EUR/USD, GBP/USD, EUR/JPY September 2nd Analysis
The EUR/USD didn’t get much movement yesterday staying in a tighter range, however it did test and hold the 1.3142 level from yesterdays commentary giving it moire weight today for the short. Having said that the fact that they didn’t make the next push is a little concerning since seeing the conviction is always better. With the daily level at 1.3113 almost tested yesterday and not giving a deeper pullback it has a slightly better chance of making the push today.
There is a little issue with that as well with the 1.3100 daily level just below. There is the chance they hold it there. If it does manage a break below there it has 1.3080, 1.3059 and 1.3000 smaller levels that have potential for a turn but a daily close below those and its all over before likely testing the 2013 lows. My thoughts are they will let it drop since they need a weaker Euro but as things get worse and Germany gets closer to letting the ECB go full retard it will be supported by the big boys. Having said that it don’t look as though Germany is any closer to letting loose on the grip it has on the ECB.
The best level to short today is at the 1.3142 again but with the daily close below last Fridays lows the 1.3130 is valid as well. There is just one problem. The proximity to current price. I will need them to at least test the lows before using 1.3130 or preferably show some conviction below yesterdays lows before using that as a level. I will be open for a long at yesterdays lows but cautious and will need to see the trapping almost screaming to go long there.
The GBP/USD did show some strength after the disappointing Manufacturing PMI data from Europe early in the session yesterday. However it gave most of it back when its own Mfg. PMI missed in the same if not worse fashion. I will have the bias for the next push up since it does have the requirements fulfilled for a first push but I should also say it has clear signs of a topping formation as well. Therefore the potential for the fake out is high. The best level for the long is at 1.6604 or just below at the psych level. It has the hourly 200 as confluence but is also close to current price so seeing a run up in Asia before the test in London would be nicer to see to take the long. Otherwise I will be open for the short at 1.6629 but will need something backing the topping formation to take that entry.
There isn’t much to say about the EUR/JPY today. Its holding a triangle pattern with price compressing over the last four days getting close to a point that it will be forced to break. Just like we had on the EU a couple weeks back, once we see a daily close outside of the price compression we will have a good idea on direction. Having said that the closer it gets to being forced out the higher chance its false so it really needs to show us something today to be reliable. If it still closes on the day in that small area to the right then I will be waiting for something more clear to trade this pair. The issue is this pair is mired with a fight on Euro weakness along with Yen weakness at the same time so in all reality I am looking more serious at the GBP/JPY this morning for a potential long if the set up is clear. The UJ agrees so that’s in its favor.
If I don’t get an entry on the GJ this morning I will be looking for a potential short on the EJ at 137.15 or a long at 136.65 during the London session. The 136.86 is valid but much to dangerous for an entry during price compression unless its screaming at me.
Forex News Today
The calendar is light today with only Spanish Unemployment and UK Construction PMI during the London session. The Spanish figures are most likely a non even while the housing data from the UK could be a mover on a big miss. Expectations are for a small drop and with the data yesterday it will probably be close or a miss to the downside. It will depend on how big as to how far they are willing to push and that don’t mean the GU will drop. The probability they soak it all up in the EG and the GU move up is still there. Anything better than expected and we should get the push up on the GU.
The US has ISM Manufacturing PMI expected to drop slightly, however with it still well above 50 then it should take a bigger miss to cause an extended move on the USD of which I doubt. Any miss to the upside and the big boys in NY will likely push the USD strength but I expect it to be close.
The Asian session tomorrow has Aussie GDP and Chinese HSBC Services PMI. The Aussies expect a drop in their GDP so if it does then there is a better chance of them dropping interest rates and the AUD will weaken. The Chinese data has the same potential with the last print right at 50 the drop below will be bad for the Aussie while any move of improvement a little helpful. Considering the Mfg. data yesterday was disappointing I have my doubts this will show much different.