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EUR/USD, GBP/USD, EUR/JPY September 4, 2014 Daily Analysis

September 04
04:15 2014


Today is going to be big for the EUR/USD due to the ECB Press Conference. More so than previous meetings we will see just how close they are to going full retard jumping on the QE buss. At this point I agree that although Draghi will be even more dovish, he wont be jumping on to the “short buss” just yet. The issue is the ECB has some recently implemented programs and some not started yet that they will want to see the results of before they go into full print mode ECB style of course. With the German data being more disappointing as of late there is a slight chance that the Bundesbank is a little more willing to give the green light but if Chancellor Merkel has to make a call to Super Mario shortly after the Jackson Hole farce asking him “what the heck is he thinking” then in reality it shows that Germany isn’t quite ready to fire up any printing presses just yet. Therefore although I do think its something that will happen, it wont be this time around. Maybe in October when the Fed signs out of the mental ward so there is more room but even then I have my doubts because the ECB will just have released funds from the TLTRO program and may want to wait and see where that goes first. The wild card is again the German data. If it continues to spiral down and the German people start to get angry then the Bundesbank and politicians alike will have to do something to keep their jobs. Then they will act or let the ECB act that is. This is going to be interesting.

Looking at the charts alone the EU has made a first push up holding the monthly low from August last year. I cant say Im too convinced we will get the second today until after the ECB press conference but its possible. I will have the bias for the long but will need to see the trapping at the 1.3134 level in order to take the long today. If for some reason they do show the conviction above yesterdays highs during the London session I will be open for the long at the Asian lows or highs depending on how far the conviction push goes. Otherwise I am open for the short with the stop run to yesterdays highs of 1.3159 as well.

EU 1hr chart


The conviction during the Asian session on the GBP/USD yesterday seems to be holding for now with the pair also showing that they didnt have much interest in a deeper pullback to push out weak holders. I will still have the bias for the next push down but not quite as strong. The best level to short is the 1.6489 just below yesterdays highs but the 1.6476 level at the NY/London overlap is valid along with the lows from Tuesday. I will also consider the long from the 1.6444 level but will need to see the set up is backed up well with more than one trap and a low risk entry while I watch for conviction.

The BOE Rate Decision is also going today but I don’t expect much from it while they wait for the ECB to take the stage. There is almost no chance of a surprise from Carney.

GU 1hr chart


The EUR/JPY went into chop mode trying to break to the upside to no avail. The 138.23 level is a significant daily high that will take conviction to break so it don’t surprise me it held after a two push in one day event. At this point its best to be open on direction for this pair but if the USD strength against the Yen holds it will break up. Having said that I have my doubts they will be pushing the Yen today unless there is a big surprise from the BOJ press Conference today during the London session.

The best level for a potential long is at 137.68 but I will be more open for a short than I was yesterday if it reaches 138.23. The daily level at 138.09 is valid but did take a beating yesterday so I will be more cautious taking a short from there.

EJ 1hr chart

Forex News Today

We have an eventful day with news events today. Starting with German Factory Orders expecting a rise above the tragic disappointment of the previous release. If it does come close and dont miss below zero again then we can count on the Germans holding back the ECB print fest until more bad data comes. Otherwise if it does disappoint big again then it will help somewhat on a possible QE start at the next ECB Meeting.

At the beginning of the London session the BOJ has a press conference so that will likely send the Yen crosses in a tizzy until its over and things settle down. For now just what they will do is not clear for me so playing it safe and waiting until thats over is best.

Later is the BOE and ECB rate decisions and Press conferences mentioned above. I dont expect much from Carney at this time with the bad data from the UK not really stacking up quite yet. The ECB is a little different story with most expecting Draghi to be dovish but not enough to signal any type of QE program in the near future. Im sure he will say they are ready as they have before but I think most know its just talk without the Buba on board.

The US has ADP Nonfarm and Thursday Unemployment claims released at the same time Draghi starts his speech so baring a massive miss they will be turned into Super Mario and will likely get ignored. Later is the ISM Non Manufacturing PMI data expected to drop a bit so as long as it dont miss big then they will still be moving on what Draghi said during the Q&A session. After London closes there are two Fed member speeches as well with Fisher (hawk) first and Kocherlakota (dove) later. With both being voting members this year the probability is they will offset each other unless one changes their stance a bit. The higher chance being Kocherlakota since the data from the US has been fairly decent lately.

Happy Trading


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