DAILY REVIEW 17 September 2014

EU Analysis:

EU: The daily candle is a below average spread (72pips) bull closing about 1/2 off the high on high vol>1day. The candle close and volume suggests selling. Levels of interest: Demand: Daily/Weekly: 1.2777, 1.2754, 1.2661 Supply: short-term: 1.3025, 1.3050 Weekly/Daily: 1.4184, 1.4246 pivot. Background: SM pushed prices to 1.2995 late in the day as expected but did not follow through to the 1.3000 key level. Today's order book for Oanda shows an increased number of traders trapped short after yesterday's song and dance by SM. The buy order stack at 1.3100 is largely unchanged. Eurozone news just released is generally positive and should provide SM the fuel to get these stops at the 1.3000 and a bit higher possibly as there is no significant supply level anywhere near the 1.3000 – 1.3050 level. SM is likely to induce breakout traders long at the 1.3000 pivot or even higher to around the 1.3049 before reversing to continue the downward trend. Note the confluence 1.3000 (50%Fib) and 1.3049 (61.8%Fib). The Order book chart shown above can be accessed at the Oanda website.

EU long levels: 1.2777, 1.2754, 1.2661  
EU short levels: 1.3025, 1.3050 

GU Analysis 

GU: The daily candle is a large spread (149pips) bull closing 1/4 off the high on high vol>2days. The candle close and volume suggests selling commencement. Demand: Weekly/Daily:  1.5870, 1.5850 Short term: 1.6248, 1.6058 Supply: Short term: 1.6158, 1.6185, 1.6230 (Gap), 1.6320 (Gap close) 
Background: The Scottish referendum is TOMORROW. The very large moves on insignificant news are usually what SM does re-positioning prices and orders according to their expectations. As expected, the retail traders chasing the shorts got trapped and are in severe drawdown if not already dead and buried. I did write that the cable will likely whipsaw as we approach the day of reckoning and it's exactly what happened and will likely continue until the vote itself. Price has already gone past the gap close level of 1.6320 with the current day high at 1.6335. A look at the order book (retail positions) reveal no open orders roughly from 1.6400 - 1.6420, with a massing of sell orders from current price to around 1.6400 Whatever the outcome of the referendum, the USD strength will remain whilst the Ukraine and ISIS situations remain unresolved and this would mean a reload of short positions for SM. The positive UK data today notwithstanding, where price spiked and is now retracing, is likely the reload for SM to take prices up again before reversing. The news say that the likely outcome is too close to call so anything that is not at a significant level will not be worth trading and holding. Having said that, SM is likely to fade weak longs to around the Asia low 1.6248 before reversing to retest the current day high at 1.6335 or higher (see the chart for levels) before reversing to resume the downtrend. In the event that price closes above 1.6360, we can expect it to test the 1.6400 key level.

GU long levels: 1.6248, 1.6050, 1.5870 
GU short levels: 1.6335, 1.6340, 1.6358 

Posted at 06.00 am