DAILY REVIEW 22 August 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 a below average spread (245pips) bull closing near the high on low vol<1month. The candle close suggests more upside.  

WEEK- The candle is an above average spread (213pips) bull closing just off the high on low vol>1week. The candle close and volume suggests more upside. 

DAY- The candle is a small spread (55pips) bear closing off the low on high vol<3days. The candle close and volume suggests selling (fade).

Levels of interest: Demand: Daily/Weekly:  1.0000  

Background: FED's members still insist the "appropriateness" of rate hikes but the recent FOMC Statement have revealed some differences of views. In any case, it will likely be limited to one more for the year in light of the forthcoming US Presidential Election and uncertainty for the world economy post-Brexit. The continued uncertainty in Turkey with the latest bomb blast at a wedding celebration and the terrorism situation in France and Germany give rise to a risk aversion climate which is already keeping the US Dollar relatively strong regardless of any pending rate hike by the FED. In this situation, raising rates may be counter-productive and this is what the FED will need to contend with.

Oanda order book:  There are trapped shorts but also profitable shorts from 1.1325.    

In the absence of major news releases today, expect SM to fade weak longs after last week's breakout. SM is likely to test to 1.1260 or lower before reversing to continue the upward push.  

EU long levels:  1.1260-1.1250, 1.1200, 1.1185, 1.1150, 1.1130, 1.1118, 1.1108, 1.1100, 1.1045, 1.0950, 1.0938, 1.0911

EU short levels:  1.1350, 1.1365-1.1371, 1.1422, 1.1452, 1.1496-1.1500, 1.1518-1.1528, 1.1592, 1.1600, 1.1615-1.1620, 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. Brexit has already seen the United Kingdom's British Pound drop significantly. The key word here is "United" because of possible secession by the pro-EU countries, if both Scotland and Northern Ireland leave there will not be much of a United Kingdom and the ramifications that such secession will birth. The British Pound as we know it would then lose significant backing economic capital (land, people, resources, etc) and thus lose its value which is not inconceivable.

MONTH- The candle is a below average spread (685pips) bear "spring" closing on very high vol<1month. The candle close and volume suggests absorption of selling.

WEEK- The candle is a below average spread (319pips) bull closing on low vol>2weeks. The candle close and volume suggests more upside.
DAY- The candle is an above average spread (161pips) bear closing about 1/3 off the low on high vol<3days. The candle close and volume suggests a fade selling.

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 very thin with newly profitable longs from around 1.3020 

Prices gapped down about 25pips before closing and dropping again. The whipsawing price action is to be expected as volumes are thin and SM must build positions in this manner. As stated last week, prices are now more likely to test 1.3350 or higher but we can expect a wild ride for risk takers. Prices dropped much more than analyzed last week and for this reason, I don't suggest longs on GU because of extreme volatility. The emphasis is to continue to look for short positions.

GU long levels: 1.3020 (not a real demand level)

GU short levels: 1.3140, 1.3185, 1.3325, 1.3350, 1.3370, 1.3420, 1.3447, 1.3485-1.3495, 1.3523-1.3533, 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 4.56 am EST