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January 28, 2013 Daily EUR/USD, GBP/USD Commentary

OK now we have some clarity on which direction they are likely to push the EUR/USD. Having a second push up Friday I will be expecting the third push up today barring some terrible news out of Europe that makes this second push fail. At this point I don’t see anything worth while so it would take a rather large tape bomb. Since it has seemed on the surface that things are improving in Europe even though nothing has changed and the good data is more than likely manipulated to look that way, I believe this trend should continue. In fact it may not even be that the big boys think that the situation in Europe is improving  but now just isn’t the ugliest kid on the block. The UK and US are looking a bit uglier at the moment. Essentially its the lesser of two evils at this point.

I did take the risk reward short trade I mentioned in Fridays commentary from 1.3409 and held onto it for 45 minutes until that hourly candle made the conviction close above the resistance. At that point I knew it wasn’t a stop run and closed the trade for a -2 pip loss. At that point I did feel it was going up but didn’t see any manipulation to the downside to enter a long so I stayed out of the market.

The levels I will be looking at today are the 1.3441 for the long position. If we do see a higher push up during Asia then the Asian lows come into play at 1.3450. Seeing some clear manipulation there would get me long if we see a higher push above Fridays highs during the Asian session. I should also mention that there is a significant daily high just above Fridays highs at 1.3486 so there is the possibility for a deeper pullback but I think its low since they didn’t muster much of a pullback Friday after London closed.

1 hour chart of the EUR/USD on Jan. 28, 2013

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The GBP/USD is getting a little rest from its fall but seeing a 50 pip gap down this morning isn’t looking too promising for the GBP. If you wonder what the heck is happening and why this seems to not have an end in sight here is an excerpt from a Telegraph article over the weekend with economists and ministers saying such things as The UK economy is WORSE than any time since 1830 including the Great Depression.

Ministers today admitted Britain is facing “very, very grave difficulties” after figures showed the economy did not grow at all in 2012.

Economists from the Royal Bank of Scotland said the last four years have produced the worst economic performance in a non post-war period since records started being collected in the 1830.

It’s the worst economic performance since at least 1830, outside of post-war demobilisations,” he told The Daily Telegraph. “It’s worse than the 1920s, it’s worse than the Great Depression.”

He said the economy has been “heading this way for a long time” because of the scale of the problems that came to a head in the 2008 financial crash.

The top economist at RBS, which is mostly owned by the Government, said it is difficult to recover when much of the world is facing similar problems.

“It’s the scale of what happened in 2008 but also the build-up to that,” he said. “Compared with other recessions [like in the 1980s and 1990s], this is happening all over the world. There’s not a quick and easy way to export your way out of this.”

All this at a time when Europe is on the road to recovery? I think not. The fact is the UK and European economies are so intertwined that if the UK is going down in flames, (since Europe is their largest trading partner) something is awry there also. Sure one may slide faster than the other which is normal. What makes this odd is Europe is supposed to be all good now while the UK just flames out. Not likely the way I see it.

Today considering the large gap I expect they will play the gap traders out there and may not let this close. If that’s the case and we get a push below Fridays lows before the gap closes the chance the gap wont close goes up significantly. Having said that the level at the bottom of the chart is that daily level from August so its understandable that it has been hard to break so far. Today is likely the day especially if the gap cant close during the London session.

The level to short from in an optimal situation will be the manipulation at the gap open at 1.5808. If they don’t let the gap traders profit or the orders in the gap are not significant enough for them to grab it wont close. At that point the Asian highs will be where I look for the manipulation. This will also depend on how close it comes during the Asian session. Being 30+ pips away isn’t encouraging. If it can make the hourly close below Fridays lows I will be looking at the Asian highs for the manipulation at 1.5783.

1 hour chart of the GBP/USD on Jan. 28, 2013

Forex News Today

As usual for a Monday the news is light. However there are a couple worth mentioning. The M3 Money supply for the Euro Zone is usually a non event but with an expected increase today a surprise to the upside will have an impact and create some Euro weakness. The probability is that this will just be another manipulation move because now that the Feds balance sheet is rising and the debt ceiling effectively removed for the next 3 months the US is definitely the ugly kid on the street.

Later the US has Durable Goods figures expected to drop. Now for those who don’t know the correlation between this and housing data. If the US housing industry is improving the Home Sales and Durable Goods data will improve in concert. I wont mention the New Home Sales disappointment last week or the Pending Home Sales expectations for a drop today.

Food For Thought

In my weekend reading I came across 2 videos that I thought you might enjoy. The first is the Iceland President at Davao this weekend telling the Iceland success story and why they are the only western country that is showing a real recovery after starting out as the poster child for a banking sector that has gone a muck in 2008. For those of you who havent seen the movie Inside Job I recommend you do so.

The next one is Daniel Hannon again being the only man with a head on his shoulders besides Nigel Farage in the UK parliament (Along with the 87% of the UK population mind you) that was against bailing out the big boys. He tells it like it is and to be honest I dont see the west coming out of this mess until they let them fail and stop the bail outs.

On a side note here is a little tid bit on Italy’s 3rd largest bank and the oldest in the world in line for its 3rd bail out in 3 years. Interesting read.


Happy Trading


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