July 15, 2014 Daily EUR/USD, GBP/USD, EUR/JPY Analysis
The Euro had a good day yesterday with what was brewing up as a bank failure in Portugal having been swept under the rug. All is well and risk was on for the most part. Gold took a hit while the EUR/USD, USD/JPY and the S&P all rose nicely. The only exception was the GBP/USD seeing its third intraday push to the downside. The best course I see for today is to be open on direction with a slight bias for the status quo to keep up and see the next push to the upside. What I mean by “status quo” is the propping up of all things about to fail, keeping the “all is well” feeling alive.
The levels I will be looking to long the EUR/USD today start with 1.3610. If they do keep the push up going during Asia this morning then I will consider the hourly 200 but would prefer to see some conviction above 1.3630 giving a long more probability. At that time the Friday daily high is also valid along with the Asian lows but those levels do carry more risk so the set up will need to be pretty nice. Otherwise I will consider the short from 1.3638 if they show clear trapping and lack of conviction to break to the upside.
The GBP/USD had the third intraday push down yesterday so the reversal has the higher probability today. There is also the chance of it going into extended pushes due to these being the intraday type. Having said that if the “all is well” attitude still persists the reversal has the best chance. There is also a nice bottoming formation as well and the test of a daily breakout level just below yesterdays lows. The best level to get the reversal long is 1.7072 but I will be open for taking it at the Asian lows if it shows conviction above 1.7100. Even though the probability for the short is lower I will be open for one if they widen the Asian range to the downside and then run to 1.7100 showing they wont let it pass.
The EUR/JPY short trade I took during Asia yesterday did end up hitting me for a 16 pip loss. As price approached the end of the Asian box without going off my direction the safer action was to simply close closer to break even. However as many members know I like to give the trade a chance while minimizing my risk so I moved my stop to just above Fridays highs and did some chores waiting for London to open. When I did come back to my desk I was out and it wasn’t looking back in the least bit.
The best way to treat this pair is open on direction having a slight bias for the second push up. I think much of any move will be made after the BOJ Press Conference later this morning so I don’t expect to catch the move. Otherwise during London I will be watching 138.22 if its not blown out this morning. They will most likely push it down to 138.03 or lower to 137.91 if the BOJ disappoints. I expect the BOJ will at least try to impress and we get the next push up early so I will be open for the short around 138.64 or higher for a pullback. This will depend on just what the BOJ says because if they do take some action, there may be momentum to keep the push going and I will just stay flat this pair.
Forex News Today
The calendar starts off with a slew of inflation data from the UK today. The big ones to watch are the CPI and PPI. If these can surprise to the upside enough there will be at least thoughts of Carneys “rate will rise” having some fundamentals backing it and the GBP will benefit. Any surprise to the downside will have the opposite effect as the truth about his real ability to raise rates diminishes. Thirty minutes later Germany and the EZ have ZEW Economic Sentiment. While the German data is expected to drop slightly the EZ is expected to rise. If these are close then they will likely offset each other but a larger miss in the German data should have more effect on any sustained move. The kicker is the BOE Carney starts a speech at the same time so this will likely throw a wrench in the mix depending on what he says. I expect he will do some backing of the rates rising unless the inflation data disappoints big.
The US has Retail Sales figures at the NY open expecting a slight rise. As long as these are close I don’t expect much because they will likely still be digesting what Carney said and waiting for what Janet Yellen has to say later. However a drop below zero should be USD negative while I expect it will take a larger miss to the upside to get USD strength going. There is also Empire State Mfg. expected to drop but I don’t expect much from a small miss from any of these since Janet Yellen is testifying not long after these releases.
The Asian session traders need to watch the Chinese data tomorrow. These will have an effect on the Aussie the most. There is also the BOJ monthly report but shouldn’t be too far off the Press Conference today so I wouldn’t expect much regarding the Yen crosses
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