DAILY REVIEW 5 January 2015

EU Analysis:

EU: Month- the candle closed at the low on low vol<3months (based on Euro Futures real contracts). The candle close and volume suggests more downside. Note that the pivot 1.2041 is already taken out and the next pivots are 1.1875 and 1.1639 Weekly- The candle is an average spread (221pips) bear closing at the low on low vol>1week. The candle close and volume suggests more downside. Daily- The candle is a normal spread (107pips) closing at the low on low vol>7days. The candle close and volume suggests more downside. 
Levels of interest: Demand: Daily/Weekly:  1.1875, 1.1639 Supply: short-term: 1.2150, 1.2205, 1.2260, 1.2300, 1.2356, 1.2375, 1.2425, 1.2500, 1.2530, 1.2600 

Background: The post-New Year Draghi speech plus the ongoing unresolved issues in the Eurozone had a severe impact on the Euro. This coupled with the seemingly improving US economy have all but brought the Euro to its knees. Reserves of the Euro held by Central banks is also at its lowest. Adam Button of ForexLive writes, " The total share of euros held by central banks fell to 22.6% from 24.1% at the end of Q2. That’s a massive move when quarterly changes usually amount to 0.1-0.2 percentage points." Furthermore, Germany's Merkel has bee quoted as saying that the EU can withstand a Greek departure from the Eurozone. Opposition politicans in Greece are also wanting Greek's debt to be written off in any restructuring process. With Greek elections coming up on 25 Jan 2015, we can expect great volatility. Seen in this light and based on market structure, we can expect a test of the next monthly pivot at 1.1875 Retail order stacks seen at 1.800, 1.1900, 1.1970-80, 1.200, 1.2050, 1.2100, 1.2150, 1.2200, 1.2250, 1.2300

Prices opened gapped down about 50pips as SM removed weak speculative longs (trying to trade tops and bottoms). SM is likely to maintain selling pressure to test the current low of 1.1900 key level or lower to the 1.1875 pivot before reversing to remove weak shorts.

EU long levels: 1.1900, 1.1875

EU short levels: 1.2150, 1.2205, 1.2260, 1.2300


GU Analysis:

GU: Monthly- The candle is a bear closing off the low on low vol<7months based on British Pound Dollar futures contracts volume. Based on tick volume or trade activity, the candle closed on very high vol>1month. The candle close and volume suggests more downside. Weekly- The candle is a large spread (296pips) bear closing at the low on low vol<17weeks. The candle close and volume suggests more downside. Day-The candle is a very large spread (260pips) bear closing on low vol>5days. The candle close and volume siggests more downside. 

Demand: Weekly/Daily:  1.4870 - 1.4812, 1.4229 Supply: Short term: 1.5400, 1.5470, 1.5500, 1.5540, 1.5600 

Background: The combination of USD strength and uncertainty over the economy coupled with the looming election in May have contributed to the sell-off of GBP. Furthermore, UK's David Cameron will also have to grapple with the EU referendum in which he intends to restrict the impact of EU's workers' freedom of movement laws in the UK. All this uncertainty has lead to the dumping of the GBP. 

Prices opened gapped down by about 20pips as weak longs were taken out. SM is likely to fade weak shorts to 1.5400 or higher before reversing to continue the downtrend.

GU long levels: 1.4870, 1.4812 

GU short levels: 1.5400, 1.5470, 1.5500, 1.5540, 1.5600

Posted at 2.25 am EST