USD Beat Down Continues June 4, 2015
USD Continues Drop Into Daily Support
The plunge of the USD continued yesterday and they didnt even reach a deal with Greece. At this point I dont think they are even looking at the Greek deal failure since they will likely ask for the balloon payment if they havent already yet. The deadline tomorrow will likely pass with not much reaction unless by some miracle they do actually come up with a deal. Otherwise the bond or bund issue is getting a bit crazier by the day seeing bund yields rise substantially this week. This could be a sign of future moves but I expect the Fed and ECB will be coming to the rescue eventually even if they are actually causing this volatility just so the ECB has bunds to buy for their QE program.
I think this will continue for now but remains to be seen over the coming weeks. I do see that some out there think they are on the cusp of losing control but I suspect that this is part of a plan and will take more time before they actually lose it. It will eventually happen but if this is the plan some think, that the ECB/Fed are trying to flush some of the extreme positions out and it actually happens. Then as long as they dont lose control things will settle down within a month or so. The wild card here is how data progresses and possibly the Greek default if the Greek government dont cave in to Troika demands.
EUR/USD Moves Another 200+ on Dragi Statements
The push to the upside has a higher probability of continuing on the EUR/USD even though it has moved over 300 pips in the last couple days. Since there wasnt any interest in a pullback yesterday it shows there is conviction in higher prices along with the fact that the daily chart is showing a decent distance before it finds substantial resistance at the May highs. I would prefer to see the Asian range widen more to the downside to test 1.1242 but if they dont then hitting the breakout traders to the highs before testing the Asian lows during London will suffice. Otherwise I will have to wait for conviction above yesterdays highs at 1.1282 before looking for a continuation trade. I will be open for the short there as well but will need some convincing price action,which is unlikely.
GBP/USD Rejects Bad PMI Data Move
The USD weakness bled through to the GBP/USD even after the negative Services PMI print from the UK. At this point it has closed the inefficient move and shown enough bottoming that the higher probability is a continuation to the upside today. The pushes arent clear by any stretch so I will still be open for a short at 1.5373 but if it gets there I prefer to be long either taking profits or waiting for the break. The best level for a long will be down at 1.5312 but they could run stops a bit lower. If they show any conviction below 1.5308 then a push to yesterdays lows is more likely.
EUR/JPY Runs North With EU
The EUR/JPY is holding the EU correlation still with the UJ holding a temporary range so as long as that continues we will this pair break higher if the EU does. The daily chart does have a little bump in the road to cross but has more potential to the upside as long as the USD weakness dont flow over to the UJ. Of which doesnt seem likely right now. Although I do prefer a long from 139.86 the early conviction above yesterdays highs makes me open for a shorter pullback on a continuation trade. Otherwise Im open for a short from the daily level at 140.31 but will need to see the EU helping along with a good set up.
Forex News Today
The London session only has the BOE Rate Decision and QE total which will most likely be a non event. They wont be raising rates or the Asset Purchases and Carney dont speak so no big deal.
Later the US has Thursday Unemployment Claims unlikely to do much unless it misses big and I dont expect that just yet. Once some of the expected lay offs start rolling in it has a better chance for a disappointment. Otherwise we may get something from a Fed member speech later in the day but its unlikely since they have been quiet on policy lately.
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