positive.
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