DAILY REVIEW 3 February 2016

EU Analysis:

EU: Perspective: Price has tested and broken through the 1.0500 which is simply a monthly low and psychological level with the next pyschological level at 1.0000 and the 0.9900 level being the breakout retest of a reaccumulation structure. December's candle suggests a retracement is in progress and January's candle is an "inside" of the December candle. We also note that there are no significant orders/ stops lower until the 1.0000 key level. Bias is still strongly down from a market structure perspective.    

MONTH- The candle is a small range (274pips) bear spinning top closing on low vol<1month. The candle close and volume suggests no selling pressure. 

WEEK- The candle is a below average spread (180pips) bull pseudo "upthrust" closing on low vol<3weeks. The candle close and volume suggests no selling pressure.  

DAY- The candle is a small spread (58pips) bull closing nearly 1/2 off the high on low vol>1day. The candle close and volume suggests more upside.

Levels of interest: Demand: Daily/Weekly:  1.0000  

Background: Tumbling oil prices with the expected additional supply of Iranian oil also creates further uncertainty.

The Oanda order book continues to show a  significant volume of net trapped short positions as well as newly trapped shorts. 

Potential demand stacks:  1.0804-1.0765

Potential supply stacks: 1.0957-1.0988

Potential long (trapped) stops:  1.0670-1.0660, 1.0635-1.0622
Potential short (trapped) stops: 1.1029-1.1040 

Euro news releases today are not particularly major but we have the high impact US ADP Non-farm employment data as well. Yesterday I wrote "SM is likely to continue to fade weak shorts to the 1.0950 level or higher", price actually pushed to 1.0940, just 10 pips short of what we expected. SM is likely to use the news releases today to continue fading weak shorts to 1.0980 or higher before reversing.

EU long levels: 1.0800-1.0795, 1.0762-1.0740, 1.0700  

EU short levels: 1.0983-1.1000, 1.1060, 1.1105, 1.1208

GU Analysis:

GU: Perspective: GU has closed below April pivot 1.4564. The June close of 1.5701 becomes important as a supply level to overcome for higher prices. The downward bias is still dominant. 

MONTH-  The candle is an above average (736pips) bear closing about 1/4 off the low on low vol>4months. The candle close and volume suggests more downside.

WEEK- The candle is a normal spread (264pips) bear spinning top closing on high vol>21weeks. The candle close and volume suggests buying.
DAY- The candle is a normal spread (119pips) bear hammer closing on low vol>1day. The candle close and volume suggests an absorption of sellers. 

Demand: Weekly/Daily:  1.3705-1.3500 Supply: Short term: 1.5574, 1.5600, 1.5619 

The Oanda order book: newly trapped short volumes are still less than the trapped long volumes.

Potential demand stacks: Not significant
Potential supply stacks: Not significant

Potential long (trapped) stops:  1.4228-1.4200, 1.4152-1.4136, 1.4075-1.4021 (small vol)

Potential short (trapped) stops:1.4448-1.4479, 1.4535-1.4548, 1.4700-1.4770

The volumes are very thin and caution is advised. Yesterday, I wrote, "The poor UK PMI released earlier will serve as the trap for weak shorts", as analyzed, prices dived to 1.4325 on the news release and then retraced strongly back up leaving newly trapped shorts but the volume is very thin. The UK services PMI today will likely be the catalyst for SM to induce more shorts and take out the weak longs and thereafter repeat what they did yesterday to trap more short volumes and push the 1.4500 key level or higher before reversing.

GU long levels:  1.4100

GU short levels: 1.4512, 1.4535, 1.4595-1.4610

Posted at 0.56 am EST