DAILY REVIEW 28 Aug 2013

EU: The Daily candle is a below-average spread bull closing near the high on near-average vol>1day. Yesterday’s SM price action took out stops below Friday’s lows of 1.3332 before fading the weak longs up to nearly 1.3400 The close and volume suggests that there will be further upside with SM positioned to push prices through 1.3400 (what else but to trap pure support/resistance traders who are taught “the longer a level holds, the stronger it is”, these poor folks have never seen a tree being chopped by an axe where each blow/test weakens it) to test the 1.3450 and possibly even higher to test the 13 Feb 2013 high at 1.3519. Although price may exceed 1.3450 to take stops, if there is no follow through, we may actually have a full blown reversal as the weekly bearish divergence is in play and price may not test 1.3600 this month. The likely SM playbook is to create selling pressure during Asia to fade the weak longs but after yesterday’s price action, I would expect 1.3350 to be the likely reversal level as after clearing stops all the way to the 1.3320 level yesterday, there is no plausible reason from an order flow perspective to go below 1.3320.

EU long levels:   1.3346, 1.3320  EU short levels:  1.3415, 1.3450, 1.3500, 1.3520

GU: The Daily candle is a normal spread bear closing slightly >½ off the low on near-average vol>1day. The candle close and volume suggests some buying but based on the position of the price range, it looks more like a fade of weak shorts before further movement downward. Although price closed at 1.5544 above the daily ema200 of 1.5537, it has drifted lower. The break of the 1.5500 level has opened a possible test of the demand levels at 1.5445 – 1.5420 Price is already headed downward and SM is likely to maintain the selling pressure and fade weak shorts along the way.

GU long levels: 1.5420 GU short levels: 1.5555, 1.5570, 1.5595, 1.5628