DAILY REVIEW 9 Aug 2013

EU: Daily candle is a below average-spread (72pips) bull closing on vol<1 day with the second day of continued bearish volume divergence is now in the daily supply area at 1.3390 – 1.3400 Broker platforms show that EU shorts open positions increased to nearly 80%. However, the candle spread, candle close and volume suggests that there is reduced buying and we may see a reversal soon. The bearish volume divergence may also play out and reverse from here. However we must be mindful that the current supply level was a successful retest of the 1.3450 area and watch out for spikes before the potential drop. The 1.3400 level is also where several ECB members commented that the Euro was “too high” and EU dropped like a rock. The likelihood is that the orders sitting above 1.3400 will be too tempting for SM to pass up.

 The SM will be likely to create selling pressure to restock inventory before reversing to test 1.3400 – 1.3415 and let’s see what happens from there. If price stopruns the level, there is a potentially nice ride down. If it does not, just wait to see what happens toward 1.3450.

EU long levels:  1.3348, 1.3300, 1.3272 EU short levels:  1.3400, 1.3430, 1.3450

GU: The daily candle is a normal-spread (89pips) bull closing 1/3 off the high on below-average volume <1day with bearish volume divergence. Note that net short positions in GU have also increased. The daily volume and candle close suggest a possible retracement after the inefficient news-based move and no-basis move yesterday. Whilst there are orders sitting above, there are also lots of orders strewn along the path up by traders jumping in long on the push up. These would be easy picking for them and SM will likely take these and create selling pressure to about 1.5500 level to remove weak longs before reversing upwards. I don’t expect it to fall much lower because we are far from the daily supply levels but if EU falls very hard and reverses from the current levels, GU may just follow to test ema200 at 1.5461

GU long levels:  1.5500, 1.5485, 1.5461  GU short levels: 1.5575, 1.5600, 1.5650, 1.5670