May 22nd 2014 EUR/USD, GBP/USD and Gold Daily Analysis
The EUR/USD did give the second push yesterday running 88 pips to the lows after the Fed Meeting Minutes release. I will be bias for the short today although I am a little concerned about the bottoming formation. I would have preferred to see them show more conviction below 1.3649 in order to have more faith they will be pushing it lower today. If they do run it down it has to 1.3583 before it finds some daily support but could run all the way to the overall lows at 1.3477 in coming days. At this point it will most likely depend on what the ECB does or more like what they think the ECB will do. I did see that some expect them to act and do a 300 billion QE injection next month but I have my doubts. Going negative on interest rates is more than likely what they will try first and save QE for the next meeting providing we don’t see more bad data showing deflationary signs. If that happened the chance for QE goes up substantially.
For now the best level I see for the short today is the Asian highs at 1.3687. I am leery of the proximity right now and prefer to see them push it down during Asia or they may just run it up to the psych 1.3700 during the London session. However if they play the breakout traders to the lows first I will watch the Asian highs for a clear set up.
On a side note I did take the EU long last night at the NY open after the stop run and confirming entry. I was hoping to see it pop before I went to bed so I stayed up a little late and it just couldn’t make the run to get my stop to break even so I manually closed at BE. I wasn’t about to hold my full risk on the entry through the Fed speeches and Minutes release and sure enough they would have just popped my stop right before running it up.
The GBP/USD made a first long term push to the upside yesterday throwing all correlation with the USD on these two pairs out the window while the EUR/GBP slammed down like we haven’t seen in some time. I do somewhat expect this to continue as the UK and Europe economies diverge with the UK seemingly getting better while Europe still has to worry about deflation.
I will be bias for the next push up today but still open for the short from the highs at 1.6920 or the psych 1.6900 level if they can widen the Asian range enough. The problem with the level for the long is that its rather far from current price and if they do push it down that far I would prefer to be short looking to see the break or taking profit around 1.6863 with a good entry. Having said that the 1.6863 is the best level for the long today but I will consider the Asian lows if I see typical trapping and a clear set up.
Gold is starting to look more like they will be breaking out of the price compression to the downside. If the USD can keep gaining value then that is the logical direction even though price continues to be supported at 1281.00 for now. If they do break it down it has a 40$ run before it finds significant daily support so if I can catch the short for the break I will be holding for a longer run. The only thing that could stop it is to see the Fed change their stance on the taper which doesn’t seem to be in the cards in the near future.
The best range to be looking for manipulation today is between 1293.42 and 1296.00 for the short. However the close proximity to current price leaves it open for a run up to the 1301.34 lower level as well. There is still potential for a long here but it seems the probability is low even considering the support it got yesterday. As I mentioned before, the longer they beat this lower level the buying pressure diminishes making the break down a higher and higher probability. Having said that I cant deny that the current price in gold is still seen as a bargain for people wanting to load up on physical so it could still hold in coming days. If I do get long from the lows I wont be holding for a longer run.
Forex News Today
The calendar is busy during the London session today starting with Manufacturing and Services PMI data from France, Germany and the EZ. Most are expected to be close to flat so a disappointment should cause the Euro weakness but mostly against the GBP like we have seen lately. The chance for a miss to the upside is smaller since data from Europe hasn’t been doing all that well lately.
The UK has its GDP figures and CBI Industrial orders that could push the GBP around today. As long as the GDP data don’t disappoint, of which I doubt, then we should see the next push on the GU while the EG tanks. Considering all the good data coming from the UK the probability that this is better than expectations is much better. The Industrial Orders will likely be ignored or even help the push as long as its not a big disappointment.
The US has Thursday Unemployment Claims expected to rise above 300k again. If this can manage to stya below that figure again it should make some USD strength as they get some notion of jobs getting better in the US. Later is Existing Home Sales expected to get a good bump as well. If there ever really is any improvement in housing that’s real and not big corporates buying up overstock to keep it off the market the US actually has a chance of pulling out of this. Having said that the way I see it is they are a long way away.
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