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Daily Analysis EUR/USD, GBP/USD February 4, 2013

Considering the price action on the EUR/USD last Friday it would seem that they really want to test that 1.3800 level I mentioned in the commentary. There is a daily close above the last significant daily level of 1.3617 showing some conviction to the upside while at the same time has a significant daily rejection wick. Remember we are in extended pushes now and from the lows January 23 we have 6 pushes total raising the possibility for the reversal today. At this point I will have a small bias for the short but will be keeping my mind open for a long position also.

In third push chop scenarios we look for the reversal first then consider trading against that with some clear manipulation. At this point I expect a shake out of weak longs before they try and test the 1.3800 level or even go into a full 3 push reversal to the downside. We also have the beginnings of the head and shoulders pattern at the highs here which is typical price action before they make the turn. Even though I am not a fan of chart patterns I do understand what is going on as this pattern forms so it is the only one I consider. 

The H&S pattern is the fake out to the upside in this case either shaking out weak shorts while at the same time inducing long positions to be stopped out later to help fuel the push to the downside. The level I will be looking at first is the top of the first shoulder at 1.3673. There is an hourly rejection candle there during the end of the US session Friday also that shows they may not let it pass that price today. The manipulation here will need to be rather clear since there really isn’t much resistance above until it reaches the Friday highs of 1.3710 which is 40 pips away. 

Otherwise I will consider a long from the breakout level of 1.3592 where it found support Friday after NFP was released. I would prefer to see a 1 hour stop run to that level that has the manipulation candles inside but will consider any clear manipulation there. However like I said the bias is short today and the preferred trade.

1 hour chart of the EUR/USD on Feb. 4, 2012

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The GBP/USD made the reversal I expected in Fridays commentary. I have to say it showed off a bit falling almost 200 pips and retracing almost all of its 3 push move last week. Considering this it may be in for a retracement at the least. What gets me is the continuation once it broke below Thursdays lows of  1.5774 was rather efficient. Meaning it wasn’t just wild selling but more than likely a true move. At this point it would be safest to let it go for a day or so and see where it finds its support and resistance. Having said that the levels I will be looking at today will be the lows Thursday last week at 1.5723 for the short since it would be unlikely that it could get to 1.5772 level without some news to push it there. There is also the potential long from a stop run to the lows so I will be keeping my mind open on direction today.

1 hour chart ofthe GBP/USD on Feb. 4, 2013

Forex News Today

The economic calendar is light today as usual for a Monday. The Euro Zone does have Sentix Investor confidence expected to improve but still be negative. We will see if investors really think all is well in Euroland if we can see this pop into positive territory. i have my doubts but as I have said before nothing surprises me these days. Spanish Unemployment is also due and expected to jump significantly losing 150K jobs. This could have an  impact if it comes out worse than expected but my guess is that this is already priced in and may be overlooked.

The UK has Construction PMI figures expected to improve but still remain below the 50 expansion level. With out a surprise above 50 I doubt there will be much to see here

The US only has the low impact Factory Orders MoM expected to rise over 2% but I doubt this will be enough to offset the bad NFP print and rise in the Unemployment Rate Friday.

Food For Thought

I came across an interesting article last week I wanted to share with you. Even though its talking about the USA its relevant pretty much all through the western world and most likely the entire world. It tales about Americas Lunatic Fringe. The people who are conspiracy theorists, dooms day preppers and the like. Those of our members that have been around know that one of us is a believer and personally I grow closer every day when I see the continual evidence that points that direction. Do I really think they want to take over the world? Lets just put it this way. I dont want to believe it but the circumstantial evidence keeps mounting and it sure looks that way even if the conspiracy theorists are wrong. Here is a couple of paragraphs that got me thinking that I should share this.

 What truly exacerbated the rush to the fringe were the Financial Crisis and the subsequent railroaded bailouts, which “democratic” America opposed to the tune of 97%, and which were, and still are viewed as rewarding the very people who caused the collapse.  The oft-spoken official claims that “the taxpayer made a profit on the bailouts” just adds salt to the taxpayers’ wounds, as it conveniently fails to take into account the host of programs—from TALF to ZIRP to QEI, II, and III and Twist—that virtually handed the banks the money with which they could “pay back” the bailout cash.

America sees backroom deals and favors to insiders every step of the way, and rightfully so they see this, because that is exactly how the bailout was affected.  No one had to pay for his mistakes, and equally significant, no one has been prosecuted despite overwhelming evidence of fraud, malfeasance, and corruption.  Americans cannot help but subscribe to the cynical quip, “everyone is equal under the law, except for those who are above it”.  Fines don’t count, especially when the money to pay them comes right back through another door.

America’s prisons are filled with people who did little more than use a banned substance.  It’s time some bankers and officials faced the possibility of similar accommodations, as their crimes are greater and victims substantially more.

Here is the link to the full article and is well worth a read.

Next was this one that really made me understand why last year when all seemed like Europe was about to implode and the Euro go down in flames the EUR/USD just kept on rising. Once you see the charts explaining just where the bulk of helicopter Bens money printing has gone you will understand it too. Here is the title of the article and link.

How The Fed’s Latest QE Is Just Another European Bailout

Finally this one.

The Putrid Smell Suddenly Emanating From European Banks

This one is the icing on the cake describing the illegal activities and current health of several European banks right now even after all the injection of the Feds QE programs. This one is a must read but here is a taste for you.

A nauseating whiff came from Barclays today, when it leaked out that it has been under investigation by the Financial Services Authority and the Serious Fraud Office in Britain for illegal fundraising in 2008. Allegedly, the bank secretly loaned £5.3 billion ($8.4 billion) to one of Qatar’s sovereign wealth funds, which then turned around and with great public fanfare pumped that money back into Barclays—a scheme to raise capital on paper to escape a government takeover during the financial crisis.

Then Crédit Agricole, France’s third largest bank, announced €3.8 billion ($5 billion) in write-downs, mostly of “Goodwill” due to the “present macro-economic and financial environment.” Goodwill reflects money paid out for certain items in excess of their value—an expense that, by a quirk of accounting, is temporarily parked as an asset on the balance sheet to be expensed eventually. After the write-off, the bank will stillhave about €14 billion of Goodwill clogging up its balance sheet, and more write-offs are to come. It already wrote off €2.5 billion last year, when it agreed to sell its stake in the Greek bank Emporiki for €1, which it had acquired with impeccable timing in 2006 for €2.2 billion.

Greek banks… oh my! They’re being investigated by Greek financial crime prosecutors for €232 million in loans that they handed out to the ruling parties, Prime Minister Antonis Samaras’ New Democracy and the Socialist PASOK. “Suspected crimes against the state,” a court official called it.

 And on Thursday, Deutsche Bank waded deeper into its quagmire of “matters,” among them the Libor rate-rigging scandal, which might cost it €2.5 billion, and the carbon-trading tax-fraud scandal that broke with a televised raid by police on its headquarters. So, more write-downs are due, and the bank announced a €2.2 billion loss for the fourth quarter. “In 2013,” said co-CEO Jürgen Fitschen reassuringly, “we will be confronted with more developments in these and other matters.”

And they wonder why the Lunatic Fringe is becoming the Lunatic Center

Happy Trading

Chad

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