September 12, 2013 Dailiy Analysis of EUR/USD and GBP/USD
The EUR/USD made the third push I was expecting yesterday and ran within 10 pips of the top of the line like I had expected also. As you should be able to see the line drawn is just a copy of the second push line placed at the lows from Tuesday. this is how I see the clarity of the pushes and since the average daily range has been tight as of late it is no surprise that it came up shy of the 104 pip push on Monday.
In normal conditions I would be expecting the reversal today but there are a few fundamental reasons I think we are in for at least 1 extended push. One is the 10yr note auction from the US yesterday. There has been talk of a couple occasions that the yield has crept up around 3%. The chatter is that once it gets above and stays above with no beat down it has a good chance of getting exponentially worse real fast. of course the Fed will step in but as we have seen they will only be able to do so much and may not be able to plug the hole in the dyke. The second is the debt ceiling that has so far been off the radar but will start winding up here in the near future. I mentioned a little on this in yesterdays commentary but its such a deep issue I could write a book and never finish this commentary. Suffice it to say, money wise the US and Bernanke share the same spot between a rock and a hard place. Lastly is things are actually looking like Europe is the cleaner dirty shirt. We all know its not really true and at least we could compare them to the 2 kids who just played football in the mud all day but when it comes to data its like the music industry in that staying on top is due to the most recent hit rather than the comparison of collections. Crazy but true.
Having said all that there is still the chance for the reversal but considering the fake out dip on Monday if it does hold these highs and dip I will still be willing to take the long as low as 1.3280. Otherwise the conviction above yesterdays highs during London today will solidify a long bias and I will look to either the Asian lows or just below around the 1.3200 area for the long. If it does make the break up then 1.3400 is the next best level for a turn and if it gets there we will probably need some bad news from the US to break the highs at 1.3450 any time soon. However we do have plenty of potential for that 😉
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The GBP/USD also made the third push as expected thanks to the awesome print of their unemployment figures yesterday. Now that I can honestly say I did not expect. This also raises the chance for an extended push today even though we should be expecting the reversal.
What makes me think the continuation has a good chance is they flushed out weak holders after the spike with a 70 pip retracement before continuing the push and closing close to the highs during the NY session. The next level that has a chance to turn it if it breaks is up at 1.5885. All it will take to solidify the move upward is that hourly close above yesterdays highs and I will be bias the long here also. Otherwise I want to see the push down here during Asia and see the hourly stop run with some clear manipulation at the highs for the short.
If we do see the conviction to the upside I will look at the Asian lows to begin with but will be careful since they may push is as low as 1.5800 or even as far as 1.5755 to try and flush out any weak longs.
Forex News Today
The scheduled releases are fairly light today with the ECB monthly Bulletin for the Euro. I have my doubts there will be anything substantial out of this and will reflect the meeting pretty well. If so it could hold up the Euro a bit but will it dirty the shirt more? I doubt it. There is also a Super Mario speech later in the day during the US session so be careful around that time.
The UK has a 10yr gilt auction today and even though its marked as low impact it could spark a move in the GU if there is any momentum in a run from US paper over to UK paper. So even though it shouldn’t be a move it does have potential.
The US has Thursday Unemployment data and barring a big miss which is unlikely to be positive I expect the 30yr bond auction and Budget balance figures to have more impact. If the Budget misses in a big positive way there will probably be some running back to US paper but unless its huge then it wont last due to the other factors mentioned above. If the Bond Auction goes off like the 10yr did yesterday then we could be in for a big ride up on both pairs.
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