September 3, 2014 Daily EUR/USD, GBP/USD, EUR/JPY Analysis
The EUR/USD is still having problems breaking below 1.3113 for the moment pretty much as I expected with such a significant level. They did show more conviction pushing below the lows so I do think its only a matter of time but they are busy beating down the GBP right now to be all that concerned with the Euro. I did finally see what has been causing the GBP crash and it was geopolitical. Its coming clearer that the Scottish independence vote is gaining momentum for a yes vote for independence from the UK. If this happens it will be bad for the GBP as the UK loses access to the north sea oil fields. Yes the fields are pretty much depleted but still a source of income for the UK and would do Scotland well in the near future. So for those wondering as I was over the last few days, we finally have an answer and keeping an eye on how that vote progresses and eventually turns out would be wise.
As for direction on the EU it has become less clear with the small ranges but the conviction does mean something. Im not going to have a bias on this pair today but would prefer to be short from 1.3142 if they can push it there. Otherwise I will be open for the long from the lows around 1.3111 since this deal with the EUR/GBP is likely to continue. Having said that the probability for the break in the near future goes down as long as they are focused on the GBP.
The slam down the GBP had yesterday is clearer now and will likely continue as the Scottish vote progresses but there will be twists and turns along the way so I will be keeping an eye on how that plays out and any changes in what they think the outcome will be. This reminds me of the last UK election when in the last hours before the tally came in it was looking as though the UK would be without a government until they had it sorted which took a couple weeks or more if I recall correctly. That night as I watched the news I made a boat load of money shorting the GU as the vote tally came in and the government was hung. This has the same potential but I don’t suggest anybody try it unless you know very well what the news means and have a good idea of how they will react. Its just as easy to get a beating if they just start back peddling a little bit.
At this point having a bias on the GU is unwise because of the 150 pip move because they could pull it back at any time they get a small breeze of the vote turning the other way. I will be trading the lows for a potential long while looking at the 1.6489 level for the short on a very clean set up. otherwise I will wait until they run to 1.6517 to look for the short. All the time looking for the updates on how this referendum is progressing to see if they are pushing traders out before a bigger run down or making a reversal on the vote turning negative.
The EUR/JPY had a nice ride to the upside for over 130 pips yesterday as well. As long as the USD strength continues then this should as well. Right now we are looking at a two pushes in one day event which is uncommon but has happened more in the recent past. We also have a conviction move in early Asia but the UJ isn’t helping much at the moment so I will be waiting for a clearer set up before taking a long this morning. Hopefully they pull the EU back and get conviction on UJ and I’m set for the long when they show some trapping. If I dont get a set up during Asia then I will look for the test of 137.95 during London as long as it don’t run off this morning. If they do hold above yesterdays highs then it will be a level as well for the London session.
On a side note I did close my EJ short from the Live session yesterday just a couple pips up after it couldn’t move off after three hours.
Forex News Today
The calendar for the London session has Services PMI data from Spain, Italy, France, Germany and the EZ. With all decently above 50 it will take a decent disappointment on many in order to get the break down on the EU. If by chance Germany drops significantly it may get things rolling but if they do think it moves the ECB closer to printing they will hold it up. The UK has its Services PMI data as well today which could give them a reason to try and push out weak holders if its better than expected. I have my doubts but just a print the same as the last would be enough since they are expecting a drop of over a half point.
The US has its Factory Orders a couple hours into the NY session with expectations of a 10 piont improvement. Personally I think the bar is set high but considering how good the latest releases have been its surely possible for a better than expected print. If its at least close it may give them reason to break the lows on the EU and probably send the GU tumbling as well breaking the significant daily lows its sitting on right now.
Aussie traders need to keep an eye on their Retail Sales tomorrow during the Asian session. This is usually a big mover for the AU if it misses significantly.
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