DAILY REVIEW  2 Aug 2013

EU: Daily normal-spread (117pips) bear closing just off the low on average vol<1 day. The candle close and volume suggests more downside. As I write, H4 does show bullish volume divergence as price presses the 1.2190 level. SM has taken the opportunity to push prices lower on the back of better than expected US data. Yesterday’s background is interesting because both GU and EU fell because of USD strength telling us that there is demand for both Gbp and Eur. SM is likely to fade the weak shorts from the 1.3200 level upwards before moving it back down. The market is still net short but with a smaller percentage week-to-date. With NFP today, there is a likelihood of price in a staying in a tight range possibly within 1.3232 and perhaps up to 1.3250 as it gives SM flexibility to react to the news later. If NFP data misses or simply meets estimates, we may see EU push back upward as usually much of the expectation is already priced-in prior to the release. If SM holds price above 1.2190 all the way to the news, the probability of a long is higher.  

EU long levels:  1.3192, 1.3165 EU short levels:  1.3230, 1.3250, 1.3300, 1.3342

GU: Daily candle is a wide-spread (133pips) bear closing near the low on increased average volume that Wed and also >11days. The close and volume suggests more downside towards the daily demand level  1.5075 – 1.5025. Traders are still net long and SM will continue to fade these guys. SM will likely create buying pressure before pushing back down again. With NFP coming up, it will also likely be a narrow range. Although my expectation is still for GU to push lower and reverse at the daily demand area, if price tests and closes below 1.5025 on H1, it will be likely to continue down.  

GU long levels:  1.5120, 1.5080, 1.5025 GU short levels: 1.5158, 1.5180