DAILY REVIEW 10 Mar 2014
EU: Weekly- the candle is normal spread bull closing off the high on low vol>3weeks. The close and volume suggests more upside. The Daily candle is a small spread (63pips) bull “upthrust” closing on high vol<1day. The candle close and volume suggests more upside but the bear trap that was sprung last week was to re-accumulate and this is no different as EU is poised to burst out of the traps. Levels of interest: Demand: short term-  1.3795 – 1.3805, 1.3770, 1.3750 – 1.3740, 1.3725 The Asian range is 1.3870 – 1.3891 currently. NFP did exactly as expected last Friday but the re-accumulation was not as strong as could reasonably be expected in spite of the good US jobs data. This is also because as reported by one analyst “ECB President Mario Draghi made clear in the press conference on Thursday, the ECB does not want to simply just inject more liquidity into the Euro-Zone banking system; there is little need right now. Interbank lending rates (EONIA) are stable below the ECB’s overnight reference rate of 0.25%, which means funding stresses are low. Sovereign yields are stable at multi-year lows (bond prices at highs) and equity markets are buoyed; the linkages between the Euro-Zone banking system and her sovereigns are being strained.” The good US employment data on Friday only resulted in moving price back to around the 1.3850 level and price has remained above it but a look at the volume profile suggests that the orders will not be sufficient for a sustained upward movement. The expected re-accumulation last week removed supply up to the 1.3900 level as predicted but the late longs have yet to be removed from the equation, this being the case, EU will be a bear trap with many retail traders eying the 1.3900 level as “resistance” or the newbie supply/demand trader as “supply”. SM will likely fade the weak shorts from 1.3900 or higher and then reverse to re-accumulate down to the 1.3750 or a bit lower before reversing northward for the journey to 1.400 and above. Although the 1.3800 level is a possible long level, it would likely be a short term trade to confuse everyone leading people to believe that EU has stalled at the 1.3900 level and price is “consolidating” again. This process may take a day or more so it is worth waiting for the train to arrive.
EU long levels: 1.3800, 1.3770, 1.3750, 1.3725 EU short levels: 1.3800, 1.3815

GU: Weekly- the candle is a below average spread (145pips) bear “near doji” closing on low vol<1week. The candle close and volume suggest that the re-accumulation is completed and a bear trap is in place. The Daily candle is a below average spread (76pips) bear “pseudo-upthrust” closing on low vol<1day with daily volume divergence. The candle close and volume suggests a bear trap.  Unchanged Levels f interest: Weekly/Daily supply level 1.6835 – 1.6845, 1.6860 – 1.6875, 1.6991 – 1.7015, 1.7025 – 1.7045 Demand:  short-term- 1.6640 (confluence) previous Asia low 1.6638, 1.6573 – 1.6555, 1.6514 – 1.6533, 1.6401 – 1.6490, 1.6354, 1.6330 – 1.6320, 1.6300 key level. The Asian range is 1.6716 – 1.6740. Similar to the EU, SM has taken S/R traders out at the top and re-accumulated back down on the NFP news. What is different is that the re-accumulation appears to have been completed and GU looks set to continue the northbound journey. The two possible scenarios would be 1)SM fades the weak shorts from to 1.6784 and reverses back to Asia low before moving back up to 1.6823 and higher 2)SM tests Asia low 1.6716 or even to Friday low at 1.6704 or to 1.6700 and then reverse for the long journey North. This process may also take a day or more.
GU long levels:  1.6716, 1.6705, 1.6670, 1.6639 GU short levels:   1.6823, 1.6835, 1.6860, 1.7000, 1.7030

Posted at 1.58 am EST