September 5, 2014 Daily EUR/USD, GBP/USD, EUR/JPY Analysis
Well not only did Super Mario surprise but he did it in spectacular fashion. Now I think he has truly earned the name “Super Mario”. As I was watching the trade I took during the London training session run off at the Interest Rate decision release I knew he did something big and sure enough cutting all three benchmark rates was massive compared to what some were expecting with a QE announcement. The speech did show they are closer than I thought to potentially doing some printing but with decent news coming from Germany I still think they may have just spewed some dribble to appease those that expect it sooner. The issue for me is if they really plan to do QE any time in the near future then why would they lower rates? Time will tell on that one.
Today I will be taking the day off trading 🙂 I did manage to book 134 of the 230 pip move before I went to bed last night. Since it was hitting significant daily support at 1.2995 I didnt think it was worth the risk to hold and wake up to a larger pullback this morning. At this point the next level for it to test and probably get a small bounce is at 1.2874 but then will likely run down to 1.2766 before getting a good bounce. If I were going to be watching the markets today the best level for a short is at 1.2955 and while I would be open for a long there would need to be something big to convince me they will be running a pullback. The move down after the initial drop was rather efficient so I have my doubts they will be running back to close the inefficiency between 1.3118 and 1.3036. What would convince me is if they show conviction above 1.2955 or show they just wont let it pass yesterdays lows with several trapping patterns during London.
The GBP/USD had the same clean set up along with great entry as the EU so anybody who took that pair short yesterday did well also. Personally I preferred the Euro since the fundamental picture was skewed much better for a large move if the ECB did as I expected. The possibility of the EUR/GBP having a fit was good which could have sent the GU to the upside so the risk was higher taking it short however as we can see now was still a good trade on a great set up.
Right now its showing conviction during the Asian session as the EG works its way back up so I will be looking to see that the conviction is true during the London session before taking the short today. The best level would be yesterdays lows at 1.6328 but they could push up to 1.6346 as well. There is also a significant daily level at 1.6260 just shy of todays ADR I would be open for the long at if they show clear trapping but I expect they will either run to test it during Asia and hold before a pullback to run it down if the USD strength holds through today. In all reality after such a move they are typically going to hold the range for a day or two even if they intend to push it lower so any trade taken today would be best managed by taking the profit at the 1-2 R/R.
The EUR/JPY had a comparable move to the EU but was held up initially on USD strength against the Yen. It did eventually go on Euro weakness but there wasn’t a clear set up to trade it yesterday to try and hold through the news. This pair has a better chance for a pullback today if the EU holds in a tight range while the UJ runs up. Thats not a reason to have a bias so being open on direction is the better course for today. Its hitting the best level to short as I type and looks like a nice set up if it pulls back for a good entry in the next hour or so. The UJ and GJ agree at this point although it would be better to see more than just one pin on the UJ. Otherwise a long from the lows with clear trapping showing they wont let it drop is also doable during the London session if your not in short from the Asian session waiting to see if it breaks. Having said that its best to just take the money and run if you get a 1-2 trade, then take the rest of the day off for a long weekend. 😉
Forex News Today
Today is NFP day so there probably wont be much movement until that release during the NY session. There is the German Industrial Production an hour before London that could get things moving but I have my doubts. Expectations are flat but considering the much better Factory Orders yesterday they have probably priced in a better figure here already. If it disappoints big then that would change but I doubt it will.
Non Farm is expected at 225K while the Unemployment Rate is expected to drop to 6.1%. As long as the NFP figures don disappoint big then I expect the USD strength will keep up. There has been some relatively good news coming from the US so it has a better chance of missing to the upside the way I see it. A miss in the Unemployment Rate will most likely be ignored unless its rather large as well since the Fed dont really look at it as a big deal right now.
Have a great weekend
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