May 6th 2014 Daily EUR/USD, GBP/USD Analysis
The 21 pip range on the EUR/USD yesterday is a bit disheartening for the potential to get back to our 100 pip daily ranges. However it doesn’t surprise me considering this pair has only been moving on news releases as of late. On top of that the Japan and London markets were closed for holiday yesterday taking a bit of the liquidity out of the markets. Having said that I would have to add that it seems as though the US and European big boys have lost all mojo with this pair. At this point I will be looking for better pairs to trade myself, for the time being anyway. In the future I will be doing the commentary on the two pairs I am looking to trade rather than just the EU and GU. For this week I will be doing the research so I will still doing the analysis for these two pairs.
The levels I will be watching haven’t changed since yesterday other than using yesterdays lows as the first place I will be looking for a long. The 1.3853 level is better with the hourly 200 as confluence. Otherwise I will consider the short from the 1.3880 while watching to see if there is conviction to the upside giving me the bias for the long today. With them holding price towards the highs yesterday it does add a little more probability for the break upwards today but I wont be counting on it with how this pair has been moving.
The GBP/USD has a little wider range with a 30 pip run for the day yesterday. It also has the two hourly pins to the 1.6853 level from yesterdays commentary showing they had no desire to let it go down. This adds a bit more to the probability it will make the move to the upside as well. Again I wont have a clear bias but with fundamentals along with the moves we have seen lately backing a rise much more than a drop on this pair. It will be my preferred pair to trade today. The best level for the long right now is 1.6858just above the daily 1.6853 but if they really want stops they will bump it past 1.6852and potentially test the hourly 200 just below. The Asian lows will be valid if we see the conviction above yesterdays highs and it don’t hit the 1.6893 in the process.
Otherwise I expect the psych 80 level to hold during Asia and then hit the 1.6858 level. I will also consider the Asian lows if they hit the breakout traders to the Asian highs during the London session first. Considering the recent moves I have my doubts they will be breaking the 1.6918 highs so will be looking take profit just below there if I can catch the long today. The short from the daily 1.6893 or just above at the psych 1.6900 is possible but I will want to see they refuse to let it pass with some clear trapping to short from there and will be holding with the stop break even if I am long.
Forex News Today
The calendar today starts off with Services PMI data from Spain, Italy, France, Germany and the Euro Zone. All are expected flat other than Italy that they think will pull into expansionary territory. If that does happen and others see improvement surprising to the upside they may get enough conviction to break the EU to the upside. I do have my doubts but its possible.
The UK also has their Services PMI data also expected flat at 57.6. At this point a miss to the upside should push the GU higher but will need to be substantial in order for them to break the overall highs. If it misses to the downside I think it would need to be bigger in order to create anything but manipulation but will also lessen the chance of a break upwards in the near future.
The US don’t have any high impact data but if the Trade Balance misses big or the Red Book changes substantially they may have reason to make a move but I doubt it. Otherwise there is a Fed Member speech that has potential if Stein drops any unforeseen hints. However the probability is low considering all other Fed speeches lately have been vague at best.
Our Aussie and NZD traders need to keep an eye on New Zealand Unemployment data and Aussie Retail sales during the Asian session tomorrow. There is also Chinese HSBC Services PMI data that will effect the Aussie if it misses big.
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