DAILY REVIEW 5 July 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 while February's candle also closed back inside the January range. 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 an above average spread (515pips) bear closing about 1/4 off the low on average vol>2months. The candle close and volume suggests absorption of selling.  

WEEK- The candle is a below average spread (198pips) bull closing near the high on high vol<1week. The candle close and volume suggests more upside. 

DAY- The candle is a below average spread (61pips) bull closing on low vol<24days. The candle close and volume suggests no demand. 

Levels of interest: Demand: Daily/Weekly:  1.0000  

Background: The Brexit vote threw markets into a tailspin. Market positioning will take this into account including the FED's expected rate hikes. Bearing this in mind, the latest 5-10 year inflation expectation was reduced from 2.5% to 2.3% is even more reason to expect that the FED should hold off any further rate hikes for the time being. Overall USD strength/weakness now in the wake of the pro-Brexit poll is likely to be transient until significant US data show clear improvement. Market sentiment in the meantime supports risk aversion and safety regardless of any pending rate hike by the FED.

Oanda order book:  Trapped short volumes are significant but stops remain quite far away.  

There are no planned major data releases today for the US and only medium impact data releases for the Euro. SM is likely to fade weak shorts to Friday's high 1.1169 or higher before reversing. I still believe that the likely volume build action will be to test the highs as mentioned, reverse back to 1.070 or lower to reaccumulate and go long back towards Pre-Brexit levels.

EU long levels:   1.1100, 1.1070, 1.1033, 1.1023, 1.0965, 1.0938, 1.0911

EU short levels:  1.1170, 1.1190, 1.1270, 1.1314, 1.1366-1.1373, 1.1391, 1.1422, 1.1452, 1.1485-1.1491, 1.1500-1.1510, 1.1520-1.1525, 1.1532, 1.1580, 1.1600, 1.1615, 1.1619-1.1630, 1.1711

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 ultralarge spread (1897 pips) bear closing near the low on historical ultrahigh vol. The candle close and volume suggests more downside.

WEEK- The candle is a below average spread (413pips) closing on high vol<2weeks. The candle close and volume suggests more downside. 
DAY- The candle is a low spread (99pips) bull closing about 1/2 off the high on low vol<15days. The candle close and volume suggests no selling pressure.

Demand: Weekly/Daily: not applicable after 31 year low was broken through. Supply: Short term: 1.5574, 1.5600, 1.5619 

The Oanda order book: Volumes are too thin to have any significance.

The UK Construction PMI was poor yesterday. Today we have the Services PMI and George Carney's speech will likely result in a whipsaw. Prices have broken below the 1.3250 level and SM is likely to fade weak the weak shorts to around the 1.3270 level or higher before reversing. 

GU long levels: 1.3120 (no real demand levels as these levels are lower than the last 31 years)

GU short levels: 1.3270, 1.3330-1.3358, 1.3405, 1.3434, 1.3470, 1.3533, 1.3655, 1.3695, 1.3711, 1.3779, 1.3815, 1.3837, 1.3874, 1.3928, 1.3974, 1.4569, 1.4685, 1.4830, 1.4925, 1.4977, 1.5000

Posted at 03.03 am EST