DAILY REVIEW 13 October 2014

EU Analysis:

EU: Weekly- The candle is a above average spread (282pips) bull closing 1/2 off the high on ultrahigh vol>64weeks. The candle close and volume suggests more upside. This is likely a removal of weak shorts before resumption of the downtrend. Daily- The candle is a normal spread (111pips) bear wide-body spinning top closing on very high vol<3days. The candle close and volume suggests a reduction in selling pressure.  Levels of interest: Demand: short-term  1.2640, 1.2614, 1.2568, 1.2500 Daily/Weekly: 1.2034 Supply: short-term: 1.2800, 1.2820, 1.2840. Background: Fundamentals project weak Euro but FOMC has deferred rate hikes. Over the weekend, another FED member said that the extent and speed of the removal of stimulus will be contingent on the performance of the world economy. In other words, no rate hike commitment further weakening the US Dollar. Keep in mind that according to one broker, "retail trader data shows that ‘the crowd’ recently turned net-short EURUSD for the first time in nearly 1000 pips and three months". This suggests that price will rise further before resumption of the downtrend. Prices in Asia have already pushed higher to 1.2697 and now pushing lower again. SM is likely to maintain the selling pressure to around Asia low 1.2619 or lower before reversing upward to test the current pivot high of 1.2790 and possibly push to 1.2800 - 1.2825 level. 

EU long levels: 1.2614, 1.2568, 1.2500

EU short levels: 1.2800, 1.2825, 1.2875, 1.2900, 1.2925

GU Analysis:

GU: Weekly- The candle is an above average spread (272pips) bull "pseudo upthrust" closing on ultrahigh vol>138weeks. The candle close and volume suggests the commencement of buying. However more downside can be expected as any entry other than at clear levels can be and are likely premature. Both sets of retail traders chasing the long and short trades at current prices will likely pay for it. Day- The candle is a large spread (126pips) bear closing on high vol<3days. The candle close and volume suggests the slowing of selling pressure. Demand: Weekly/Daily:  1.5900, 1.5850 Supply: Short term: 1.6400, 1.6492, 1.6523 I'll do a little bit of discussion here today: In order to induce high volume of short traders, the current pivot 1.5950 is a level that "fits the bill". It is a level in the weekly demand level and also a level that will induce a lot of breakout short traders trying to "follow" the "trend". This may likely happen with some news event and present us with a reversal. One must question the weekly volume, if it is so significant, then why has price not plunged right to the next level yet? These are key questions to ask when we trade order flow. So rather than simply write "SM is likely to test the 1.5950 pivot and reverse long", it is better to see HOW price reaches that level today or tomorrow and see if it presents us a reversal trade. How about taking the trade down? Is it possible? Of course it is... since we are expecting SM to take prices lower aren't we? The question is from where? In this regard, the 1.6225 pivot would be a nice pristine level to look for a possible setup short, for the aggressive entries, the 1.6182 - 1.6200 is also a possible short level. I guess that is enough food for thought.... cheers

GU long levels: 1.6007, 1.5870 
GU short levels: 1.6182, 1.6200, 1.6225, 1.6400, 1.6492, 1.6523 

Posted at 05.15 am EST