DAILY REVIEW 9 October 2014

Background: The FOMC Minutes release showed the FED taking a dovish stance by voicing concern over the risks to the economy (so what else is new?) as well as keeping the sentence "considerable time" concerning rates hike in the text. The result was a steep sell-off of US dollars resulting in USD weakness and just about every major reversing and reversing sharply and closing back at highs. The FOMC minutes is more likely to be an opportunity to pump up the equity markets toward the end of the year for window dressing before the resumption of downtrend. The Jpy had also weakened against the USD too fast too far to say the least and "surely something must give" and it did!

EU Analysis:

EU: Daily- The candle is a large spread (123pips) bull closing just off the high on ultrahigh vol>321days. The candle close and volume suggests more upside but also looks like compression and selling has started.  Levels of interest: Demand: short-term 1.2500 Daily/Weekly: 1.2034 Supply: short-term: 1.2800, 1.2820, 1.2840. Background: Even with the FOMC minutes, the fundamental real money issues such as negative yield on German bonds for 4 years and the ongoing geopolitical conflicts in the Middle East remain unchanged and the bias is still for a weaker Euro. Prices did pretty much what was analyzed and expected up until the FOMC minutes release. Prices broke the monthly ema200 (1.2738) and continued pushing higher. Prices in Asia have already pushed higher and still pushing upward as I write. Morgan Stanley have recommended short EU at the 1.2800 level, however, one must take into account the fact that SM must start to oscillate up and down to distribute before reversing the move. SM is likely to test the 1.2800 - 1.2825 level before reversing to remove weak longs to around the 1.2750 or Asia low 1.2715 before continuing the upward move. 

EU long levels: 1.2750, 1.2715

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

GU Analysis:

GU: Day- The candle is a very large spread (149pips) bull closing near the high on very high vol>12days. The candle close and volume suggests more upside. Demand: Weekly/Daily:  1.5900, 1.5850 Supply: Short term: 1.6400, 1.6492, 1.6523 Prices have rallied together with the FOMC minutes. With the upcoming Interest Rate decision at 7am EST today and price not anywhere near structure levels, it is better to leave it alone. Having said that, we can expect interest rates to rise sooner rather than later and this will likely push GU to structure highs from which we can resume shorts in tandem with the expected restrengthening of the US Dollar.

GU long levels: 1.6050, 1.5870 
GU short levels: 1.6400, 1.6492, 1.6523 

Posted at 04.35 am EST