DAILY REVIEW  26 Jul 2013

EU: Daily wide-spread (130pips) bull candle on near-average vol<1day with bearish volume divergence closing off the highs at 1.3275 after bouncing off the weekly ema200  1.3293. This puts the daily 1.3390 – 1.3400 supply area within reach. Although there is a daily bearish volume divergence, the accumulated 2days/3days volume is increasing with the candle close near the highs. This suggests that there is strength for this move to continue. The lower volume on the daily basis implies that this is more of a mark-up move by SM rather than herd-driven therefore we should be ready to take the ride back down when price hits the daily supply levels to fade the increased net short sellers in the market. Being a Friday, it will not surprise me to see a few “sweep the board” moves where prices may move down and then up and then down. Price has held within 27pips from the high last night during Asia. If SM intend to push up, I expect them to create buying pressure and maybe stoprun the 1.34000 key level, reverse and create selling pressure to get more shorts on board before reversing back upwards and away. My suspicion is that they may  even drive down a little deeper to look more convincing before they reverse long so I will watch price action closely before jumping in. I have a long bias today so my short levels will be at the manipulation levels for the first stophunt move and thereafter at the daily supply levels at the end of the anticipated move. Looking at the volume divergence, I also suspect that if SM moves up today, we may have a gap down on Monday, having seen this kind of thing happen enough at these types of levels but having put this in black and white, I don’t have a crystal ball and things can change so watch the price action closely.

EU long levels: 1.3245, 1.3227, 1.3210  EU short levels: 1.3295, 1.3300, 1.3330, 1.3390, 1.3400, 1.3420

GU: Daily candle is a wide-spread bear (171pips) wide-bodied bull spinning top closing 46pips off the high on average vol>1day. The price action yesterday was a classic “wash and rinse” by SM to shake out the weak shorts and longs. Yesterday I wrote “The volume in this down move is not convincing to consider a full blown reversal so I will still consider a long trade….” There is daily bearish volume divergence but more importantly the candle close and increased volume in thin trading hours suggests SM fading this move. There is also bearish volume divergence on a 2 daily basis which signals a highly probable impending reversal. The daily ema200 at 1.5477 is sitting just below the daily drop-base-drop supply level at 1.5482 – 1.5530. There is also confluence with the 78.6% fib which makes this a high probability reversal area. SM will likely create selling pressure to fade the weak longs and then reverse upward. Whether they will wipe up and down again like yesterday is anybody’s guess so as always I will stick as close to the edges as possible.

GU long levels:  1.5350, 1.5321 GU short levels: 1.5405, 1.5433, 1.5485, 1.5500, 1.5525 

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